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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998 Commission file number 1-7228
THE WASHINGTON CORPORATION
(Name of Small Business Issuer in Its Charter)
MARYLAND 52-1157845
(State of Incorporation) (I.R.S. Employer Identification No.)
4550 Montgomery Avenue
Bethesda, Maryland 20814
(Address of principal executive offices)
(301) 657-3640
(Issuer's telephone number)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Class B Common Stock, $.01 par value per share
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Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 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
--- ---
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best of
registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. / X /
The registrant's revenues for the fiscal year ended December 31, 1998 were:
$3,327,888
The Registrant has been unable to ascertain any market for the Registrant's
securities, and, therefore, the Registrant believes that the best estimate of
the market value of its voting stock held by non-affiliates is $0 at the present
time.
As of December 31, 1998, the number of shares outstanding of each class of the
registrant's classes of common stock were as follows:
1,640,327 shares of Class A Common Stock
21,476 shares of Class B Common Stock
45,119 shares of Class C Common Stock
EXHIBITS BEGIN ON PAGE 36 1
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
(a) BUSINESS DEVELOPMENT
The Washington Corporation (individually, "TWC" and together with its
affiliates that are consolidated with it for financial reporting purposes, the
"Company"), a Maryland corporation, was founded in 1979. The Company's
operations consist of the ownership of real estate, both income-producing and
unimproved, and office building management, primarily in the metropolitan
Washington, D.C. area. The Company has been pursuing a plan to divest its
non-income-producing properties and to obtain appropriate financing and a
long-term lease for its primary income-producing asset.
RECENT DEVELOPMENTS
TIMBERLAKE
TWC, through a wholly-owned subsidiary, the Nanjemoy Associates
Limited Partnership ("NALP") owned 361 acres in Charles County, Maryland for
future residential development (the "Timberlake Project"). NALP defaulted on its
quarterly interest payments on the purchase money mortgage made to NALP ("PMM")
that was secured by the Timberlake property. The principal amount of the PMM is
$880,000 and it matured on January 15, 1998. The PMM is not guaranteed by TWC
and the note contains a provision that the holder will rely solely on the
property for repayment of the PMM. This default resulted in TWC losing 313 of
the 361 acres of land owned by NALP due to foreclosure action by the note holder
on February 2, 1999. As a result, the approved preliminary site plan was voided
together with the various entitlements for the development of the property. It
is uncertain at this time how the remaining 48 acres could be developed. (See
"Business Development - Recent Developments - Subsequent Events" below).
REFINANCING OF THE ARLINGTON SQUARE LOAN
TWC, directly and through an affiliate, Arlington Square, Inc., a
wholly-owned subsidiary of TWC ("ASI"), owns a 74% interest in Arlington Square
Limited Partnership ("ASLP"). ASLP owns 1.75 acres of land and an office
building constructed thereon (the "Arlington Square Project") located in
Arlington, Virginia. The Arlington Square Project is the Company's primary
source of revenue.
In November 1997, ASLP obtained a loan, secured by the Arlington
Square Project, from Allied Capital Commercial Corporation ("Allied") in the
original principal amount of $24,300,000 (the "Allied Loan"). The interest rate
on the Allied Loan was 10% and the Allied Loan also included a 30% participation
for Allied in the net cash flow and net sales proceeds of ASLP.
From January 1, 1998 to November 25, 1998, ASLP's property was
encumbered by mortgage notes to Allied. The outstanding principal balance on the
mortgage loans accrued interest at a blended rate of 10%, based on the LIBOR
rates. The notes were cash-flow mortgages with all excess cash flow, as defined,
being applied to reduce the principal balance and to fund the required escrows.
One of the mortgage agreements provided for the lender to receive a
participation interest of 30% in the net cash flow and a 30% equity value in the
property if and when it is sold, with such provision to survive any
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payoff of the mortgage.
On November 25, 1998, the Allied Loan was repaid with proceeds of a
loan obtained by ASLP and secured by the Arlington Square Project from
Metropolitan Life Insurance Company ("MetLife") in the original principal amount
of $21,500,000 (the "MetLife Loan"). At the closing of the MetLife Loan,
$21,500,000 was disbursed to (i) repay the Allied Loan in the amount of
$20,600,000; and (ii) to pay for costs associated with the MetLife Loan in the
amount of $373,477. The MetLife Loan has a fixed interest rate of 6.80% and
matures on December 1, 2010. See "Description of Properties - Arlington Square
Project".
Upon refinancing of the Allied Loan, Allied gave notice of demand for
full payment of its participation interest in the equity value and net cash flow
of the Arlington Square Project. ASLP entered into a forbearance agreement with
Allied which (i) established the value for Allied's participation interest at
$1,850,000 and (ii) established a payment term of 9 1/2% with interest at 7.5%
and monthly payments at $22,739. Allied's participation interest is
collateralized by a deed of trust, subordinate to that of MetLife, in the
Arlington Square Project and is guaranteed by all of the partners of ASLP.
Approximately 96% of the Company's revenues for fiscal year 1998
were derived from the Arlington Square Project.
AWARD OF BID AND LEASE EXECUTION
On October 17, 1997, the General Services Administration ("GSA"), an
agency of the U.S. Government, published a Solicitation for Offers ("SFO") to
lease office space in Northern Virginia for various purposes under the advanced
requisition programs. On November 7, 1997, ASLP offered to lease to GSA for a
fixed term of ten (10) years 100% of the existing office space in the Arlington
Square Building. GSA informed ASLP in early 1998 that GSA intended to award the
lease to ASLP.
On June 22, 1998, GSA executed the lease which contained the following
terms: (i) a firm ten (10) year term beginning October 1, 1998 through September
30, 2008; and (ii) fixed annual rent of $3,137,043.12 payable at the rate of
$261,420.26 per month in arrears.
In addition, on September 16, 1998, the U.S. Fish and Wildlife Service
executed a ten year lease with ASLP for exclusive use of 231 parking spaces at
the Arlington Square building. The annual rent is $175,000 escalating at 5% per
year.
ELECTION OF DIRECTORS
TWC did not hold an annual or special stockholder's meeting in 1998,
and did not elect directors in 1998.
TWC's Amended and Restated Charter ("Charter") provides that the number
of directors of TWC shall be seven (7), consisting of: (i) five (5) directors
("Class A Directors") elected by the holders of TWC's Class A Common Stock, par
value $.01 per share (the "Class A Common Stock"), voting separately as a class;
and (ii) two (2) directors (the "Class B and Class C Directors") elected by
holders of TWC's Class B Common Stock, par value $.01 per share (the "Class B
Common Stock"), and Class C Common Stock, par value $.01 per share (the "Class C
Common Stock"), voting together as a single
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class. In addition, under Maryland Law, TWC is required to have at least three
(3) directors. Under TWC's Bylaws, two (2) directors, at least one of which is a
Class A Director, constitute a quorum for a Board of Directors meeting and the
vote of a majority of the Class A Directors participating at such meeting is
necessary for TWC's Board of Directors to act.
On October 25, 1996 at TWC's last annual stockholders meeting, William
N. Demas, formerly a Class B and Class C Director was elected as a Class A
Director and Jose Ma. C. Castro was elected as a Class B and Class C Director to
fill the position held by Mr. Demas. Jonathan C. Kinney was also re-elected as a
Class B and Class C Director. These three directors continue to serve.
SUBSEQUENT EVENTS
TWC owned the Timberlake Project through NALP, a wholly-owned
subsidiary. NALP defaulted on quarterly interest payments to the note holder on
the purchase money mortgage secured by the Timberlake Project. The note holder
initiated foreclosure proceedings in late 1998, and on February 2, 1999, 313 of
the 361 acres were foreclosed on by the note holder. NALP continues to hold the
remaining 48 acres without any continuing obligations except for the payment of
property taxes. The preliminary site plan and various entitlements for the
development at the Timberlake property have been voided as a result of the
foreclosure. The Company is uncertain if and how the remaining 48 acres could be
developed.
(b) BUSINESS OF THE REGISTRANT
The Company's operations consist of the ownership of real estate, both
income-producing and unimproved land, and the management of these real estate
assets.
OWNERSHIP OF INCOME-PRODUCING PROPERTIES
TWC, directly and through ASI, owns a 74% interest in ASLP. ASLP owns
1.75 acres of land and an office building constructed thereon located in
Arlington, Virginia. The building is leased to an agency of the U.S. Government
under a ten year lease expiring in September of 2008. See "Business Development
- - Award of Bid and Lease Execution." During the year ended December 31, 1998,
approximately 96% of the Company's revenues was derived from income on the
Arlington Square Project. In November 1998, the Arlington Square Project was
refinanced, and in connection therewith, ASLP executed a promissory note and
various other loan documents and TWC entered into a guaranty agreement with
MetLife. See "Description of Properties - Arlington Square Project."
TWC also owns a parcel of land which is leased to Fort Washington Inn
Associates ("FWIA"), a non-affiliate of the Company, until March of 2024. The
land is improved with a 222-room Holiday Inn which is owned by FWIA. TWC
receives base rent plus overage rent under the lease both of which are paid
monthly. See "Description of Properties - Fort Washington."
OWNERSHIP OF LAND
TWC, through wholly-owned subsidiaries, currently owns four parcels of
unimproved land - Timberlake, River Oaks, Winchester, and Port-O-Dumfries. TWC
is currently marketing or considering marketing each of these properties for
sale.
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MANAGEMENT OF REAL ESTATE
TWC manages the Arlington Square Project. TWC receives management fees
equal to 5% of monthly revenues of the Arlington Square Project. See
"Description of Properties--Arlington Square Project".
COMPETITION
The Washington area real estate market has fully recovered from most of
the problems associated with the early 1990's, however, many market segments are
still depressed, particularly for the sale of unimproved land. The Company must
compete with other owners of real property that is now or will be for sale. The
lack of buyers and financing make the sale of real estate extremely difficult.
Management believes this condition is expected to continue for the foreseeable
future. The value of improved property, such as the Arlington Square Project,
has stabilized in recent years.
REGULATORY APPROVALS
In the past, when the Company acquired land for development, certain
regulatory approvals and permits were required to either improve, develop, lease
or sell the property. Approval of the preliminary site plan for Timberlake from
the Charles County Planning Commission was received during 1994. Additional
county, state and federal permits will be required for a purchaser to develop
the property and the receipt of such may be a condition of any purchase
contract.
EMPLOYEES
As of December 31, 1998, the Company employed five full-time persons
and one part-time person. Two of the Company's employees work at the Arlington
Square Project as the Chief Engineer and the Assistant Engineer.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's operations involve ownership of income-producing
properties and unimproved land. The Company currently owns four principal
properties and leases its corporate headquarters.
The following table summarizes, as of December 31, 1998, the Company's
ownership interests in its four principal properties and in two properties of
secondary importance. More detailed disclosure relating to the principal
properties follows immediately after the table.
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THE WASHINGTON CORPORATION AND SUBSIDIARIES
REAL ESTATE PROPERTIES OWNED
<TABLE>
<CAPTION>
ENCUM-
BRANCES
PERCEN- INCLUDING COSTS WRITE UP/
TAGE ACCRUED LOAN CAPITALIZED (DOWN) TO NET
OWNER- INTEREST MATURITY SUBSEQUENT TO FAIR BOOK
NAME DESCRIPTION SHIP AND TAXES DATE LAND PURCHASE VALUE VALUE
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
Arlington Square 46,481 sq. ft. of land with
Project a building of approximately
135,000 sq. ft. in
Arlington County, Va. 74% $21,500,000 12/10 2,533,038 12,352,799 3,625,120 $18,510,957(3)
Timberlake 363 acres of land zoned
for residential development
located in Charles
County, Md.(1) 100% $ 964,334 01/98 1,370,545 999,177 (1,013,222) $ 1,355,220
Ft. Washington 7.3 acres of land with a
222-room hotel located in
Ft. Washington, Pa.(2) 100% -- 400,000 -- -- $ 400,000
River Oaks 16.6 acres of land zoned
for commercial development
located in Prince William
County, Va. 100% -- 1,821,670 520,220 (2,141,890) $ 200,000
Winchester 23.21 acres of land zoned
for multi-family garden
apartments located in
Memphis, Tn. 100% -- 100,000 -- (95,000) 5,000
Port-O- 7 townhouse lots totaling
Dumfries approximately 19,436 sq. ft.
located in Dumfries, Va. 100% -- 14,829 -- (11,829) 3,000
</TABLE>
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(1) This property is owned by an wholly owned subsidiary of TWC.
(2) The lease on this property is subordinated to a first mortgage secured by
the land and the leasehold which consists of a 222-room Holiday Inn. The
Company has no payment obligation on the loan which had a balance of $0 as
of December 31, 1998.
(3) This amount reflects depreciation, deferred loan closing costs, and deferred
rental concessions.
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PROPERTIES
ARLINGTON SQUARE PROJECT
TWC, directly and through a wholly-owned affiliate, owns a 74% interest
in ASLP. ASLP owns 1.75 acres of land and an office building containing 135,000
gross square feet constructed thereon located in Arlington, Virginia. The
building is 100% leased to an agency of the U.S. Government under a ten year
lease expiring in September of 2008. The terms of the lease require the tenant
to pay base rent plus its proportionate share of certain operating expense
increases. During 1998 and 1997, the Company realized rental income from such
lease and the previous lease amounting to approximately $3,181,000 and
$3,142,000, respectively, per year, or approximately $23.39 and $23.10,
respectively, per rentable square foot based on a BOMA standard. During 1998 and
1997, approximately 96% and 95%, respectively, of the Company's revenues was
derived from the Arlington Square Project.
On November 25, 1998, the Allied Loan was repaid with proceeds of
a loan secured by the Arlington Square Project from MetLife in the original
principal amount of $21,500,000. At the closing of the MetLife Loan, $21,500,000
was disbursed (i) to repay the Allied Loan in the amount of $20,600,000; (ii) to
pay for certain costs associated with the MetLife Loan; and (iii) to fund an
escrow account for future tenant improvements in the amount of $656,000. The
MetLife Loan has a fixed interest rate of 6.80% and matures on December 1, 2010.
See "Description of Properties--Arlington Square Project".
The Allied Loan, closed on November 21, 1997, included a 30%
participation for Allied in the net cash flow and equity of the Arlington Square
Project (the "Allied Participation Interest"). The Allied Participation Interest
survives any repayment of the Allied Loan. Therefore, upon refinancing of the
Allied Loan with the MetLife Loan, the Company entered into a forbearance
agreement with Allied for the repurchase of the Allied Participation Interest.
Under the forbearance agreement, the Company agreed to pay Allied $1,850,000 for
the Allied Participation Interest, payable over 9 1/2 years at 7.5% interest
requiring monthly payments of $22,739. In return, Allied agreed to forbear on
certain of its surviving rights and subordinated its deed of trust to MetLife's
deed of trust.
INTEREST PAYMENTS AND AMORTIZATION
The annual interest rate on the outstanding principal balance of the
Metlife Loan in the amount of $21,500,000 is 6.80% payable in monthly principal
and interest payments of $147,058. The note matures on December 1, 2010. The
MetLife Loan is amortized over 26 years with a balloon payment of all remaining
indebtedness after 12 years. Prepayment of the MetLife Loan is not permitted
during the first six years of the term, and is permitted thereafter with a
prepayment penalty.
ESCROW AND RESERVE ACCOUNTS
The MetLife Loan requires that ASLP fund an escrow account for the
purpose of paying the semi-annual payments of real estate taxes held by MetLife
by making monthly payments of $20,155. ASLP is required to deposit $12,500 per
month into a Leasing Escrow account held by MetLife for the purpose of
accumulating the funds that may be required to pay for any improvement required
under the terms of a new ten year lease with the U.S. Government.
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AGREEMENTS SECURING PAYMENT OF THE METLIFE LOAN
Payment of obligations under the MetLife Loan are secured by (i) the
Deed of Trust, Security Agreement and Fixture Filing, dated November 25, 1998
among ASLP and trustees for the benefit of MetLife (the "MetLife Deed of
Trust"); (ii) the Assignment of Leases dated November 25, 1998 between ASLP and
MetLife; and (iii) the Assignment of Contracts and Agreements dated November 25,
1998, between ASLP and MetLife.
In a Guaranty Agreement dated November 25, 1998, TWC has guaranteed to
MetLife the payment and performance of all obligations of ASLP under the Note
and the other documentation related to the MetLife Loan. In a separate Unsecured
Indemnity Agreement, dated November 25, 1998, TWC has indemnified MetLife
against any Environmental Claims, as defined in the Unsecured Indemnity
Agreement, which directly or indirectly relate to the Arlington Square Property.
Finally, TWC has entered into a Subordination of Management Agreement dated
November 25, 1998, whereby TWC subordinates all of its rights under the
Management Agreement between TWC and ASLP to any obligations of ASLP to MetLife.
GENERAL INFORMATION
For federal income tax purposes at December 31, 1998, the basis of the
Arlington Square Project, including, the land, building, tenant improvements on
the project and equipment (including asset adjustments under Section 754 of the
Internal Revenue Code of 1986, as amended) are stated as follows:
<TABLE>
<S> <C>
Land $ 2,791,072
Building 19,355,790
Tenant improvements 1,588,127
Equipment 28,898
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23,763,887
Less accumulated depreciation (6,395,854)
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Total $17,368,033
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</TABLE>
Depreciation is determined using the straight-line method over the estimated
useful lives of the assets. Building and tenant improvements are depreciated
over 31.5 and 39 years respectively, and equipment is depreciated over seven
years. The realty tax rate on the project is .986%, and in 1998 ASLP paid an
aggregate of $210,443 in realty taxes.
FORT WASHINGTON
TWC owns a fee simple interest in a parcel of land on which a 222-room
hotel is built. The property is located in Ft. Washington, Pennsylvania.
Pursuant to a certain Lease Agreement dated March 24, 1974, TWC, as landlord, is
paid an annual minimum rent of $66,000, plus one percent of gross room sales,
but not less than $1,000 a month. The lease provides that upon termination of
the lease on March 29, 2024, the property together with all improvements thereon
shall accrue to the landlord free and clear of all liens. The Company believes
that the Fort Washington property is adequate for its present use. During 1998
and 1997, the Company recorded revenues of $111,285 and $102,860 respectively,
under the lease agreement.
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TIMBERLAKE
TWC, through wholly-owned subsidiaries, owns 48 acres for future
residential development in Charles County, Maryland. The Company has no plans
for the future development of the Timberlake property, as its preliminary
site plan was voided by the foreclosure by the note holder on 313 additional
acres. See "Business Development--Recent Developments--Subsequent Events."
RIVER OAKS
TWC, through a wholly-owned subsidiary, owns 100% of the partnership
interests of Four Year Trail Limited Partnership. The partnership owns 16.6
acres of land located in Prince William County, Virginia, known as River
Oaks. The Company has no obligations on this property except for the periodic
payment of real estate taxes.
COMPANY HEADQUARTERS
TWC has an operating lease for its office space at 4550 Montgomery
Avenue, Suite 220 North, Bethesda, Maryland 20814, which expires on January
31, 2004. Currently, TWC's rent obligations under the lease are $22,944 per
annum. The rent increases annually at a rate of 3%.
COMPETITION
The real estate market in the Washington Area has fully recovered
from most of the problems associated with the early 1990's, however, many
market segments are still depressed, particularly for the sale of unimproved
land. When it attempts to sell its properties, the Company must compete with
other owners of real property that is for sale. The lack of buyers and
financing makes the sale of the Company's properties extremely difficult. The
value of the Arlington Square Project has stabilized in recent years.
Competition for tenants to lease land and office space is also very
strong, however, the Company's two principal income producing properties, the
Arlington Square Project and the Fort Washington property, as of December 31,
1998, are fully under lease to tenants until 2008 and 2024, respectively.
INSURANCE
In the opinion of management of the Company, all of the Company's
primary real estate assets are adequately covered by insurance.
INVESTMENT POLICIES
No limitations exist on the percentage of the Company's assets which
may be invested in any one investment, or type of investment, although
approval by the shareholders of a majority of the outstanding shares of Class
A, Class B and Class C Common Stock, voting jointly as a class, is required
before a sale or other disposition of all or substantially all of the assets
of the Company or any material subsidiary.
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Management's objective for the foreseeable future is to retain the
income-producing properties and to prepare for sale all non-income-producing
real estate assets. In the foreseeable future, the Company contemplates no
new investments in real estate, interests in real estate, real estate
mortgages or securities of or interests in entities primarily engaged in real
estate activities. In addition, during such period, the Company does not
intend to acquire other assets, either primarily for possible capital gain or
primarily for income.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Under TWC's Amended and Restated Charter, filed July 30, 1992 with
the Maryland Department of Assessments and Taxation ("TWC's Charter"), TWC
has three classes of common stock: Class A Common Stock, Class B Common
Stock, and Class C Common Stock (Class A, B and C Common Stock collectively
referred to herein as the "New Common Stock"). At the present time, there is
no established public trading market for any class of the New Common Stock.
As of December 31, 1998, there were 123 record holders of the Class A Common
Stock, 418 record holders of the Class B Common Stock, and 16 record holders
of the Class C Common Stock.
TWC has been unable to ascertain any market for TWC's common stock
during 1998 or 1997. Consequently, TWC does not have any information
concerning high and low bids on any class of its common stock during 1998 or
1997.
TWC has not paid any dividends or distributions on its common stock
since 1990.
Under TWC's Charter and except as may otherwise be required by law,
holders of Class A Common Stock are entitled to receive 100% of all dividends
and other distributions (the "Dividend Preference") made by TWC in respect of
its capital stock until such time as dividends and other distributions paid
to the holders of Class A Common Stock equal, in aggregate, to approximately
$5,500,000 (the "First Trigger").
Following the First Trigger, if it occurs, the holders of Class A
Common Stock are to receive approximately 98.6%, and holders of Class B
Common Stock are to receive the remaining approximate 1.4%, of all dividends
and other distributions paid in respect of TWC's capital stock until such
time as the Dividend Preference paid to the holders of Class A Common Stock
equal 100% of the Allowed Class 7 Claims (the "Second Trigger"). Until the
occurrence of the Second Trigger, if any, the holders of Class C Common Stock
have no right to receive any dividends in respect of Class C Common Stock.
In addition, under the Charter, the Class A Common Stock has an
aggregate liquidation preference in an amount equal to approximately
$11,000,000 reduced (but not below zero) by the aggregate amount of dividends
and other distributions paid to the holders of the Class A Common Stock.
Under the Charter, following the Second Trigger, if it occurs, all
outstanding shares of Class A Common Stock, Class B Common Stock and Class C
Common Stock will automatically be converted into a single class of common
stock (the "Single Class Common Stock"). Upon such conversion, the holders of
Class B Common Stock and the holders of the Class C Common Stock will receive
an aggregate of 25% of the outstanding shares of the Single Class Common
Stock, such 25% to be allocated PRO RATA based on the number of shares of
Class B Common Stock and Class C Common Stock outstanding at the time of such
conversion. Except as otherwise provided in the Charter or required by law,
upon the occurrence of the Second Trigger: (i) shares of the Single Class
Common Stock will rank PARI PASSU and will share equally, share for share, in
any dividends or other distributions made by TWC, and will be identical in
all respects; and (ii) the holders of the Single Class Common Stock will be
entitled to one vote per share on all matters submitted for shareholder vote.
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Following the Second Trigger, if it occurs, TWC is required to
provide the holders of outstanding shares of Class A Common Stock, Class B
Common Stock and Class C Common Stock with a quarterly statement (which may
be contained in reports periodically filed by TWC with the Securities and
Exchange Commission or regularly provided by TWC to its shareholders) of the
then-current amount of the Dividend Preference and other distributions
theretofore paid to the holders of Class A Common Stock. As of December 31,
1998, the then-current amount of the Dividend Preference was approximately
$11,000,000. The aggregate amount of the Dividend Preference paid to holders
of the Class A Common Stock was $0.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
MATERIAL CHANGES IN FINANCIAL CONDITION
During the year ended December 31, 1998, the Company's total assets
were reduced by $3,000,000 from $24,118,000 to $21,118,000. Such decrease was
primarily the result of depreciation of operating property and equipment and
an increase in the valuation allowance of $547,000 on Timberlake, offset, in
part, by increases in cash and cash equivalents and escrow deposits.
Real estate and development property decreased by $547,000 from
$2,110,000 at December 31, 1997 to $1,563,000 at December 31, 1998. Such
decrease was primarily the result of an increase in the valuation allowance
of $547,000 on the Timberlake property.
Operating property and equipment decreased by $545,000 from
$18,511,000 at December 31, 1997 to $17,966,000 at December 31, 1998. Such
decrease was primarily the result of depreciation and the amortization of
deferred rent concessions on the Arlington Square Project, offset, in part,
by the capitalization of repair costs on the Arlington Square Project.
Cash and cash equivalents increased by $606,000 from $223,000 at
December 31, 1997 to $829,000 at December 31, 1998. Such increase was
primarily the result of the mortgage refinancing of the Arlington Square
Project. The refinancing was completed on November 25, 1998.
Escrow deposits decreased by $511,000 from $569,000 at December 31,
1997 to $58,000 at December 31, 1998. Such decrease was primarily the result
of periodic deposits made to the reserves on the Arlington Square Project,
offset, in part, by the use of escrow funds for costs related to the
Arlington Square Project. As a result of the Arlington Square mortgage
refinancing on November 25, 1998, the required reserves were decreased.
Reserves are required by the mortgage lender, and are to be used for the
payment of certain capital expenditures, semi-annual payments of real estate
taxes and the annual payment of insurance as well as escrowed funds for
capital improvements. See "Description of Properties--Arlington Square
Project".
During the year ended December 31, 1998, the Company's total
liabilities increased by $954,000 from $23,772,000 at December 31, 1997 to
$24,726,000 at December 31, 1998. Such increase was primarily the result of
an increase in note payable--Arlington Square Project and accrued interest
payable.
Note payable--Arlington Square Project increased by $800,000 from
$22,550,000 at December 31, 1997 to $23,350,000 at December 31, 1998. Such
increase was the result of the mortgage
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refinancing of the ASLP Loan on November 25, 1998.
Accrued interest payable increased by $52,000 from $259,000 at
December 31, 1997 to $311,000 at December 31, 1998. This increase was the
result of an increase in accrued interest payable on the Timberlake Note. See
"Description of Properties--Timberlake".
Accounts payable and other liabilities increased by $108,000 from
$65,000 at December 31, 1997 to $173,000 at December 31, 1998. Such increase was
primarily the result of an increase in accrued expenses.
RESULTS OF OPERATIONS
Revenues increased by $88,000 from $3,238,000 for the year ended
December 31, 1997 to $3,327,000 for the year ended December 31, 1998. Such
increase was primarily the result of an increase in operating property income
and other income, offset, partially, by loss on sale of investments in 1997.
Operating property rental income decreased by $24,000 from $3,205,000
for the year ended December 31, 1997 to $3,181,000 for the year ended
December 31, 1998. This decrease was the result of decreased income received
from the Arlington Square Project, which is the Company's primary source of
rental income.
Other income increased by $23,000 from $0 for the year ended
December 31, 1997 to $23,000 for the year ended December 31, 1998. This increase
was attributable to build out fees earned by Arlington Square, Inc.
The equity interest in net income from partnership investments
increased by $7,000 from $3,000 for the year ended December 31, 1997 to $10,000
for the year ended December 31, 1998. This increase was primarily the result of
a distribution from joint ventures.
The net loss on sale of investments decreased by $73,000 for the year
ended December 31, 1998 from a loss of $73,000 for the year ended December 31,
1997 to $0 for the year ended December 31, 1998. The loss of $73,000 in 1997 was
the result of the sale of a limited partnership interest in Ashton Glen Limited
Partnership.
Total expenses increased by $1,331,000 from $2,688,000 for the year
ended December 31, 1997 to $4,019,000 for the year ended December 31, 1998. This
increase is primarily due to a provision to reduce assets to fair market value,
an increase in interest expense, and an increase in general and administrative
expenses, partially, offset, by a decrease in operating property expenses and
other expenses.
During 1997, the Company recorded a provision for estimated losses on
asset dispositions in the amount of $100,000. For 1998, the Company increased
the provision by an additional $547,000. This provision was due to the reduction
in net realizable value of certain real estate and development properties of the
Company.
Interest expense increased by $620,000 from $1,535,000 for the year
ended December 31, 1997 to $2,156,000 for the year ended December 31, 1998. This
increase was the result of a refinancing of the mortgage on the Arlington Square
Project, and the resulting one-time recognition of the additional
13
<PAGE>
interest liability to the previous mortgage lender.
Operating property expenses decreased by $17,000 from $824,000 for the
year ended December 31, 1997 to $807,000 for the year ended December 31, 1998.
This decrease is due to a decrease in operating expenses relating to the
Arlington Square Project.
General and administrative expenses increased by $350,000 from $119,000
for the year ended December 31, 1997 to $470,000 for the year ended December 31,
1998. This comparative increase was primarily the result of a one-time write off
of previously accrued professional fees in 1997.
Other expenses decreased by $69,000 from $108,000 for the year ended
December 31, 1997 to $39,000 for the year ended December 31, 1998. This increase
was primarily the result of a decrease in consulting fees.
Net (loss) income before depreciation and amortization decreased by
$1,241,000 to a loss of $691,000 for the year ended December 31, 1998 from
income of $551,000 for the year ended December 31, 1997. Such decrease was a
result of an increase in total expenses as described above, offset, in part, by
an increase in revenues.
Depreciation and amortization increased by $460,000 from $954,000 for
the year ended December 31, 1997 to $1,413,000 for the year ended December 31,
1998. This increase was the result of a one-time amortization for the
un-amortized portion of the loan closing costs from the previous mortgage lender
on the Arlington Square Project.
Net loss increased by $1,800,000 from a net loss of $403,000 for the
year ended December 31, 1997 to a net loss of $2,204,000 for the year ended
December 31, 1998. This increase was the result of the changes in the items
described above.
LIQUIDITY AND CAPITAL RESOURCES: OUTLOOK
The Company's primary sources of funds for 1998 came from rental
income, distributions the Company received from affiliated partnerships and
property management fees. As of December 31, 1998, the Company had cash and cash
equivalents and escrow deposits totaling approximately $886,548 of which $57,655
was escrow deposits. The Company expects its primary source of funds for 1999 to
again be rents received on the Arlington Square Project.
During 1998, cash and cash equivalents increased by $606,000 as
compared to an increase of $82,000 for 1997. The increase in 1998 was primarily
due to decreased interest payments on the Timberlake Notes, a reduction in real
estate taxes and a reduction in general and administrative expenses, offset, in
part, by an increase in operating property expenses. Additionally, it is
attributable to the refinancing of debt that provided cash.
Future sources of funds are anticipated to come from the rents,
property management fees and distributions from affiliated partnerships.
However, distributions from affiliated partnerships are no longer a significant
portion of the Company's cash flow. The Company has tried without success to
sell its remaining assets.
TWC's agreement to manage the Arlington Square Project provides for
management fees
14
<PAGE>
approximating $96,000 annually. See "Description of Properties--Arlington Square
Project". The continued ownership of the Arlington Square Project is necessary
to provide the Company with sufficient cash for operations.
The Company's primary use of operating funds is anticipated to be for
corporate overhead expenses and principal payments on the ASLP Note.
On October 25, 1996 at TWC's annual stockholders meeting, William N.
Demas, formerly a Class B and Class C Director was elected as a Class A Director
and Jose Ma. C. Castro was elected as a Class B and Class C Director to fill the
position held by Mr. Demas. Jonathan C. Kinney was also re-elected as a Class B
and Class C Director.
The Company does not have a plan to address its liquidity problems
other than to continue to seek to have creditors extend the maturity of their
notes and to seek to have creditors exchange their debt on certain properties
for equity in the property securing their debt. The Company will also, to the
extent if necessary, attempt to delay payment for certain services until
properties are sold. If these attempts are not successful, the Company may be
forced to sell its remaining properties for significantly less than recorded
values and/or seek protection from its creditors under the Bankruptcy Code.
15
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Independent Auditor's Report 17
Consolidated Balance Sheets at December 31, 1997 and 1996 18
Consolidated Statements of Operations for the years ended
December 31, 1997 and December 31, 1996 19
Consolidated Statements of Stockholders' (Deficiency) Equity 20
Consolidated Statements of Cash Flows 21
Notes to Consolidated Financial Statements 22-29
</TABLE>
16
<PAGE>
[LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
THE WASHINGTON CORPORATION
Bethesda, Maryland
We have audited the accompanying Consolidated Balance Sheets of THE
WASHINGTON CORPORATION and Subsidiaries (the "Company") as of December 31,
1998 and 1997, and the related Consolidated Statements of Operations,
Stockholders' Equity and Cash Flows for the years then ended. These
consolidated statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements as referred to above
present fairly, in all material respects, the financial position of The
Washington Corporation and Subsidiaries as of December 31, 1998 and 1997, and
the results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
The accompanying financial statements as of December 31, 1998 have been
prepared assuming that the Company will continue as a going concern. As
discussed in Note 14 to the financial statements, the Company has incurred
continuing losses from operations and has been unable to dispose of certain
of its real estate assets. As a result, the Company may not be able to
continue to meet its obligations as they come due. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
These factors raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these matters are also
discussed in Note 14. The eventual outcome of these matters are not presently
determinable and the consolidated financial statements do not include any
adjustments that might be necessary should the Company be unable to continue
in existence.
/s/ Aronson, Fetridge & Weigle
Rockville, Maryland
March 24, 1999
6116 Executive Boulevard, Fifth Floor
Rockville, Maryland 20852
Phone (301) 231-6200
Fax (301) 231-7630
Internet http://www.aronson.com
17
<PAGE>
THE WASHINGTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AT DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
ASSETS
Real estate and development property (Notes 1,2, and 7) $ 1,563,220 $ 2,110,342
Operating property and equipment, net (Notes 1,2, 6 and 7) 17,965,953 18,510,957
Cash and cash equivalents (Note 1) 828,893 222,821
Escrow deposits (Note 6) 57,655 569,348
Land purchase leaseback (Note 4) 400,000 400,000
Debt-discount and equity participation liability 0 1,950,000
Other assets (Note 5) 301,884 354,994
----------- -----------
Total Assets $21,117,605 $24,118,462
----------- -----------
----------- -----------
LIABILITIES
Note payable-Arlington Square Project (Note 6) $23,350,000 $22,550,000
Other notes and loans payable (Note 7) 891,698 898,009
Accrued interest payable 310,985 259,292
Accounts payable and other liabilities 173,298 65,078
----------- -----------
Total Liabilities 24,725,981 23,772,379
----------- -----------
COMMITMENTS AND CONTINGENCIES (Notes 2,4,6,11,12 and 13)
STOCKHOLDERS' (DEFICIT) EQUITY
Common stock, $.01 par value; shares issued (Note 10)
Class A - 1,640,327 shares 16,403 16,403
Class B - 21,476 shares 215 215
Class C - 45,119 shares 451 451
Additional paid-in capital 2,804,821 2,804,821
Accumulated deficit (6,430,266) (2,475,807)
----------- -----------
Total Stockholders' (Deficit) Equity (3,608,376) 346,083
Total Liabilities and Stockholders' (Deficit) Equity $21,117,605 $24,118,462
----------- -----------
----------- -----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
18
<PAGE>
THE WASHINGTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
REVENUES
Operating property rental income (Note 11) $3,181,202 $3,205,248
Rent from land purchase leaseback (Note 4) 111,285 102,860
Other income 23,051 0
Equity interest in net income from partnership
investments 0 3,437
Interest income 12,350 774
Loss on sale of investments (Note 3) 0 (73,417)
---------- ----------
Total revenues 3,327,888 3,238,902
---------- ----------
EXPENSES
Provision for estimated losses on asset value adjustments (Note 2) 547,122 100,000
Interest expense (Notes 6 and 7) 2,255,559 1,535,665
Operating property expenses 806,651 824,040
General and administrative expenses 469,091 119,837
Other expenses 39,000 108,519
---------- ----------
Total expenses 4,117,423 2,688,061
---------- ----------
NET INCOME BEFORE DEPRECIATION AND AMORTIZATION (789,535) 550,841
DEPRECIATION AND AMORTIZATION (NOTE 1) 1,414,924 954,339
NET LOSS BEFORE EXTRAORDINARY LOSS (2,204,459) (403,498)
EXTRAORDINARY LOSS (NOTE 13) (1,750,000) 0
---------- ----------
NET LOSS (3,954,459) (403,498)
---------- ----------
---------- ----------
LOSS PER COMMON SHARE:
Net loss before extraordinary loss $(1.34) $(0.25)
---------- ----------
---------- ----------
Net loss from extraordinary items $(1.07) $0.00
---------- ----------
---------- ----------
Net loss $(2.41) $(0.25)
---------- ----------
---------- ----------
Weighted average common shares outstanding 1,640,327 1,640,327
---------- ----------
---------- ----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
19
<PAGE>
THE WASHINGTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
------------ ----------- ------------ -----------
<S> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1997 $ 17,069 $ 2,804,821 $(2,072,309) $ 749,581
NET LOSS 0 0 (403,498) $ (403,498)
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1997 17,069 2,804,821 (2,475,807) $ 346,083
NET LOSS (3,954,459) $(3,954,459)
----------- ----------- ----------- -----------
BALANCE, DECEMBER 31, 1998 $ 17,069 $ 2,804,821 $(6,430,266) $(3,608,376)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
20
<PAGE>
THE WASHINGTON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (3,954,459) $ (403,498)
Adjustments to reconcile net loss to net cash (used) provided
by operating activities:
Provision for estimated losses on asset value adjustments 547,122 100,000
Depreciation and amortization 1,414,924 954,339
Amortization of debt discount on participation liability 100,000 0
Extraordinary loss from equity participation 1,750,000 0
Amortization of deferred rental concessions 159,557 190,932
Loss on sale of investments 0 73,417
Increase in deferred rental concession (656,000) 0
Decrease in other assets 53,110 (5,956)
Decrease (increase) in interest payable 51,693 136,318
(Increase) decrease in accounts payable and other liabilities 108,220 (132,860)
------------ ------------
Net cash (used) provided by operating activities (425,833) 912,692
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of partnership 0 180,000
Purchase of fixed assets 0 (116,175)
Withdrawals from restricted escrows 958,710 172,355
Deposits to restricted escrows (447,017) (569,348)
------------ ------------
Net cash provided (used) in investing activities 511,693 (333,168)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payment of mortgage loan (20,600,000) (20,362,749)
Proceeds from mortgage loan 21,500,000 20,600,000
Proceeds from note payable 0 20,000
Principal payments on notes payable (6,311) (183,697)
Payment of loan fees and settlement costs (373,477) (596,825)
Distributions from partnerships 0 25,650
------------ ------------
Net cash provided (used) in financing activities 520,212 (497,621)
NET CHANGE IN CASH AND CASH EQUIVALENTS 606,072 81,903
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 222,821 140,918
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 828,893 $ 222,821
------------ ------------
------------ ------------
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid during the year $ 2,103,866 $ 1,289,347
------------ ------------
------------ ------------
</TABLE>
Noncash transactions
During 1998, the Company satisfied an obligation to the mortgage holder for
30% participation interest in its real property by establishing the value of
that interest at $1,850,000 and agreeing to pay that obligation on an
installment basis over 9.5 years (Note 6)
The accompanying Notes to Consolidated Financial Statements are an integral part
of these financial statements.
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1
ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The accompanying consolidated statements include the accounts of The
Washington Corporation ("TWC") and all entities over 50% owned by TWC
(collectively, the "Company"). Investments in 5% to 50% owned ventures and
partnerships are accounted for using the cost or equity method. As appropriate,
all significant intercompany transactions have been eliminated in consolidation.
The Company considers its operating activities to be all within one operating
segment.
REVENUE RECOGNITION AND DEFERRED RENTAL CONCESSIONS
Profit on the sale of real estate is recognized at the time the sale is
settled. Rental income from leases, with scheduled rental increases during their
lease terms, is recognized for financial reporting purposes on a straight-line
basis net of amortization of deferred rental concessions.
REAL ESTATE AND DEVELOPMENT PROPERTY EXPENSES
The Company records its real estate and development property at the
lower of accumulated cost or estimated net realizable value. The Company follows
the policy of charging, as current expenses, the holding costs of real estate
such as taxes, insurance and interest, to the extent the properties are not
currently being developed. Direct development and engineering costs are
capitalized as part of property cost. Interest expense totaled $2,255,559 and
$1,535,656 for the years ended December 31, 1998 and 1997, respectively. No
interest was capitalized during either of the periods noted above.
OPERATING PROPERTY AND EQUIPMENT - ARLINGTON SQUARE PROJECT
At December 31, 1998 and 1997, operating property and equipment is
stated at the net "fresh start" value of $23,000,000, less related accumulated
depreciation and amortization of related intangibles. For "fresh start"
reporting purposes, the Arlington Square Project was revalued to an amount equal
to the original amount of the non-recourse debt secured by the property.
Depreciation is calculated using the straight-line method over the estimated
useful lives of the assets. Buildings and related improvements are depreciated
over 31.5 and 39 years, respectively. Tenant improvements are amortized using
the straight-line method over the lesser of the term of the life of the
respective lease or the useful life of the improvements. Deferred rental
concessions are amortized over the term of the lease.
At December 31, 1998 and 1997, operating property and equipment
consisted of:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Land, building and equipment $23,363,353 $23,069,531
Tenant improvements 1,587,548 1,587,548
Deferred rental concessions, net 639,600 143,157
Deferred loan closing costs, net 310,516 580,242
----------- -----------
25,901,017 25,380,478
Less depreciation and amortization (7,935,064) (6,869,521)
----------- -----------
$17,965,953 $18,510,957
----------- -----------
----------- -----------
</TABLE>
22
<PAGE>
CASH AND CASH EQUIVALENTS
For purposes of the statements of cash flows, the Company considers all
highly liquid instruments purchased with a maturity of three months or less to
be cash equivalents. The Company periodically has cash balances which may exceed
federally insured limits. The Company does not believe that this results in any
significant credit risk.
ESCROW DEPOSITS
At December 31, 1998 and 1997, deposited funds of $57,655 and $569,348
were restricted for replacement reserve, and tax and insurance escrows,
primarily for the Arlington Square Project as required by the lender.
MANAGEMENT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
BASIC NET LOSS PER SHARE
In 1997, the Company adopted Statement of Financial Accounting Standard
No. 128, EARNINGS PER SHARE. The adoption of this Standard had no effect on
current period or previously reported net loss per share. The basic net loss per
common share is computed by dividing the net loss by the weighted average number
of common shares outstanding during the period. The weighted average number of
common shares outstanding is comprised of all classes of common stock.
ACCOUNTING PRONOUNCEMENTS
In June 1997 the Financial Accounting Standard Board issued Statement
of Financial Accounting No. 130 REPORTING COMPREHENSIVE INCOME. The Company had
no elements of shareholders' (deficit) equity that should be reported in a
separate statement of comprehensive income.
NOTE 2
REAL ESTATE AND DEVELOPMENT PROPERTY
Residential development efforts in the past included the acquisition of
raw land for the development of planned sites or finished building lots for sale
to homebuilders. The Company, through a wholly-owned subsidiary, owned 363 acres
known as Timberlake in Charles County, Maryland at December 31, 1998. The
property has been foreclosed upon in February, 1999. During 1995, management
assessed the property's net realizable value and has recorded a $366,100
adjustment to income to lower the property value from $2,368,442 to $2,002,342.
Management reassessed the property value in 1997 and determined that an
additional $100,000 reserve was necessary to adjust the property to fair market
value. Since the property has been foreclosed upon in February, 1999, the
Company has made additional reserves on the property down to the carrying value
on the debt.
23
<PAGE>
The Company also owns a property, known as River Oaks, that was
intended to be a retail development site in Prince William County, Virginia.
Pursuant to its Chapter 11 reorganization plan, the lender has released its debt
and security interest on the property in exchange for the Company's release of
the lender's development obligations. The property had been revalued in "fresh
start" accounting to $200,000.
In addition, in 1995, the Company recorded an adjustment of $81,472 to
reduce other development properties to their net realizable value of $8,000.
NOTE 3
INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED PARTNERSHIPS
RESIDENTIAL PARTNERSHIPS
The Company owned a 5% limited partnership interest in a 128-unit HUD
assisted apartment complex that was recorded at $278,644 at December 31, 1996.
The Company sold its partnership interest in 1997 for $180,000. A payment of
$25,656 was received from this project during 1997.
NOTE 4
LAND PURCHASE LEASEBACK
The Company owns a land purchase leaseback representing a fee simple
interest in land underlying a hotel located in Ft. Washington, Pennsylvania. The
property had an original cost and current value of $400,000. The minimum annual
rent under the lease which expires in 2024 is $66,000 plus one percent of gross
room sales of the property, but not less than $1,000 a month. The Company's
lease on the property was subordinated to a first trust loan, however, the loan
was fully repaid at December 31, 1996. The minimum lease payments due pursuant
to this lease through expiration are as follows:
<TABLE>
<S> <C>
1999 78,000
2000 78,000
2001 78,000
2002 78,000
2003 78,000
Thereafter 1,657,500
-----------
$2,047,500
</TABLE>
NOTE 5
OTHER ASSETS
Other assets includes rent receivable from the tenant in the Arlington
Square Project in the amounts of $257,473 and $335,422 at December 31, 1998 and
December 31, 1997, respectively.
NOTE 6
NOTE PAYABLE - ARLINGTON SQUARE PROJECT
From January 1, 1997 to November 21, 1997, the Partnership was
encumbered by a mortgage to the Fuji Bank. The outstanding principal balance on
the mortgage loan accrued interest at a blended rate of 6.63%, based on the
LIBOR rates. The note was a cash-flow mortgage with all excess cash flow, as
24
<PAGE>
defined in the note agreement, being applied to reduce the principal balance and
to fund the required escrows.
On November 21, 1997, the original ASLP Loan was repaid with the
proceeds of the Allied Loan, secured by the Arlington Square Project, from
Allied in the original principal amount of $24,300,000. At the closing of the
Allied Loan, pursuant to a loan agreement among Allied, ASLP, ASI, and TWC (the
"Loan Agreement"), $20,600,000 was disbursed pursuant to two promissory notes
(the "Notes"), a first lien in the amount of $19,600,000 and a second lien in
the amount of $1,000,000 (i) to repay the ASLP Loan in the amount of
$19,856,454; (ii) to pay for costs associated with the Allied Loan in the amount
of $243,506; and (iii) to deposit $500,000 in an escrow account under Allied's
control to be used to pay for anticipated tenant improvements ("T.I. Reserve")
that would be required under the terms of a new ten year lease to an agency of
the U.S. Government.
From January 1, 1998 to November 25, 1998, ASLP's property was
encumbered by mortgage notes to Allied. The outstanding principal balance on the
mortgage loans accrued interest at a blended rate of 10%, based on the LIBOR
rates. The notes were cash-flow mortgages with all excess cash flow, as defined,
being applied to reduce the principal balance and to fund the required escrows.
One of the mortgage agreements provided for the lender to receive a
participation interest of 30% in the net cash flow and a 30% equity value in the
property if and when it is sold, with such provision to survive any payoff of
the mortgage.
On November 25, 1998, ASLP refinanced the above described mortgages
with a new mortgage with MetLife in the amount of $21,500,000, secured by a
first deed of trust on the land and building. This note bears interest at 6.8%
and both principal and interest are payable in monthly installments of $147,058
beginning in January 1999, with the outstanding principal of approximately $15.9
million balance due on December 1, 2010.
On December 1, 1998, ASLP entered into a forbearance agreement with
Allied whereby Allied gave notice of demand for full payment of its
participation interest in the equity value of the property and established the
value of that interest at $1,850,000, including Allied's cash flow interest for
the period October 1 through December 31, 1998. Under the agreement, the
partnership is to pay Allied its participation interest in equal monthly
installments of $22,739, including interest at 7.5% over a term of 9 1/2 years.
Allied's participation interest is collaterized by a deed of trust in the real
estate and is guaranteed by all of the partners. Each partner's guarantee is
secured by a pledge of its interest in the partnership. Allied agreed to
forebear on certain of its surviving rights from the mortgage note, including an
abatement of its right to the property's net cash flow, provided all payments
under the agreement are paid when due. In addition, Allied subordinated its deed
of trust to the deed of trust of MetLife.
NOTE 7
OTHER NOTES AND LOANS PAYABLE
Other notes and loans payable at December 31, 1998 and 1997 consist of
the following:
25
<PAGE>
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Notes payable collateralized by real estate bearing
interest at 10%, payable interest only until final
maturity in January, 1998. As of the date of this
report, the note is in default. $880,000 $880,000
Note payable with bank, secured by automobile,
bearing interest at 8.25%, payable in monthly
principal and interest payments of $630,
due August 7, 2000. 11,698 18,008
Total $891,698 $898,008
-------- --------
-------- --------
</TABLE>
At December 31, 1998, the scheduled future maturities of the notes is as
follows:
<TABLE>
<CAPTION>
Year Ending
December 31 Amount
----------- --------
<S> <C>
1999 $886,848
2000 4,850
--------
TOTAL $891,698
--------
--------
</TABLE>
NOTE 8
INCOME TAXES
As of December 31, 1998, the Company had tax net operating loss
carryforwards of approximately $18,002,000. The deferred tax asset associated
with these net operating loss carryforwards of approximately $7,201,000 is
offset by the valuation allowance applied to the deferred tax asset. The net
operating losses for income tax reporting purposes will expire as follows:
<TABLE>
<S> <C> <C> <C>
2004 - $1,309,000 2007 - $9,405,000
2005 - 5,652,000 2008 - 1,429,000
2006 - 155,000
</TABLE>
NOTE 9
RELATED PARTY TRANSACTIONS
During 1998 and 1997, the Company engaged a law firm in which one
current director of the Company serves as partner in the firm. During 1998 and
1997, the Company paid $16,033 and $21,804, respectively, in fees to this law
firm. In addition, the parking garage at the Arlington Square Project is managed
by an entity affiliated with this director of the Company.
NOTE 10
COMMON STOCK AND DISTRIBUTIONS
26
<PAGE>
In connection with a reorganization in 1992, the equity interests of
the Company have been restructured as follows:
Unsecured creditors with pre-confirmation claims totaling approximately
$11,000,000 exchanged their interests for 1,675,163 shares of the Class A Common
Stock, representing 100% of such class.
Pre-confirmation shareholders of the Company (other than controlling
shareholders as defined in the Plan) exchanged 610,736 shares of Old Common
Stock for 24,429 shares of the Class B Common Stock, representing 100% of such
class.
Controlling shareholders of the Company exchanged their 1,134,225,
shares of Old Common Stock for 45,369 shares of the Class C Common Stock,
representing 100% of such class.
Under the terms of the Plan, holders of the Class A Common Stock will
receive 100% of all dividends paid by the Company in respect of its capital
stock until such time as the cumulative dividends and other distributions paid
to holders of Class A Common Stock equal 50% of the allowed Class 7 bankruptcy
claims of approximately $11,000,000 (the "First Trigger").
Following the First Trigger, the holders of the Class A Common Stock
will receive approximately 98.6% (with Class B stockholders receiving 1.4%) of
all dividends paid in respect of the Company's capital stock until such time as
the cumulative dividends and other distributions paid to holders of Class A
Common Stock equal 100% of the allowed Class 7 bankruptcy claims (the "Second
Trigger").
Following the Second Trigger, all outstanding shares of Class A Common
Stock, Class B Common Stock and Class C Common Stock will automatically convert
into a single class of common stock.
The holders of Class A Common Stock also have an aggregate liquidation
preference of an amount equal to the amount of Class 7 bankruptcy claims allowed
in the Company's Chapter 11 case. All dividends or distributions made with
respect to the Class A Common Stock shall reduce the liquidation preference
dollar for dollar.
As of December 31, 1998, the number of new common shares outstanding is
as follows:
<TABLE>
<S> <C>
Class A 1,640,327
Class B 21,476
Class C 45,119
</TABLE>
NOTE 11
LESSOR ARRANGEMENTS
The Company, through its 74% interest in ASLP, owns a building which is
100% leased to an agency of the U.S. Government under a ten year lease expiring
in September, 2008. During the years ended December 31, 1998 and December 31,
1997, the Company realized income from this lease of approximately $3,181,000
and $3,142,000, respectively, or 96% and 95% of total revenues, respectively.
The terms of the lease require the tenant to pay base rent plus its
proportionate share of increases in certain operating expenses.
27
<PAGE>
The minimum lease payments due pursuant to this lease are as follows:
<TABLE>
<S> <C>
1999 3,066,191
2000 3,066,091
2001 3,066,091
2002 3,066,091
2003 3,066,091
Thereafter 14,564,406
-----------
Total $29,895,361
-----------
-----------
</TABLE>
NOTE 12
OFFICE LEASE
In January 1999, the Company executed an operating lease as lessee, for
its office space which expires January 31, 2004. The rent is increased annually
at 3%. The future annual rents under this lease are:
<TABLE>
<S> <C>
1999 24,271
2000 23,575
2001 24,281
2002 25,006
2003 25,750
Thereafter 2,151
--------
Total $125,034
--------
--------
</TABLE>
Rental expense under the Company's office lease agreements was $15,828
and $17,076 for 1998 and 1997, respectively.
NOTE 13
EXTRAORDINARY ITEMS
In accordance with Statement of Position 97-1, "Accounting by
participating Mortgage Loan Borrowers" issued by the American Institute if
Certified Public Accountants, during 1998, the Partnership established a
participation liability and a debt-discount for the fair value of the
participation interest with its lender (Note 6). SOP 97-1 is effective for
fiscal years beginning after June 30, 1997, and requires that upon initial
application its provisions be reported as a cumulative effect of a change in
accounting principle. Because the effect of amortization of the debt discount in
1997 would have been immaterial, the Partnership has not made such a cumulative
effect adjustment.
In 1998, the participation interest in the equity value was converted
to a note and a forbearance agreement was executed dated December 1, 1998 (Note
6). As such, the unamortized portion of the debt-discount, net of the gain on
the conversion of the participation liability, has been recorded as an
extraordinary item.
NOTE 14
GOING CONCERN ISSUES
28
<PAGE>
The Company has continued to incur losses and has been unable to
liquidate certain of its real estate assets in a timely manner and is facing
certain liquidity problems in the near future if these assets cannot be
disposed. These factors raise substantial doubt about the Company's ability to
continue as a going concern. Management does not have a formal plan to address
these possible liquidity problems although they will continue to monitor and
reduce administrative costs and/or attempt to delay payment for certain services
until properties are sold. If these attempts are not successful, the Company may
be forced to sell its remaining properties for significantly less than the
recorded values and/or seek protection from its creditors under the Bankruptcy
Code. The eventual outcome of these matters cannot be determined. The
accompanying financial statements do not include any adjustments to assets or
recorded liabilities of the Company if it is forced to liquidate prematurely and
sales of assets and settlement of liabilities are not conducted in the normal
course of business.
29
<PAGE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
30
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
EXECUTIVE OFFICERS AND DIRECTORS OF THE COMPANY
TWC's Bylaws require no less than two (2) directors, at least one of
which is a Class A Director, shall constitute a quorum for a Board of
Directors meeting and the vote of a majority of the Class A Directors
participating at such meeting is necessary for the Board to act. The Board of
Directors is composed of one (1) Class A Director and two (2) Class B
Directors. On October 25, 1996, William N. Demas, formerly a Class B and
Class C Director was elected as a Class A Director and Jose Ma. C. Castro was
elected as a Class B and Class C Director to fill the position held by Mr.
Demas. Jonathan C. Kinney continues to serve as a Class B and C Director. All
three directors are elected to serve until the next annual meeting of
shareholders or the next special meeting of shareholders called for the
election of directors, and until their successors have been elected and
qualified. TWC did not hold an annual or special meeting of shareholders in
1998. See "Description of Business - Business Development Recent
Developments."
TWC's executive officers and directors are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William N. Demas 62 Chairman of the Board of Directors,
Chief Executive Officer and President
Jonathan C. Kinney 53 Director
Jose Ma. C. Castro 43 Director
Geraldine Piatt 63 Secretary
</TABLE>
William N. Demas has been Chairman of the Board of Directors, Chief
Executive Officer and President of TWC since it was established in 1979. Mr.
Demas served as Chairman of the Board of Directors and Chief Executive
Officer of Capital Mortgage Investors, TWC's predecessor, from 1969 to 1979.
Jonathan C. Kinney has served as a director of TWC since 1982. Mr.
Kinney is a partner at the law firm of Bean, Kinney & Korman, P.C., which has
served as the Company's counsel in various corporate and real estate
transactions since 1984.
Jose Ma. C. Castro has served part-time as the Controller of the
Company since 1995. Mr. Castro also currently serves as a project accountant
with the engineering firm of ICF Kaiser International, Inc., a position he
has held since 1993. Mr. Castro previously served as the Controller of the
Company from 1988 through May 1993.
Geraldine Piatt has served as the Secretary of the Company since
1992. Ms. Piatt also serves as
31
<PAGE>
property management administrator since 1989.
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934, AS
AMENDED
Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires that directors and officers of a registrant
and persons owning more than ten percent of such registrant's equity
securities registered under Section 12 of the Securities Exchange Act file
reports of ownership and changes in ownership ("Section 16 Filings") with the
Securities and Exchange Commission (the "SEC"). The SEC requires that copies
of all such Section 16 Filings be furnished by the filers to the registrant.
TWC has not received any Section 16 Filings during Fiscal 1998.
ITEM 10. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information concerning the annual
compensation earned by the President and Chief Executive Officer of TWC (the
"Named Executive Officer") for services rendered to TWC in all capacities for
the fiscal years ended December 31, 1998 ("Fiscal 1998"), December 31, 1997
("Fiscal 1997") and December 31, 1996 ("Fiscal 1996"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------------------------------------------------------
OTHER ALL
ANNUAL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- --------------------------- ---- ------ ----- ------------ ------------
<S> <C> <C> <C> <C> <C>
William N. Demas, Chief
Executive Officer 1998 37,081 -- -- 24,852 (1)
and President
1997 36,843 -- -- 24,852 (1)
1996 38,111 -- -- 24,852 (1)
</TABLE>
- -------------------------
1 Since August 1993, TWC has paid the premiums on a term life insurance policy
for Mr. Demas ("the Demas Policy"). The amounts shown represent TWC's total
annual payments therefor in Fiscal 1998 and Fiscal 1997. In both years, TWC
reduced Mr. Demas's base salary by the amount equal to the costs of the Demas
Policy.
TWC has not granted stock options, restricted stock awards, or share
appreciation rights during Fiscal 1998, Fiscal 1997, and Fiscal 1996. Since
its reorganization in 1992, TWC has not had a long-term incentive plan or
pension plan. However, in 1992, TWC established a noncontributory Salary
Reduction SEP on behalf of its employees (including Mr. Demas), pursuant to
which employees, at their election, may defer a percentage of their annual
salaries.
EMPLOYMENT AGREEMENT WITH WILLIAM N. DEMAS
On July 30, 1992, William N. Demas entered into an agreement with
TWC providing for his employment as President and Chief Executive Officer of
TWC (the "Employment Agreement"). The Employment Agreement expired on July
30, 1995.
Since the expiration of the Employment Agreement on July 30, 1995,
Mr. Demas has
32
<PAGE>
been acting as the President and Chief Executive Officer of TWC without a
written employment agreement. Mr. Demas has been serving in such positions
for a base salary of $60,000 per year and performs such services on a
part-time basis, not to exceed 25 hours per week. In addition, Mr. Demas
receives as benefits health insurance and reimbursement of expenses incurred
on behalf of TWC.
In addition, since August 1993, in lieu of paying Mr. Demas' full
salary, TWC has paid the monthly premiums on a term life insurance policy for
Mr. Demas.
COMPENSATION OF DIRECTORS
In accordance with TWC's Bylaws, directors may be reimbursed for any
reasonable expenses incurred in connection with their service on the Board of
Directors. There are no other arrangements pursuant to which directors of TWC
are compensated for services as director. Messrs. Demas, Kinney and Castro
did not seek or receive any reimbursement for their expenses in Fiscal 1998.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table shows with respect to each person or entity
known by TWC to be the beneficial owner of more than 5% of any class of TWC's
voting securities as of December 31, 1998, (i) the number of shares so owned,
and (ii) the percentage of all shares represented by such ownership (based
upon the number of shares outstanding in the class) as of December 31, 1998.
<TABLE>
<CAPTION>
CLASS OF SHARES BENEFICIALLY OWNED
STOCK # OF SHARES % OF CLASS(1)
----- ----------- ------------
<S> <C> <C> <C>
Class A Kevin E. Foley, 410,618 24.7
Common Stock Deputy Superintendent of Insurance of the State of New
York, as Agent of the Rehabilitator of Executive Life
Insurance of New York(2)
Class A AIF II, L.P.(3) 325,242 19.6
Common Stock
Class A Lion Advisors, L.P.(3) 325,242 19.6
Common Stock
Class C The Antonelli Creditors Liquidating Trust 18,206 40.1
Common Stock
Class C Andrea Kinney Greene
Common Stock 4,116 9.1
Class C David B. Kinney 5,326 11.7
Common Stock
Class C David H. Kinney 4,154 9.2
Common Stock
</TABLE>
1 For purposes of this table and the table set forth immediately below, under
the heading "Directors and Executive Officers", the percentage of shares owned
by each shareholder listed is based on the number of Class A Common Stock, Class
B Common Stock and Class C Common Stock (the "New Shares") that have been
authorized pursuant to TWC's plan of reorganization. If claimed by TWC's
shareholders, the authorized New Shares will equal the number of New Shares
issued and outstanding. Under the plan of reorganization, shareholders may claim
their New Shares until July 30, 1995, after which date TWC will have the right
to cancel any and all of the unclaimed New Shares. Because the
33
<PAGE>
New Shares have not been registered under the Securities Act of 1933,
shareholders are not required to file statements with the SEC under
section 13(d) and 13(g) concerning their beneficial ownership of such shares.
The information set forth in the table is based principally upon information
provided by the Company's transfer agent and plan of reorganization.
2 Mr. Foley's address is 123 Williams Street, New York, NY 10038-3889.
3 The address for AIF II, L.P. and Lion Advisors, L.P. c/o Apollo Advisors, L.P.
is 1999 Avenue of the Stars, Suite 1050, Los Angeles, CA 90067.
4 The address for the trust is the Antonelli Liquidating Trust c/o Bailey Realty
Corporation, 1130 Connecticut Avenue, N.W., Washington, D.C. 20036.
5 Andrea Kinney Greene, the sister of Jonathan Kinney who is a director of TWC,
owns approximately 4,116 shares of Class C Common Stock. In addition, Andrea
Kinney Greene, as custodian for her children, holds approximately 132 shares of
Class B Common Stock. The address provided to TWC by Andrea Kinney Greene is
Route 2, Box 782, Purcellville, VA 22132.
6 This total includes approximately 584 shares of Class C Common Stock over
which David B. Kinney has voting and investment powers in his capacity as
general partner of K-F Associates, a Virginia limited partnership, which
interests are owned by members of the Kinney Family. David B. Kinney is the
father of Jonathan C. Kinney. The address provided to TWC by David B. Kinney is
754 Walker Road, 2nd Floor, Great Falls, VA 22066.
7 Mr. David H. Kinney is the brother of Jonathan C. Kinney. The address provided
to TWC by David H. Kinney is 1056 Manning Street, Great Falls, VA 22066.
34
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth, as of December 31, 1998, information
with respect to beneficial ownership of TWC's capital stock by (i) the Named
Executive Officers, (ii) each director and (iii) all directors and executive
officers of TWC as a group.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percentage of Class
Beneficial Owner(1) Title of Class Beneficial Ownership Outstanding
------------------- -------------- -------------------- -----------
<S> <C> <C> <C>
William N. Demas Class A Common Stock 7,608 *
Class C Common Stock 8,982(2) 19.8
Jonathan C. Kinney Class A Common Stock 523(3) *
Class C Common Stock 4,564(4) 10.1
Jose Ma. C. Castro Class A Common Stock 198 *
Directors and Officers as a Group Class A Common Stock 8,131 *
(2 persons) Class C Common Stock 13,546 29.9
</TABLE>
- ------------------
* Less than 1% of outstanding shares of the Class
(1) The address for each director and officer is c/o TWC, 4550 Montgomery
Avenue, Suite 220 North, Bethesda, Maryland 20814.
(2) This total includes 1,340 shares of Class C Common Stock which Mr. Demas
owns with his wife in joint tenancy; however, it does not include
approximately 440 shares of Class C Common Stock beneficially owned by Mr.
Demas' daughter Edith Demas. In addition, Mr. Demas, as custodian for his
children, Amy, James and Sarah Demas, holds 164 shares of Class B Common
Stock.
(3) Mr. Kinney disclaims beneficial ownership of these shares of Class A
Common Stock which are held by Bean, Kinney & Korman, P.C., a law firm in
which Mr. Kinney is a stockholder.
(4) This total includes 8 shares of Class C Common Stock which are held by
Mr. Kinney's wife and 146 shares of Class C Common Stock held by Mr. Kinney
as a limited partner in K-F Associates, a limited partnership which interests
are owned by members of the Kinney Family. Mr. Kinney disclaims beneficial
ownership of shares held by K-F Associates. In addition, Mr. Kinney, as
custodian for his children, David N.A. and Rachael W.K. Kinney, holds 232
shares of Class B Common Stock.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Kinney and certain members of Mr. Kinney's family (collectively,
the "Kinney Family") have a 16% ownership interest (6% of which is Mr. Kinney's
personal holding) in ASLP, a limited partnership in which the Company is the
general partner. Mr. Demas has a 7% ownership interest in ASLP. In Fiscal 1998,
Messrs. Demas and Kinney and the Kinney Family received no partnership
distributions from their limited partnership interests and do not expect to
receive any in the foreseeable future. See "Description of Properties -
Arlington Square Project.
In Fiscal 1998 and Fiscal 1997, the Company paid legal fees of
approximately $16,033 and $21,804 respectively to Bean, Kinney & Korman,
P.C., the law firm in which Mr. Kineny is partner and stockholder.
35
<PAGE>
ITEM 13. EXHIBITS LIST AND REPORTS ON FORM 8-K
(a) EXHIBITS
<TABLE>
<S> <C>
3.1 The Company's Amended and Restated Charter, filed with the Maryland
Department of Assessments and Taxation on July 30, 1992, which was
filed as Exhibit 2.2 to the Company's Registration Statement on Form
8-A filed with the Commission on August 10, 1992, is incorporated
herein by reference.
3.2 The Company's Bylaws, dated as of July 30, 1992, which were filed as
Exhibit 2.3 to the Company's Registration Statement on Form 8-A filed
with the Commission on August 10, 1992, are incorporated by reference.
4.1 The Second Amended Joint Plan of Reorganization of The Washington
Corporation, Carlin Springs Associates Limited Partnership, Second Fair
Ridge Associates Limited Partnership and Wilson-Randolph Limited
Partnership, dated May 28, 1992, as modified, which was filed as
Exhibit 2.1 to the Company's Report on Form 8-K filed with the
Commission on July 29, 1992, Commission File No. 0-20518, is
incorporated herein by reference.
4.2 The Registration Rights Agreement, dated as of July 30, 1992, by and
among the Company and certain holders of the Company's Class A Common
Stock which was filed as Exhibit 4.4 to the Company's Form 10-Q filed
with the Commission on August 14, 1992, Commission File No. 0-20518, is
incorporated herein by reference.
10.1 Agreement of Limited Partnership of Arlington Square Limited
Partnership dated September 17, 1985, by and among TWC Properties
Partnership and the limited partners, which was filed as Exhibit 10.1
to the Company's report on Form 10-KSB filed with the Commission April
6, 1995, is incorporated herein by reference.
10.2 The U. S. Government Lease of Real Property (Arlington Square Project)
dated May 13, 1988 including Riders 1, 2 and 3 which was filed as
Exhibit 10 to the Company's Form 10-K filed with the Commission on
March 29, 1990, Commission File No. 0-20518, is incorporated herein by
reference.
10.3 The Lease Agreement dated March 24, 1974 between the Company and Fort
Washington Inn Associates, which was filed as Exhibit 10.5 to the
Company's Form 10-KSB filed with the Commission April 6, 1993, is
incorporated herein by reference.
10.4 The Stock Purchase Agreement dated November 1, 1994 relating to the
sale of 2900 South Glebe, Inc, between The Washington Corporation and
William N. Demas, which was filed as Exhibit 10.5 to the Company's Form
10-KSB filed with the Commission on April 6, 1995, is incorporated
herein by reference.
10.5 The First Amendment to Agreement of Limited Partnership of Arlington
Square Limited Partnership dated December 14, 1990, by and among TWC
Properties Partnership, William N. Demas, John D. Wolf and The Ballston
Corporation, which was filed as Exhibit 10.8 to the Company's report on
Form 10-KSB filed with the Commission April
</TABLE>
36
<PAGE>
<TABLE>
<S> <C>
6, 1995, is incorporated herein by reference.
10.6 The Second Amendment to Agreement of Limited Partnership of Arlington
Square Limited Partnership dated March 8, 1991, by and among TWC
Properties Partnership, William N. Demas, John D. Wolf, The Ballston
Corporation and Arlington Square, Inc., which was filed as Exhibit 10.9
to the Company's report on Form 10-KSB filed with the Commission April
6, 1995, is incorporated herein by reference.
10.7 The Third Amendment to Agreement of Limited Partnership of Arlington
Square Limited Partnership dated March 8, 1991, between TWC Properties
Partnership, William N. Demas, John D. Wolf, The Ballston Corporation,
Arlington Square Incorporated, Jonathan C. Kinney, David B. Kinney and
Barbara A. Kinney evidencing the transfer of a 16% partnership interest
in ASLP to Jonathan C. Kinney, David B. Kinney and Barbara A. Kinney,
which was filed as Exhibit 10.1 to the Company's Form 10-KSB filed with
the Commission on April 13, 1993, is incorporated herein by reference.
10.8 The Fourth Amendment to Agreement of Limited Partnership of Arlington
Square Limited Partnership dated January 1, 1993, by and among TWC
Properties Partnership, Arlington Square, Inc., and The Washington
Corporation, is incorporated herein by reference.
10.9 Promissory Note in the original principal amount of $23,000,000 dated
November 20, 1997 between Arlington Square Limited Partnership and
Allied Capital Commercial Corporation, which was filed as Exhibit 10.9
to the Company's Form 10-KSB filed with the Commission on May 8, 1998,
is incorporated herein by reference.
10.10 Promissory Note in the original principal amount of $1,000,000 dated
November 20, 1997 between Arlington Square Limited Partnership and
Allied Capital Commercial Corporation, which was filed as Exhibit 10.10
to the Company's Form 10-KSB filed with the Commission on May 8, 1998,
is incorporated herein by reference.
10.11 Loan Agreement in the amount of $24,300,000 dated November 20, 1997
between Arlington Square Limited Partnership and Allied Capital
Commercial Corporation, which was filed as Exhibit 10.11 to the
Company's Form 10-KSB filed with the Commission on May 8, 1998, is
incorporated herein by reference.
10.12 Amended and Restated Agreement of Limited Partnership of Arlington
Square Limited Partnership, which was filed as Exhibit 10.12 to the
Company's Form 10-KSB filed with the Commission on May 8, 1998, is
incorporated herein by reference.
10.13 Assignment of Leases and Rents dated November 20, 1997 by Arlington
Square Limited Partnership to Allied Capital Commercial Corporation,
which was filed as Exhibit 10.13 to the Company's Form 10-KSB filed
with the Commission on May 8, 1998, is incorporated herein by
reference.
10.14 Assignment of Leases and Rents (GSA) dated November 20, 1997 by
Arlington Square Limited Partnership to Allied Capital Commercial
Corporation, which was filed as Exhibit 10.14 to the Company's Form
10-KSB filed with the Commission on May 8, 1998, is incorporated herein
by
</TABLE>
37
<PAGE>
<TABLE>
<S> <C>
reference.
10.15 Guaranty by Arlington Square Limited Partnership to Allied Capital
Commercial Corporation, on May 8, 1998, is incorporated herein by
reference. which was filed as Exhibit 10.15 to the Company's Form
10-KSB filed with the Commission.
10.16 Indemnity Agreement dated November 20, 1997 between Arlington Square
Limited Partnership and Allied Capital Commercial Corporation, which
was filed as Exhibit 10.16 to the Company's Form 10-KSB filed with the
Commission on May 8, 1998, is incorporated herein by reference.
10.17 Deed of Trust and Security Agreement "A" dated November 20, 1997
between Arlington Square Limited Partnership and Allied Capital
Commercial Corporation, which was filed as Exhibit 10.17 to the
Company's Form 10-KSB filed with the Commission on May 8, 1998, is
incorporated herein by reference.
10.18 Deed of Trust and Security Agreement "B" dated November 20, 1997
between Arlington Square Limited Partnership and Allied Capital
Commercial Corporation, which was filed as Exhibit 10.18 to the
Company's Form 10-KSB filed with the Commission on May 8, 1998, is
incorporated herein by reference.
10.19 Assignment of Limited Partnership interest of Ashton Glen Associates
dated December 11, 1997 from The Washington Corporation to K-F
Associates, which was filed as Exhibit 10.19 to the Company's Form
10-KSB filed with the Commission on May 8, 1998, is incorporated herein
by reference.
10.20 First Amendment to the Limited Partnership Agreement of Ashton Glen
Associates dated December 11, 1997 which was filed as Exhibit 10.20 to
the Company's Form 10-KSB filed with the Commission on May 8, 1998, is
incorporated herein by reference.
10.21 Promissory Note dated November 25, 1998 in the original principal
amount of $21,500,000 with Arlington Square Limited Partnership as
borrower and Metropolitan Life Insurance Company as holder, is attached
hereto.
10.22 Deed of Trust, Security Agreement and Fixture Filing from Arlington
Square Limited Partnership to Keith J. Willner and Scott A. Morehouse
as Trustees for the benefit of Metropolitan Life Insurance Company,
dated November 25, 1998, is attached hereto.
10.23 Assignment of Leases between Arlington Square Limited Partnership and
Metropolitan Life Insurance Company dated November 25, 1998, is
attached hereto.
10.24 Assignment of Contracts and Agreements between Arlington Square Limited
Partnership and Metropolitan Life Insurance Company dated November 25,
1998, is attached hereto.
10.25 Unsecured Indemnity Agreement among Arlington Square Limited
Partnership, Metropolitan Life Insurance Company and The Washington
Corporation dated November 25, 1998, is attached hereto.
</TABLE>
38
<PAGE>
<TABLE>
<S> <C>
10.26 Financing Statement dated November 25, 1998 executed by Arlington
Square Limited Partnership as debtor and Metropolitan Life Insurance
Company as secured party, is attached hereto.
10.27 Subordination of Management Agreement dated November 25, 1998 by and
among The Washington Corporation, Arlington Square Limited Partnership
and Metropolitan Life Insurance Company, is attached hereto.
10.28 Guaranty Agreement dated November 25, 1998 by and between The
Washington Corporation, Arlington Square Limited Partnership and
Metropolitan Life Insurance Company, is attached hereto.
10.29 Subordination Agreement dated November 25, 1998, by and among Arlington
Square Limited Partnership, Metropolitan Life Insurance Company and
Allied Capital Commercial Corporation, is attached hereto.
10.30 Subordination, Non-Disturbance and Attornment Agreement among
Metropolitan Life Insurance Company, Arlington Square Limited
Partnership and United States of America - General Services
Administration dated November 25, 1998, is attached hereto.
10.31 Subordination, Non-Disturbance and Attornment Agreement among
Metropolitan Life Insurance Company, U.S. Fish and Wildlife Service,
and Arlington Square Limited Partnership, dated November 25, 1998, is
attached hereto.
11. Computation of per share earnings for the years ended December 31, 1998
and 1997 is attached hereto.
21. Subsidiaries of the Registrant as of December 31, 1998 is attached
hereto.
(b) REPORTS ON FORM 8-K. The Company filed no report on Form 8-K during
fourth quarter of 1998.
</TABLE>
39
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
THE WASHINGTON CORPORATION
Date: 5/20/99 By: /s/William N. Demas
----------------- ----------------------------------------------
William N. Demas
Chairman of the Board of Directors/
President
Date: 5/26/99 By: /s/Jose Ma. C. Castro
----------------- ----------------------------------------------
Jose Ma. C. Castro
Controller
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.
Date: 5/20/99 By: /s/ William N. Demas
----------------- ----------------------------------------------
William N. Demas
Chairman of the Board of Directors/President
Date: 5/21/99 By: /s/ Jonathan C. Kinney
----------------- ----------------------------------------------
Jonathan C. Kinney
Director
Date: 5/26/99 By: /s/ Jose Ma. C. Castro
----------------- ----------------------------------------------
Jose Ma. C. Castro
Director
40
<PAGE>
Exhibit 10.21
PROMISSORY NOTE
DEFINED TERMS
EXECUTION DATE: As of November 25, 1998
CITY AND STATE OF SIGNING: Arlington, Virginia
LOAN AMOUNT: $21,500,000.00
INTEREST RATE: 6.8% per annum
BORROWER: Arlington Square Limited Partnership, a Virginia limited Partnership
BORROWER'S ADDRESS: c/o The Washington Corporation
4650 East-West Highway, Suite 251
Bethesda, MD 20814
Attention: William N. Demas
HOLDER: Metropolitan Life Insurance Company, a New York corporation
HOLDER'S ADDRESS: Metropolitan Life Insurance Company
200 Park Avenue, 12th Floor
New York, New York 10166
Attention: Senior Vice-President
Real Estate Investments
and: Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010-3690
Attention: Vice-President and Investment Counsel
Real Estate Investments
MATURITY DATE: December 1, 2010
INTEREST ONLY PERIOD: The period
from the Advance Date and ending
on the last day of the month in
which the Advance Date occurs.
MONTHLY INSTALLMENT: Equal monthly
installments of principal and
interest at the Interest Rate each
in the amount of $147,057.86.
The Monthly Installment is based
upon an amortization period of 26
years.
ADVANCE DATE: The date funds are disbursed
Borrower.
PRINCIPAL AND INTEREST INSTALLMENT DATE:
The first day of the second calendar month
following the Advance Date.
PERMITTED PREPAYMENT PERIOD: During the 90
day period prior to the Maturity Date,
Borrower may prepay the Loan without a
Prepayment Fee on 30 days' prior written
notice to Holder. In addition, commencing on
the first day of the 72nd month following the
month in which the Advance Date occurs,
Borrower may prepay the Loan with a
Prepayment Fee on 60 days' prior written
notice to Holder.
LIABLE PARTIES: The Washington Corporation
ADDRESSES OF LIABLE PARTIES: 4650 East-West Highway, Suite 251
Bethesda, MD 20814
LATE CHARGE: An amount equal to four cents ($.04) for each dollar that is
overdue.
DEFAULT RATE: The lesser of (i) an annual rate equal to the Interest Rate plus
four percent (40%), and (ii) the highest rate permitted under applicable law.
NOTE: This Promissory Note, together with all extensions, renewals,
amendments, modifications and restatements hereof.
DEED OF TRUST: Deed of Trust, Security Agreement and Fixture Filing dated as
of the Execution Date granted by Borrower to secure repayment of the Note
together with all extensions, renewals, modifications, amendments and
restatements thereof.
LOAN DOCUMENTS: This Note, the Deed of Trust and any other documents related
to this Note and/or the Deed of Trust and all renewals, amendments,
modifications, restatements and extensions of these documents.
GUARANTY: Guaranty Agreement dated as of the Execution Date and executed by
Liable Parties in favor of Holder, together with all renewals, amendments,
modifications and restatements thereof.
UNSECURED INDEMNITY AGREEMENT: Unsecured Indemnity Agreement dated as of the
Execution Date and executed by Borrower and Liable Parties in favor of Holder,
together with all renewals, amendments, modifications and restatements thereof.
The Unsecured Indemnity Agreement and Guaranty are not Loan Documents and shall
survive repayment of the Loan or other termination of the Loan Documents.
PROPERTY: The property defined as such in the Deed of Trust.
<PAGE>
FOR VALUE RECEIVED, Borrower promises to pay to the order of Holder
at Holder's Address or such other place as Holder may from time to time
designate, the Loan Amount with interest payable in the manner described below,
in money of the United States of America that at the time of payment shall be
legal tender for payment of all obligations.
Capitalized terms which are not defined in this Note shall have the
meanings set forth in the Deed of Trust.
1. PAYMENT OF PRINCIPAL AND INTEREST. Principal and interest under
this Note shall be payable as follows:
(a) Interest on the funded portion of the Loan Amount shall
accrue from the Advance Date at the Interest Rate and shall be paid on the
first day of the first calendar month following the Advance Date;
(b) Commencing on the Principal and Interest Installment Date
and continuing on the first day of each calendar month thereafter, to and
including the first day of the calendar month immediately preceding the
Maturity Date, Borrower shall pay the Monthly Installment; and
(c) On the Maturity Date, a final payment in the aggregate
amount of the unpaid principal sum evidenced by this Note, all accrued and
unpaid interest, and all other sums evidenced by this Note or secured by the
Deed of Trust and/or any other Loan Documents as well as any additional
advances under the Deed of Trust that may be made to or on behalf of Borrower
by Holder following the Advance Date (collectively, the "AGGREGATE
INDEBTEDNESS"), shall become immediately payable in full.
Borrower acknowledges and agrees that a substantial portion of the
original Loan Amount shall be outstanding and due on the Maturity Date.
Interest shall be calculated on the basis of a thirty (30) day month and
a three hundred sixty (360) day year, except that (i) if the Advance Date
occurs on a date other than the first day of a calendar month, interest payable
for the period commencing on the Advance Date and ending on the last day of the
month in which the Advance Date occurs shall be calculated on the basis of the
actual number of days elapsed over a 365 day or 366 day year, as applicable,
and (ii) if the Maturity Date occurs on a date other than the last day of the
month, interest payable for the period commencing on the first day of the month
in which the Maturity Date occurs and ending on the Maturity Date shall be
calculated on the basis of the actual number of days elapsed over a 365 day or
366 day year, as applicable.
2. APPLICATION OF PAYMENTS. At the election of Holder, and to the
extent permitted by law, all payments shall be applied in the order selected by
Holder to any expenses, prepayment fees, late charges, escrow deposits and
other sums due and payable under the Loan Documents, and to unpaid interest at
the Interest Rate or at the Default Rate, as applicable. The balance of any
payments shall be applied to reduce the then unpaid Loan Amount.
3. SECURITY. The covenants of the Deed of Trust are incorporated by
reference into this Note. This Note shall evidence, and the Deed of Trust
shall secure the Aggregate Indebtedness.
4. LATE CHARGE. If any payment of interest, any payment of a Monthly
Installment or any payment of a required escrow deposit is not paid within 7
days of the due date, Holder shall have the option to charge Borrower the Late
Charge. The Late Charge is for the purpose of defraying the expenses incurred
in connection with handling and processing delinquent payments and is payable
in addition to any other remedy Holder may have. Unpaid Late Charges shall
become part of the Aggregate Indebtedness and shall be added to any subsequent
payments due under the Loan Documents.
5. ACCELERATION UPON DEFAULT. At the option of Holder, if Borrower
fails to pay any sum specified in this Note when due after giving effect to any
grace periods, or if an Event of Default occurs, the Aggregate Indebtedness,
and all other sums evidenced and/or secured by the Loan Documents, including
without limitation any applicable prepayment fees (collectively, the
"ACCELERATED LOAN AMOUNT") shall become immediately due and payable.
2
<PAGE>
6. INTEREST UPON DEFAULT. The Accelerated Loan Amount shall bear
interest at the Default Rate which shall never exceed the maximum rate of
interest permitted to be contracted for under the laws of the Commonwealth of
Virginia. The Default Rate shall commence upon the occurrence of an Event of
Default and shall continue until all then-existing Events(s) of Default shall
have been cured.
7. LIMITATION ON INTEREST. The agreements made by Borrower with
respect to this Note and the other Loan Documents are expressly limited so that
in no event shall the amount of interest received, charged or contracted for by
Holder exceed the highest lawful amount of interest permissible under the laws
applicable to the Loan. If at any time performance of any provision of this
Note or the other Loan Documents results in the highest lawful rate of interest
permissible under applicable laws being exceeded, then the amount of interest
received, charged or contracted for by Holder shall automatically and without
further action by any party be deemed to have been reduced to the highest
lawful amount of interest then permissible under applicable laws. If Holder
shall ever receive, charge or contract for, as interest, an amount which is
unlawful, at Holder's election, the amount of unlawful interest shall be
refunded to Borrower (if actually paid) or applied to reduce the then unpaid
Loan Amount. To the fullest extent permitted by applicable laws, any amounts
contracted for, charged or received under the Loan Documents included for the
purpose of determining whether the Interest Rate would exceed the highest
lawful rate shall be calculated by allocating and spreading such interest to
and over the full stated term of this Note.
8. PREPAYMENT. Borrower shall not have the right to prepay all or
any portion of the Loan Amount at any time during the term of this Note except
as expressly set forth in the Defined Terms. If Borrower provides notice of
its intention to prepay, the Accelerated Loan Amount shall become due and
payable in accordance with the Defined Terms.
9. PREPAYMENT FEE.
(a) Any tender of payment by Borrower or any other person or
entity of the Aggregate Indebtedness, other than as expressly provided in the
Loan Documents, shall constitute a prohibited prepayment. If a prepayment of all
or any part of the Aggregate Indebtedness is made following (i) an Event of
Default and an acceleration of the Maturity Date, (ii) the application of money
to the principal of the Loan after a casualty or condemnation, or (iii) in
connection with a purchase of the Property or a repayment of the Aggregate
Indebtedness at any time before, during or after, a judicial or non-judicial
foreclosure or sale of the Property, then to compensate Holder for the loss of
the investment, Borrower shall pay an amount equal to the Prepayment Fee (as
hereinafter defined).
(b) The "PREPAYMENT FEE" shall be the greater of (A) the
Prepayment Ratio (as hereinafter defined) multiplied by the difference between
(x) and (y), where (x) is the present value of all remaining payments of
principal and interest including the outstanding principal due on the Maturity
Date, discounted at the rate which, when compounded monthly, is equivalent to
the Treasury Rate compounded semi-annually, and (y) is the amount of the
principal then outstanding, or (B) one percent (1%) of the amount of the
principal being prepaid.
(c) THE "TREASURY RATE" shall be the annualized yield on
securities issued by the United States Treasury having a maturity equal to the
remaining stated term of the Note, as quoted in the FEDERAL RESERVE STATISTICAL
RELEASE [H.15 (519)] under the heading "U.S. Government Securities--Treasury
Constant Maturities" for the date on which prepayment is being made. If this
rate is not available as of the date of prepayment, the Treasury Rate shall be
determined by interpolating between the yield on securities of the next longer
and next shorter maturity. If the Treasury Rate is no longer published, Holder
shall select a comparable rate. Holder will, upon written request, provide an
estimate of the amount of the Prepayment Fee two weeks before the date of the
scheduled prepayment.
(d) The "PREPAYMENT RATIO" shall be a fraction, the numerator
of which shall be the amount of principal being prepaid, and the denominator of
which shall be the principal then outstanding.
(e) Notwithstanding the foregoing provisions of this SECTION
9, no Prepayment Fee shall be due in connection with a prepayment of all or a
portion of the Aggregate Indebtedness occasioned by the exercise by a tenant of
the Property which is a governmental instrumentality of its right at law (and
without implying any consent by Holder
3
<PAGE>
to any such contractual right to be contained in an express provision of any
present or future lease of the Property) to condemn the Property of any
interest therein in connection with or in lieu of a holdover occupancy by such
tenant.
10. WAIVER OF RIGHT TO PREPAY NOTE WITHOUT PREPAYMENT FEE.
Borrower acknowledges that Holder has relied upon the anticipated investment
return under this Note in entering into transactions with, and in making
commitments to, third parties and that the tender of any prohibited prepayment,
shall, to the extent permitted by law, include the Prepayment Fee. Borrower
agrees that the Prepayment Fee represents the reasonable estimate of Holder and
Borrower of a fair average compensation for the loss that may be sustained by
Holder as a result of a prohibited prepayment of the Note and it shall be paid
without prejudice to the right of Holder to collect any other amounts provided
to be paid under the Loan Documents.
BORROWER EXPRESSLY (A) WAIVES ANY RIGHTS IT MAY HAVE UNDER
APPLICABLE STATE LAW TO PREPAY THIS NOTE, IN WHOLE OR IN PART, WITHOUT FEE OR
PENALTY, UPON ACCELERATION OF THE MATURITY DATE OF THE NOTE, AND (B) AGREES
THAT IF, FOR ANY REASON, A PREPAYMENT OF THIS NOTE IS MADE, UPON OR FOLLOWING
ANY ACCELERATION OF THE MATURITY DATE OF THIS NOTE BY HOLDER ON ACCOUNT OF ANY
DEFAULT BY BORROWER UNDER ANY LOAN DOCUMENT, INCLUDING BUT NOT LIMITED TO ANY
TRANSFER, FURTHER ENCUMBRANCE OR DISPOSITION WHICH IS PROHIBITED OR RESTRICTED
BY THE DEED OF TRUST, THEN BORROWER SHALL BE OBLIGATED TO PAY CONCURRENTLY THE
PREPAYMENT FEE SPECIFIED IN SECTION 9. BY EXECUTING THIS NOTE, BORROWER AGREES
THAT HOLDER'S AGREEMENT TO MAKE THE LOAN AT THE INTEREST RATE AND FOR THE TERM
SET FORTH IN THIS NOTE CONSTITUTES ADEQUATE CONSIDERATION FOR THIS WAIVER AND
AGREEMENT.
11. LIABILITY OF BORROWER. Upon the occurrence of an Event of
Default, except as provided in this SECTION 11, Holder will look solely to the
Property and the security under the Loan Documents for the repayment of the
Loan and will not enforce a deficiency judgment against Borrower. However,
nothing contained in this Section 11 shall limit the rights of Holder to
proceed against Borrower and the general partner of Borrower and/or the
Liable Parties, (i) to enforce any leases entered into by Borrower or its
affiliates as tenant, guarantees, or other agreements entered into by
Borrower in a capacity other than as borrower or any policies of insurance;
(ii) to recover damages for fraud, material misrepresentation, breach of
warranty or waste; (iii) to recover any condemnation proceeds or insurance
proceeds or other similar funds which have bow misapplied by Borrower or
which, under the terms of the Loan Documents, should have been paid to
Holder; (iv) to recover any tenant security deposits, tenant letters of
credit or other deposits or fees paid to Borrower that are part of the
collateral for the Loan or prepaid rents for a period of more than 30 days
which have not been delivered to Holder; (v) to recover Rents and Profits (as
defined in the Deed of Trust) received by Borrower after the first day of the
month in which an Event of Default and prior to the date Holder acquires
title to the Property which have not been applied to the Loan or in
accordance with the Loan Documents to operating and maintenance expenses of
the Property; (vi) to recover damages, costs and expenses arising from, or in
connection with the provisions of the Deed of Trust pertaining to hazardous
materials or the Unsecured Indemnity Agreement; (vii) to recover all amounts
due and payable pursuant to Sections 11.06 and 11.07 of the Deed of Trust;
and/or (viii) to recover damages arising from Borrower's failure to comply
with the provisions of the Deed of Trust pertaining to ERISA.
The limitation of liability set forth in this Section 11 shall not apply
and the Loan shall be fully recourse in the event that Borrower commences a
voluntary bankruptcy or insolvency proceeding or an involuntary bankruptcy or
insolvency proceeding is commenced against Borrower and is not dismissed within
ninety (90) days of filing. In addition, this Note shall not waive any rights
which Holder would have under any provisions of the Bankruptcy Code to file a
claim for the full amount of the Aggregate Indebtedness or to require that the
Property shall continue to secure all of the Aggregate Indebtedness.
12. WAIVER BY BORROWER. Borrower and others who may become liable
for the payment of all or any part of this Note and each of them, waive
diligence, demand, presentment for payment, notice of nonpayment, protest,
notice of dishonor and notice of protest, notice of intent to accelerate and
notice of acceleration and specifically consent to and waive notice of any
amendments, modifications, renewals or extensions of this Note, including the
granting of extension of time for payment, whether made to or in favor of
Borrower or any other person or persons.
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<PAGE>
13. EXERCISE OF RIGHTS. No single or partial exercise by Holder, or
delay or omission in the exercise by Holder, of any right or remedy under the
Loan Documents shall waive or limit the exercise of any such right or remedy.
Holder shall at all times have the right to proceed against any portion of or
interest in the Property in the manner that Holder may deem appropriate,
without waiving any other rights or remedies. The release of any party under
this Note shall not operate to release any other party which is liable under
this Note and/or under the other Loan Documents or under the Guaranty or the
Unsecured Indemnity Agreement.
14. FEES AND EXPENSES. If Borrower defaults under this Note,
Borrower shall be personally liable for and shall pay to Holder, in addition
to the sums stated above, the costs and expenses of enforcement and
collection, including, without limitation, a reasonable sum as an attorney's
fee. This obligation is not limited by SECTION 11.
15. NO AMENDMENTS. This Note may not be modified or amended except
in a writing executed by Borrower and Holder. No waivers shall be effective
unless they are set forth in a writing signed by the party which is waiving a
right. This Note and the other Loan Documents are the final expression of the
lending relationship between Borrower and Holder.
16. GOVERNING LAW. This Note shall in all respects be governed by,
and construed and enforced in accordance with, the laws of the Commonwealth of
Virginia, without regard to conflict of laws principles.
17. CONSTRUCTION. The words "Borrower and "Holder" shall be deemed
to include their respective heirs, representatives, successors and assigns, and
shall denote the singular and/or plural, and the masculine and/or feminine, and
natural and/or artificial persons as appropriate. The provisions of this Note
shall remain in full force and effect notwithstanding any changes in the
shareholders, partners or members of Borrower. If more than one party is
Borrower, the obligations of each party shall be joint and several. The
captions in this Note are inserted only for convenience of reference and do not
expand, limit or define the scope or intent of any section of this Note.
18. NOTICES. All notices, demands, requests and consents permitted
or required under this Note shall be given in the manner prescribed in this
Deed of Trust.
19. TIME OF THE ESSENCE. Time shall be of the essence with respect
to all of Borrower's obligations under this Note.
20. SEVERABILITY. If any provision of this Note should be held
unenforceable or void, then that provision shall be deemed separable from the
remaining provisions and shall not affect the validity of this Note, except that
if that provision relates to the payment of interest or principal provided for
herein, then Holder may, at its option, declare the Aggregate Indebtedness
(together with the Prepayment Fee) immediately due and payable.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, Borrower has, by its duly authorized
representatives, executed this Note as of the Execution Date.
ARLINGTON SQUARE LIMITED PARTNERSHIP, a
Virginia limited partnership
By: Arlington Square, Inc., a Virginia
corporation, general partner
By: /s/ William N. Demas [SEAL]
---------------------------
William N. Demas
President
6
<PAGE>
IDENTIFICATION
This is to certify that this is the Promissory Note described in that
certain Deed of Trust, Security Agreement and Fixture Filing, dated as of even
date therewith, from the Maker of the Promissory Note to Keith J. Willner, and
Scott A. Morehouse, Trustees, conveying certain property (described in said
Deed of Trust, Security Agreement and Fixture Filing) situated in the
Commonwealth of Virginia, said Deed of Trust, Security Agreement and Fixture
Filing having been executed in my presence.
/s/ VERONICA JENKINS
--------------------
Notary Public
My Commission Expires:
- -----------------------
[Notarial Seal]
VERONICA JENKINS
NOTARY PUBLIC, DISTRICT OF COLUMBIA
MY COMMISSION EXPIRES April 30, 2003
7
<PAGE>
Exhibit 10.22
PREPARED BY AND AFTER RECORDING RETURN TO:
Mayer, Brown & Platt
2000 Pennsylvania Avenue, N.W.
Suite 6500
Washington, D.C. 20006
Attention: Keith J. Willner, Esq.
DEED OF TRUST, SECURITY AGREEMENT
AND FIXTURE FILING
FROM
ARLINGTON SQUARE LIMITED PARTNERSHIP,
A VIRGINIA LIMITED PARTNERSHIP,
AS GRANTOR,
TO
KEITH J. WILLNER AND SCOTT A. MOREHOUSE
AS TRUSTEES,
FOR THE BENEFIT OF
METROPOLITAN LIFE INSURANCE COMPANY,
A NEW YORK CORPORATION,
AS BENEFICIARY,
IN THE AMOUNT OF S21,500,000.00
November 25, 1998
RPC #14017016
<PAGE>
DEED OF TRUST, SECURITY AGREEMENT
AND FIXTURE FILING
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE I
GRANT OF SECURITY ....................................................3
Section 1.01 Real Property Grant ....................................................................3
Section 1.02 Personal Property Grant ................................................................4
Section 1.03 Satisfaction and Release ...............................................................5
ARTICLE II
GRANTOR REPRESENTATIONS, WARRANTIES AND COVENANTS....................................5
Section 2.01 Due Authorization, Execution, and Delivery .............................................5
Section 2.02 Performance by Grantor .................................................................6
Section 2.03 Warranty of Title ......................................................................7
Section 2.04 Taxes, Liens and Other Charges .........................................................7
Section 2.05 Escrow Deposits ........................................................................8
Section 2.06 Care and Use of the Property ..........................................................10
Section 2.07 Collateral Security Instruments .......................................................12
Section 2.08 Suits and Other Acts to Protect the Property ..........................................12
Section 2.10 Business of Grantor ...................................................................12
ARTICLE III
INSURANCE .......................................................13
Section 3.01 Required Insurance and Terms of Insurance Policies ....................................13
Section 3.02 Adjustment of Claims ..................................................................16
Section 3.03 Assignment to Beneficiary .............................................................16
ARTICLE IV
BOOKS, RECORDS AND ACCOUNTS ..............................................16
Section 4.01 Books and Records .....................................................................16
Section 4.02 Property Reports ......................................................................17
Section 4 03 Additional Matters ....................................................................17
ARTICLE V
LEASES AND OTHER AGREEMENTS AFFECTING THE PROPERTY .................................17
Section 5.01 Grantor's Representations and Warranties ..............................................17
Section 5.02 Assignment of Leases ..................................................................18
Section 5.03 Performance of Obligations ............................................................19
Section 5.04 Subordinate Leases and Non-disturbance Agreements .....................................19
Section 5.05 Leasing Commissions ...................................................................19
</TABLE>
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<TABLE>
<S> <C>
ARTICLE VI
ENVIRONMENTAL HAZARDS ...............................................20
Section 6.01 Representations and Warranties .......................................................20
Section 6.02 Remedial Work ........................................................................20
Section 6.03 Environmental Site Assessment ........................................................20
Section 6.04 Unsecured Obligations ................................................................21
Section 6.05 Hazardous Materials ..................................................................21
Section 6.06 Requirements of Environmental Laws ...................................................22
ARTICLE VII
CASUALTY, CONDEMNATION AND RESTORATION ........................................22
Section 7.01 Grantor's Representations ............................................................22
Section 7.02 Restoration ..........................................................................22
Section 7.03 Condemnation .........................................................................23
Section 7.04 Requirements for Restoration .........................................................24
ARTICLE VIII
REPRESENTATIONS OF GRANTOR .............................................26
Section 8.01 ERISA ................................................................................26
Section 8.02 Non-Relationship .....................................................................26
Section 8.03 No Adverse Change ....................................................................26
Section 8.04 Foreign Person .......................................................................27
Section 8.05 Broker ...............................................................................27
ARTICLE IX
EXCULPATION AND LIABILITY .............................................28
Section 9.01 Liability of Grantor .................................................................28
ARTICLE X
CHANGE IN OWNERSHIP, CONVEYANCE OF PROPERTY ...................................29
Section 10.01 Conveyance of Property, Change in Ownership and Composition .........................29
Section 10.02 Prohibition on Subordinate Financing ................................................29
Section 10.03 Restrictions on Additional Obligations ..............................................30
Section 10.04 Statements Regarding Ownership ......................................................30
ARTICLE XI
DEFAULTS AND REMEDIES ................................................30
Section 11.01 Events of Default ...................................................................30
Section 11.02 Remedies upon Default ...............................................................31
Section 11.03 Application of Proceeds of Sale .....................................................34
Section 11.04 Waiver of Jury Trial ................................................................34
Section 11.05 Beneficiary's Right to Perform Grantor's Obligations ................................34
Section 11.06 Beneficiary Reimbursement ...........................................................34
Section 11.07 Fees and Expenses ...................................................................35
Section 11.08 Waiver of Consequential Damages .....................................................35
Section 11.09 Attorney-in-Fact ....................................................................35
</TABLE>
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<TABLE>
<S> <C>
Section 11.10 Indemnification of Trustees .........................................................35
Section 11.11 Actions by Trustees .................................................................36
Section 11.12 Substitution of Trustees ............................................................36
ARTICLE XII
GRANTOR AGREEMENTS AND FURTHER ASSURANCES ....................................36
Section 12.01 Participation and Sale of Loan ......................................................36
Section 12.02 Replacement of Note .................................................................37
Section 12.03 Grantor's Estoppel ..................................................................37
Section 12.04 Further Assurances ..................................................................37
Section 12.05 Subrogation .........................................................................38
ARTICLE XIII
SECURITY AGREEMENT .................................................38
Section 13.01 Security Agreement ..................................................................38
Section 13.02 Representations and Warranties ......................................................38
Section 13.03 Characterization of Property ........................................................38
Section 13.04 Protection Against Purchase Money Security Interests ................................39
ARTICLE XIV
MISCELLANEOUS COVENANTS ...............................................39
Section 14.01 No Waiver ...........................................................................39
Section 14.02 Notices .............................................................................40
Section 14.03 Heirs and Assigns; Terminology ......................................................40
Section 14.04 Severability ........................................................................40
Section 14.05 Applicable Law ......................................................................40
Section 14.06 Captions ............................................................................40
Section 14.07 Time of the Essence .................................................................40
Section 14.08 No Merger ...........................................................................40
Section 14.09 No Modifications ....................................................................40
Section 14.10 Entire Agreement ....................................................................40
Section 14.11 Counterparts ........................................................................41
Section 14.12 No Third-Party Beneficiaries ........................................................41
Section 14.13 Commercial Loan .....................................................................41
Section 14.14 Effective Date ......................................................................41
EXHIBITS
EXHIBIT "A": Legal Description of the Land .........................................................I
EXHIBIT "B": Leasing Guidelines ....................................................................I
EXHIBIT "C": Specific Items of Personal Property ...................................................I
</TABLE>
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<PAGE>
DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING
DEFINED TERMS
EXECUTION DATE: As of November 25, 1998
NOTE: The Promissory Note dated as of the Execution Date made by Grantor to the
order of Beneficiary in the principal amount of $21,500,000.00, together with
all renewals, amendments, modifications, restatements and extensions thereof.
BENEFICIARY & ADDRESS: METROPOLITAN LIFE INSURANCE COMPANY,
a New York corporation
200 Park Avenue, 12th Floor
New York, New York 10166
Attention: Senior Vice-President
Real Estate Investments
and: Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010-3690
Attention: Vice-President and Investment
Counsel
Real Estate Investments
GRANTOR & ADDRESS: ARLINGTON SQUARE LIMITED PARTNERSHIP
c/o The Washington Corporation
4650 East-West Highway, Suite 251
Bethesda, Maryland 20814
TRUSTEES & ADDRESS: KEITH J. WILLNER, a resident of Fairfax
County, Virginia and SCOTT A. MOREHOUSE, a
resident of Fairfax County, Virginia,
TRUSTEES, either of whom may act
c/o Mayer, Brown & Platt
2000 Pennsylvania Avenue, N.W.,
Suite 6500
Washington, D.C. 20006
LIABLE PARTIES & ADDRESS: The Washington Corporation
4650 East-West Highway,
Suite 251
Bethesda, Maryland 20814
COUNTY AND STATE IN WHICH THE PROPERTY IS LOCATED: Arlington County,
State of Virginia
USE: Office
1
<PAGE>
INSURANCE:
Full Replacement Cost: $23,050,000, including $50,000 for Personal Property.
Boiler and Machinery: $5,000,000.
Business Income: $3,225,000.
Commercial General Liability: $10,000,000
ADDRESS FOR INSURANCE NOTIFICATION: Metropolitan Life Insurance Company and/or
its successors and assigns
One Madison Avenue
New York, New York 10010-3690
Attn: Risk Management Unit, Area: 3 D/E
LOAN DOCUMENTS: The Note, this Deed of Trust and any other documents related to
the Note and/or Deed of Trust and all renewals, amendments, modifications,
restatements and extensions of these documents.
GUARANTY: Guaranty Agreement dated as of the Execution Date and executed by
Liable Parties, together with all amendments, modifications, replacements,
substitutions and restatements thereof.
UNSECURED INDEMNITY AGREEMENT: Unsecured Indemnity Agreement dated as of the
Execution Date and executed by Borrower and Liable Parties in favor of
Beneficiary, together with all amendments, modifications and restatements
thereof.
The Unsecured Indemnity Agreement and the GUARANTY ARE NOT Loan Documents.
THIS DEED OF TRUST, SECURITY AGREEMENT AND FIXTURE FILING (this "DEED
OF TRUST") is made as of the Execution Date by Grantor to Trustees for the
benefit of Beneficiary with reference to the following Recitals:
RECITALS
A. This Deed of Trust secures: (1) the payment of the indebtedness
evidenced by the Note with interest at the rates set forth in the Note, together
with all renewals, modifications, consolidations and extensions of the Note, all
additional advances or fundings made by Beneficiary, and any other amounts
required to be paid by Grantor under any of the Loan Documents, (collectively,
the "SECURED INDEBTEDNESS", and sometimes referred to as the "Loan") and (2) the
full performance by Grantor of all of the terms, covenants and obligations set
forth in any of the Loan Documents.
B. Grantor makes the following covenants and agreements for the benefit
of Beneficiary or any party designated by Beneficiary, including any prospective
purchaser of the Loan Documents or participant in the Loan, and their respective
officers, employees, agents, attorneys, representatives and contractors (all of
which are collectively referred to as, "BENEFICIARY") and Trustees.
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NOW, THEREFORE, IN CONSIDERATION of the Recitals and for other good and
valuable consideration, the receipt and sufficiency of which are acknowledged,
Grantor agrees as follows:
ARTICLE I
GRANT OF SECURITY
SECTION 1.01 REAL PROPERTY GRANT. Grantor irrevocably mortgages, sells,
transfers, grants, conveys, assigns and warrants to Trustees, in mist, with
power of sale and right of entry and possession, all of Grantor's present and
future estate, right, title and interest in and to the following which are
collectively referred to as the "REAL PROPERTY":
(a) that certain real property located in Arlington County, Virginia
which is more particularly described in EXHIBIT "A" attached to this Deed of
Trust or any portion of the real property; all easements, rights-of-way,
gaps, Strips and gores of land; streets and alleys; sewers and water rights;
privileges, licenses, tenements, and appurtenances appertaining to the real
property, and the reversion(s), remainder(s), and claims of Grantor with
respect to these items, and the benefits of any existing or future
conditions, covenants and restrictions affecting the real property
(collectively, the "LAND");
(b) all things now or hereafter affixed to or placed on the Land,
including all buildings, structures and improvements, all fixtures and all
machinery, elevators, boilers, building service equipment (including, without
limitation, all equipment for the generation or distribution of air, water,
heat, electricity, light, fuel or for ventilating or air conditioning purposes
or for sanitary or drainage purposes or for the removal of dust, refuse or
garbage) and all other equipment, including restaurant equipment, partitions,
appliances, furniture, furnishings, building materials, supplies, computers and
software, window coverings and floor coverings, lobby furnishings, and other
property now or in the future attached, or installed in the improvements and all
replacements, repairs, additions, or substitutions to these items (collectively,
the "IMPROVEMENTS");
(c) all present and future income, rents, revenue, profits, proceeds,
accounts receivable, security deposits, and other benefits from the Land and/or
Improvements and all deposits made with respect to the Land and/or Improvements,
including, but not limited to, any security given to utility companies by
Grantor, any advance payment of real estate taxes or assessments, or insurance
premiums made by Grantor and all claims or demands relating to such deposits
and other security, including claims for refunds of tax payments or assessments,
and all insurance proceeds payable to Grantor in connection with the Land and/or
Improvements whether or not such insurance coverage is specifically required
under the terms of this Deed of Trust ("INSURANCE PROCEEDS") (all of the items
set forth in this paragraph are referred to collectively as "RENTS AND
PROFITS");
(d) all damages, payments and revenue of every kind that Grantor may be
entitled to receive, from any person owning or acquiring a right to the oil, gas
or mineral rights and reservations of the Land;
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(e) all proceeds and claims arising on account of any damage to, or
Condemnation (as hereinafter defined) of any part of the Land and/or
Improvements, and all causes of action and recoveries for any diminution in the
value of the Land and/or Improvements;
(f) all licenses, contracts, management agreements, guaranties,
warranties, franchise agreements, permits, or certificates relating to the
ownership, use, operation or maintenance of the Land and/or Improvements; and
(g) all names by which the Land and/or Improvements may be operated or
known, and all rights to carry on business under those names, and all
trademarks, trade names, and goodwill relating to the Land and/or Improvements.
TO HAVE AND TO HOLD the Real Property, unto Trustees in trust for the
use and benefit of Beneficiary, and its successors and assigns, forever subject
to the terms, covenants and conditions of this Deed of Trust.
SECTION 1.02 PERSONAL PROPERTY GRANT. Grantor irrevocably sells,
transfers, grants, conveys, assigns and warrants to Beneficiary, its successors
and assigns, a security interest in Grantor's interest in all personal property
in all of its forms that Grantor now or hereafter owns or in which Grantor now
or hereafter acquires an interest or right, including, without limitation, those
in which Grantor has an interest in mass or a joint or other interest or right
of any kind, those which are now or hereafter located on or affixed to the Real
Property, and those in transit thereto or in any other location, or used or
useful in the operation, use or occupancy of the Real Property or the
construction of any improvements thereon, including, without limitation, all of
Grantor's right, title and interest in and to the following items (expressly
excluding, however, trade fixtures and other personal property of tenants of the
Real Property), all of which are collectively referred to as "PERSONAL
PROPERTY":
(a) any portion of the Real Property which may be personal property,
and all other personal property, whether now existing or acquired in the future
which is attached to, appurtenant to, or used in the construction or operation
of, or in connection with, the Real Property;
(b) all rights to the use of water, including water rights appurtenant
to the Real Property, pumping plants, ditches for irrigation, all water stock or
other evidence of ownership of any part of the Real Property that is owned by
Grantor in common with others and all documents of membership in any owner's
association or similar group;
(c) all plans and specifications prepared for construction of the
Improvements, and all contracts and agreements of Grantor relating to the plans
and specifications or to the construction of the Improvements;
(d) all art work located on or used in connection with the Property or
its occupation or occupancy;
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(e) all equipment, furniture, furnishings, appliances, machinery,
fixtures, goods and other personal property, at any time located on or used in
connection with the Real Property (expressly excluding, however, that certain
1997 Dodge T300 truck having a vehicle identification number of
3B7KF23Z3VM514653);
(f) a sales agreements, deposits, escrow agreements, other documents
and agreements entered into with respect to the sale of any part of the Real
Property, and all proceeds of the sale;
(g) all leases, tenant security deposits, policies of insurance,
accounts (including, without limitation, any escrow account described in this
Deed of Trust and all sums on deposit therein), documents, instruments and
chattel paper, and other agreements and rights relating to the Real Property,
and other general intangibles, including but not limited to all governmental
permits relating to construction or other activities on the Real Property,
all names under or by which the Real Property may at any time be operated or
known, including, without limitation, the name "Arlington Square" and any
similar name, all rights to carry on business under any such names, or any
variant thereof, all trade names, trademarks and franchises relating in any
way to the Real Property, all good will in any way relating to the Property,
all licenses and permits relating in any way to, or to the operation of, the
Property, all contractual rights, all options, all purchase orders, all
manufacturers' warranties with respect to improvements, all construction
contracts, all maintenance contracts, all service contracts and all of
Grantor's claims and rights arising under or pursuant to Section 365 of the
Bankruptcy Code, 11 U.S.C. Section 365;
(h) the items of personal property listed on EXHIBIT "C" annexed
hereto; and
(i) all proceeds from the voluntary or involuntary disposition or claim
respecting any of the foregoing items (including, without limitation, judgments,
condemnation awards or otherwise) and all substitutions, replacements of, and
additions to, any of the foregoing items.
All of the Real Property and the Personal Property are collectively
referred to as the "Property."
SECTION 1.03 SATISFACTION AND RELEASE. If Grantor shall pay to
Beneficiary the Secured Indebtedness, at the times and in the manner stipulated
in the Loan Documents, and if Grantor shall perform and observe each of the
terms, covenants and agreements set forth in the Loan Documents, then this Deed
of Trust and all the rights granted by this Deed of Trust shall be satisfied and
released by Trustees and/or Beneficiary in accordance with the laws of the
Commonwealth of Virginia.
ARTICLE H
GRANTOR REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 2.01 DUE AUTHORIZATION, EXECUTION, AND DELIVERY.
(a) Grantor represents and warrants that the execution of the Loan
Documents and the Unsecured Indemnity Agreement have been duly authorized and
there is no provision in the
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organizational documents of Grantor requiring further consent for such action by
any other entity or person.
(b) Grantor represents and warrants that it is duly formed, validly
existing and is in good standing under the laws of the state of its formation
and in the Commonwealth of Virginia, that it has all necessary licenses,
authorizations, registrations, permits and/or approvals to own its properties
and to carry on its business as presently conducted.
(c) Grantor represents and warrants that the execution, delivery and
performance of the Loan Documents will not result in Grantor's being in default
under any provision of its organizational documents or of any deed of trust,
mortgage, lease, credit or other agreement to which it is a party or which
affects it or the Property.
(d) Grantor represents and warrants that the Loan Documents and the
Unsecured Indemnity Agreement have been duly authorized, executed and delivered
by Grantor and constitute valid and binding obligations of Grantor which are
enforceable in accordance with their terms. Grantor represents and warrants that
each individual executing the Loan Documents on behalf of Grantor has the legal
capacity and authority to execute the Loan Documents.
(e) The limited partnership interests evidenced by the Grantor's
organizational documents have been issued in accordance with all applicable
federal and state securities laws, or authorized exemptions from such securities
laws, including, but not limited to, the Securities Act of 1933, as amended, the
Securities and Exchange Act of 1934. The limited partnership interests of
Grantor have not been issued in violation of any federal, state or local
securities law, and to the extent that these securities have been issued in
reliance on exemptions from such federal or state securities law, all necessary
steps have been taken to qualify for such exemptions. The limited partners of
Grantor have been properly notified of all applicable securities laws and
related restrictions on their ability to transfer, sell or otherwise dispose of
their partnership interests in Grantor. The name of Beneficiary is not and will
not be in any of the offering materials provided or to be provided to any
person, including, but not limited to, any of the limited partners of Grantor,
nor has there been any representation, whether written, oral or otherwise, that
Beneficiary in any way has participated or endorsed the offering of the
partnership interests in Grantor.
(f) Without the prior written consent of Beneficiary, to be exercised *
in Beneficiary's sole and absolute discretion, other than the Permitted
Exceptions, Grantor shall not create, place or allow to remain any lien or
encumbrance on the Property, including deeds of trust, mortgages, security
interests, conditional sales, mechanic liens, tax liens or assessment liens
regardless of whether or not they are subordinate to the lien created by this
Deed of TRUST (collectively, "LIENS AND ENCUMBRANCES"). If any Liens and
Encumbrances are recorded against the Property or any part of the Property,
Grantor shall obtain a discharge and release of any Liens and Encumbrances
within fifteen (15) days after receipt of notice of their existence.
SECTION 2.02 PERFORMANCE BY GRANTOR. Grantor shall pay the Secured
Indebtedness to Beneficiary and shall keep and perform each and every other
obligation, covenant and agreement of the Loan Documents.
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SECTION 2.03 WARRANTY OF TITLE.
(a) Grantor warrants that it owns and holds marketable and
indefeasible fee simple absolute title to the Real Property, and that it has
the right and is lawfully authorized to sell, convey or encumber the Property
subject only to those property specific exceptions to title recorded in the
real estate records of Arlington County, Virginia and contained in Schedule B
of the title insurance policy or policies which have been approved by
Beneficiary (the "PERMITTED EXCEPTIONS"). The Property is free from all due
and unpaid taxes, assessments and mechanics' and materialmen's liens.
(b) Grantor further covenants to warrant and forever defend Trustee
and Beneficiary from and against all persons claiming any interest in the
Property.
SECTION 2.04 TAXES, LIENS AND OTHER CHARGES.
(a) Unless otherwise paid to Beneficiary as provided in SECTION 2.05
hereof, Grantor shall pay (i) all real estate and other taxes, assessments,
water and sewer charges, vault and other license or permit fees, and (ii) all
other liens, fines, penalties, interest and similar public and private claims
in excess of $50,000, which may be payable, assessed, levied, imposed upon or
become a lien on or against any portion of the Property (all of the foregoing
items are collectively referred to as the "IMPOSITION(S)"). The Impositions
shall be paid not later than ten (10) days before the dates on which the
particular Imposition would become delinquent and Grantor shall produce to
Beneficiary receipts of the imposing authority, or other evidence reasonably
satisfactory to Beneficiary, evidencing the payment of the Imposition in
full. If Grantor elects by appropriate legal action to contest any
Imposition, Grantor shall first deposit cash with Beneficiary as a reserve in
an amount which Beneficiary determines is sufficient to pay the Imposition
plus all fines, interest, penalties and costs which may become due pending
the determination of the contest. If Grantor deposits this sum with
Beneficiary, Grantor shall not be required to pay the Imposition provided
that the contest operates to prevent enforcement or collection of the
Imposition, or the sale or forfeiture of, the Property, and is prosecuted
with due diligence and continuity. Upon termination of any proceeding or
contest, Grantor shall pay the amount of the Imposition as finally determined
in the proceeding or contest. Provided that there is not then an Event of
Default (as defined in SECTION 11.01 hereof), the monies which have been
deposited with Beneficiary pursuant to this Section shall be applied toward
such payment and the excess, if any, shall be returned to Grantor.
(b) In the event of the passage, after the Execution Date, of any
law which deducts from the value of the Property, for the purposes of
taxation, any lien or security interest encumbering the Property, or changing
in any way the existing laws regarding the taxation of mortgages, deeds of
trust and/or security agreements or debts secured by these instruments, or
changing the manner for the collection of any such taxes, and the law has the
effect of imposing payment of any Impositions upon Beneficiary, at
Beneficiary's option, the Secured Indebtedness shall immediately become due
and payable. Notwithstanding the preceding sentence, Beneficiary's election
to accelerate the Loan shall not be effective if (1) Grantor is permitted by
law (including, without limitation, applicable interest rate laws) to, and
actually does. pay the Imposition or the increased portion of the Imposition
and (2) Grantor agrees in writing to pay or
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reimburse Beneficiary in accordance with SECTION 11.06 hereof for the payment of
any such Imposition which becomes payable at any time when the Loan is
outstanding.
SECTION 2.05 ESCROW DEPOSITS.
(a) Without limiting the effect of SECTION 2.04 and SECTION 3.01,
Grantor shall pay to Beneficiary monthly on the same date the Monthly
Installment (as defined in the Note) is payable under the Note, an amount equal
to 1/12th of the amounts Beneficiary reasonably estimates are necessary to pay,
on an annualized basis, (a) all Impositions and (b) the premiums for the
issuance policies required under this Deed of Trust (collectively, the `TAXES'~
until such time as Grantor has deposited an amount equal to the annual charges
for these items and on demand, from time to time, shall pay to Beneficiary any
additional amounts necessary to pay the Premiums and Impositions.
Notwithstanding the foregoing (but without limiting the effect of SECTION 2.04
or SECTION 3.01), until and unless an Event of Default shall exist, Grantor
shall not be required to deposit with Beneficiary with its monthly installment
either the Premiums or the portion of the Impositions consisting of water and
sewer charges and license or permit fees. Grantor will furnish to Beneficiary
bills for the Impositions and PREMIUM thirty (30) days before Impositions become
delinquent and such Premiums become due for payment. No amounts paid as
Impositions or Premiums shall be deemed to be trust funds and these funds may be
commingled with the general funds of Beneficiary without any requirement to pay
interest to Grantor on account of these funds. If an Event of Default occurs,
Beneficiary shall have the right, at its election, to apply any amounts held
under this SECTION 2.05 in reduction of the Secured Indebtedness, or in payment
of the Premiums or Impositions for which the amounts were deposited.
(b)(i) In addition, on the Advance Date, Grantor will pay to
Beneficiary $25,000.00; and commencing on the first day of the first month
after the Advance Date (as defined in the Note), and thereafter monthly on
the same date the Monthly Installment is payable under the Note, Grantor
shall pay to Beneficiary an amount equal to Twelve Thousand Five Hundred
Dollars ($12,500.00), up to an aggregate amount so deposited (exclusive of
interest) of One Million Five Hundred Thousand Dollars ($1,500,000.00). All
of such amounts, collectively, together with interest thereon which is on
deposit from time to time, are hereinafter referred to as the "LEASING
FUNDS". Commencing on the first day of the 13th month after the Execution
Date and continuing on the anniversary of such date every year thereafter,
Beneficiary shall pay to Borrower, within 30 days of such date, all interest
which may have accrued on the Leasing Funds for the previous 12 month period.
(ii) The Leasing Funds shall be held by Beneficiary subject to the
terms hereof as assurance to Beneficiary of (i) the completion of all tenant
finish work required in connection with the re-leasing under Qualifying
Leases (hereinafter defined) of any and all rentable space at the Property
(the "Re-Leasing Space") in good and workmanlike manner, using materials of
first-class grade and quality, free and clear of claims or liens for labor or
materials (the "TI Work") and (ii) the payment of leasing commissions in
respect of such re-leasing under Qualifying Leases (the "Leasing
Commissions"), and Grantor hereby covenants to pay for such TI Work and to
pay such Leasing Commissions promptly when such amounts are due and
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payable and before any late charge or penalty attaches. The term "Qualifying
Lease" shall mean a lease which is satisfactory in form and substance to
Beneficiary in Beneficiary's sole discretion.
(iii) Beneficiary shall invest the Leasing Funds in interest-bearing
deposit accounts or in securities of any mutual fund offered by any
investment company or in other instruments or investments selected by
Beneficiary, including those of Beneficiary or its affiliates. If the Leasing
Funds are invested in Grantor's name with any bank or trust company or
through any other investment company other than with Beneficiary, Grantor
shall provide the written waiver of such bank, trust company or investment
company, of any right set-off against the Leasing Funds arising from the
nonpayment of other obligations of Grantor to such bank, trust company or
investment company. Grantor shall be responsible for all tax filings and
payments required with respect to interest accrued on the Leasing Funds.
Grantor's taxpayer identification number is 52-1453274.
(iv) Subject to the provisions of (v) below and, provided that no
Event of Default then exists, Beneficiary shall release portions of the
Leasing Funds to Grantor for the payment of TI Work and Leasing Commissions,
but not in excess of the lesser of (i) Grantor's actual out-of-pocket costs
for such TI Work and Leasing Commissions or (ii) $25.00 per square foot for
TI Work plus $10.00 per square foot for Leasing Commissions, pursuant to
requests made by Grantor from time to time and approved by Beneficiary for
release of Leasing Funds in respect of costs incurred for TI Work and Leasing
Commissions under Qualifying Leases. All such requests shall be in writing
and shall include (i) a copy of the Qualifying Lease, (ii) documentation
reasonably satisfactory to Beneficiary including (A) as to Leasing
Commissions: invoices and final or partial lien waivers, as applicable,
covering amounts to be released, and (B) as to TI Work: invoices and paid
receipts, demonstrating that the all-in costs of the T1 Work under the
Qualifying Lease have been fully paid and that all TI Work has been completed
in accordance with the terms and requirements of the Qualifying Lease, free
and clear of any liens as evidenced by final and unconditional lien waivers
or evidence acceptable to Beneficiary in its reasonable discretion, (iii)
satisfactory evidence, including an executed tenant estoppel certificate,
that the Qualifying Lease is in full force and effect, with the tenant having
accepted the premises demised thereunder and being in occupancy and paying
rent, (iv) if required by the terms of the Loan Documents or the Qualifying
Lease, a subordination, nondisturbance and attornment agreement which is
satisfactory in all respects to Beneficiary, (v) a satisfactory certificate
from an architect or contract acceptable to Beneficiary certifying that the
TI Work has been completed in accordance with the plans and specifications
for the Qualifying Lease and all applicable governmental rules and
regulations, (vi) inspection of the demised space at Beneficiary's option,
(vii) evidence of governmental approval of completion of the TI Work, if
applicable, and (viii) evidence of the amount of all leasing commissions
payable in connection with the Qualifying Lease. Notwithstanding the
foregoing requirements in the preceding sentence, Grantor shall only be
required to provide the materials described in items (i), (iii), (iv) and
(viii) in connection with as request for release to fund a tenant improvement
allowance in connection with the renewal of either or both of the Leases of
the Property in place on the date of this Deed of Trust Requests shall be
made in respect of not less than $125,000 and not more often than quarterly,
and each request for the release of Leasing Funds shall constitute a
representation and warranty by Grantor that all of the information contained
in or provided with
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such request and all previous requests is true and accurate in all material
respects and does not omit any facts or information which would render such
request or requests misleading.
(v) Anything to the contrary in this Deed of Trust notwithstanding,
if an Event of Default exists, Beneficiary shall have the right, at its sole
election, to apply the Leasing Funds in reduction of the Secured
Indebtedness, or in payment of any outstanding TI Work or Leasing Commissions.
(vi) Grantor hereby pledges to Beneficiary the Leasing Funds and any
other amounts deposited with Beneficiary under this SECTION 2.05, and any
instruments in which they are invested hereunder, and grants Beneficiary a
lien thereon and security interest therein as security for payment of the
Secured Indebtedness and performance of Grantor's obligations under the Loan
Documents. Grantor covenants and agrees to take all actions reasonably
requested by Beneficiary to better assure to Beneficiary the benefits of its
security interest hereunder.
(vii) In addition to all liens upon, and rights of set off against,
the money, securities or other property of Grantor given to Beneficiary by
law, Beneficiary shall have a lien upon, security title to, a security
interest in and right of set off against the Leasing Funds and any other
amounts deposited with Beneficiary under this SECTION 2.05, and any
instruments or account,of other vehicle in which they are invested, and every
such lien, security title, security interest and right of setoff may be
exercised without demand upon or notice to Grantor. No lien, security title,
security interest or right of setoff shall be deemed to have been waived by
any act or conduct on the part of Beneficiary, or by any neglect to exercise
such right or setoff to enforce such lien, security title, security interest
or by any delay in so doing, and every lien, security title, security
interest and right of setoff shall continue in full force and effect until
the Secured Indebtedness has been fully repaid.
SECTION 2.06 CARE AND Use of THE PROPERTY.
(a) Grantor represents and warrants to Beneficiary as follows:
(i) All authorizations, approvals, licenses, including without
limitation liquor licenses, if any, and operating permits required to
allow the Improvements to be operated for the Use have been obtained,
paid for and are in full force and effect.
(ii) The Improvements, all PLAN , parking facilities and
landscaping upon the described Land and their Use comply with (and no
notices of violation have been received in connection with) all
Requirements (as defined in this Section) and Grantor shall at all
times comply with all present or future Requirements affecting or
relating to the Property and/or the Use. Grantor shall furnish
Beneficiary, on request, proof of compliance with the Requirements.
Grantor shall not use or permit the use of the Property, or any part
thereof, for any illegal purpose. "REQUIREMENTS" shall mean all laws,
ordinances, orders, covenants, conditions and restrictions and other
requirements relating to land and building design and construction, use
and maintenance, that may now or hereafter
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pertain to or affect the Property or any part of the Property or the
Use, including, without limitation, planning, zoning, subdivision,
environmental, air quality, flood hazard, fire safety, handicapped
facilities, building, health, fire, traffic, safety, wetlands, coastal
and other governmental or regulatory rules, laws, ordinances, statutes,
codes and requirements applicable to the Property, including permits,
licenses, certificates of occupancy and/or other certificates that may
be necessary from time to time to comply with any of the these
requirements.
(iii) Grantor has complied with all requirements of all
instruments and agreements affecting the Property, whether or not of
record, including without limitation all covenants and agreements by
and between Grantor and any governmental or regulatory agency
pertaining to the development, use or operation of the Property.
Grantor, at its sole cost and expense, shall keep the Property in good
order, condition, and repair, and make all necessary structural and
nonstructural, ordinary and extraordinary repairs to the Property and
the Improvements.
(iv) Grantor shall abstain from, and not permit, the
commission of waste to the Property and shall not remove or alter in
any substantial manner, the structure or character of any Improvements
without the prior written consent of Beneficial.
(v) The zoning approval for the Property is not dependent upon
the ownership or use of any property which is not encumbered by this
Deed of Trast.
(b) Beneficiary shall have the right, at any time and from time to time
during normal business hours, to enter the Property in order to ascertain
Grantor's compliance with the Loan Documents, to examine the condition of the
Property, to perform an appraisal, to undertake surveying or engineering work,
and to inspect premises occupied by tenants. Grantor shall cooperate with
Beneficiary performing these inspections.
(c) Grantor shall use, or cause to be used, the Property continuously
for the Use. Grantor shall not use, or permit the use of, the Property for any
other use without the prior written consent of Beneficiary. To the extent the
Property is used as a residential apartment complex, (i) Grantor shall not file
or record a declaration of condominium, master deed of trust or mortgage or any
other similar document evidencing the imposition of a so-called "condominium
regime" whether superior or subordinate to this Deed of Trust and (ii) Grantor
shall not permit any part of the Property to be converted to, or operated as, a
"cooperative apartment house" whereby the tenants or occupants participate in
the ownership, management or control of any part of the Property.
(d) Without the prior written consent of Beneficiary, Grantor shall not
(i) initiate or acquiesce in a change in the zoning classification of and/or
restrictive covenants affecting the Property or seek any variance under existing
zoning ordinances; (ii) use or permit the use of the Property in a manner which
may result in the Use becoming a non-conforming use under applicable zoning
ordinances; or (iii) subject the Property to restrictive covenants.
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SECTION 2.07 COLLATERAL SECURITY INSTRUMENTS. Grantor covenants and
agrees that if Beneficiary at any time holds additional security for any
obligations secured by this Deed of Trust, it may enforce its rights and
remedies with respect to the security, at its option, either before,
concurrently or after a sale of the Property is made pursuant to the terms of
this Deed of Trust Beneficiary may apply the proceeds of the additional security
to the Secured Indebtedness without affecting or waiving any right to any other
security, including the security under this Deed of Trust, and without waiving
any breach or default of Grantor under this Deed of Trust or any other Loan
Document.
SECTION 2.08 SUITS AND OTHER ACTS TO PROTECT THE PROPERTY.
(a) Grantor shall immediately notify Beneficiary of the commencement,
or receipt of notice, of any and all actions or proceedings or other material
matter or claim affecting the Property and/or the interest of Beneficiary under
the Loan Documents (collectively, "Actions"). Grantor shall appear in and defend
any Actions.
(b) Beneficiary shall have the right, at the cost and expense of
Grantor, to institute, maintain and participate in Actions and take such other
action, as it may deem appropriate in the good faith exercise of its discretion
to preserve or protect the Property and/or the interest of Beneficiary under the
Loan Documents. Any money paid by Beneficiary under this Section shall be
reimbursed to Beneficiary in accordance with SECTION 11.06 hereof.
SECTION 2.10 BUSINESS OF GRANTOR. Grantor shall at all times be a
single purpose entity and shall not (a) engage in business other than owning and
operating the Property (operation of the Property shall include construction of
tenant improvements pursuant to Leases), (b) acquire or own a material asset
other than the Property and incidental Personal Property, (c) maintain assets in
a way difficult to segregate and identify or commingle its assets with the
assets of any other person or entity; (d) fail to hold itself out to the public
as a legal entity separate from any other, (e) fail to conduct business solely
in its name or fail to maintain records, accounts of bank accounts separate from
any other person or entity; (0 file or consent to a petition pursuant to
application of bankruptcy, insolvency, liquidation or reorganizational statutes,
or make an assignment for the benefit of creditors without the unanimous consent
of its partners, members or stockholders, as applicable, (g) incur additional
indebtedness except for trade payables in the ordinary course of business of
owning and operating the Property, (h) dissolve, liquidate, consolidate, merge
or sell all or substantially all of its assets, or (i) modify, amend or revise
its organizational documents, except to comply with law enacted after the
Execution Date, to change the registered agent or business address not more than
once a year, or as may be necessary to effectuate any Transfer permitted under
ARTICLE X hereof
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ARTICLE III
INSURANCE
SECTION 3.01 REQUIRED INSURANCE AND TERMS OF INSURANCE POLICIES.
(a) During the term of this Deed of Trust, Grantor at its sole cost and
expense must provide insurance policies and certificates of insurance
satisfactory to Beneficiary as to amounts, types of coverage and the companies
underwriting these coverages. In no event will such policies be terminated or
otherwise allowed to lapse. Grantor shall be responsible for its own
deductibles. Grantor shall also pay for any insurance, or any increase of policy
limits, not described in this Deed of Trust which Grantor requires for its own
protection or for compliance with government statutes. Grantor's insurance shall
be primary and without contribution from any insurance procured by Beneficiary.
Policies of insurance shall be delivered to Beneficiary in accordance
with the following requirements:
(1) All Risk Property insurance on the Improvements and the
Personal Property, including contingent liability from Operation of
Building Laws, Demolition Costs and Increased Cost of Construction
endorsements, in each case (i) in an amount equal to 100% of the "Full
Replacement Cost" of the Improvements and Personal Property, which for
purposes of this ARTICLE III shall mean actual replacement value
(exclusive of costs of excavations, foundations, underground utilities
and footings) with a waiver of depreciation and with a Replacement Cost
Endorsement; (ii) containing an agreed amount endorsement with respect
to the Improvements and Personal Property waiving all co-insurance
provisions; (iii) providing for no deductible in excess of $10,000; and
(iv) containing an "Ordinance or Law Coverage" or "Enforcement"
endorsement if any of the Improvements or the use of the Property shall
constitute non-conforming structures or uses. The Full Replacement Cost
shall be determined from time to time by an appraiser or contractor
designated and paid by Grantor and approved by Beneficiary or by an
engineer or appraiser in the regular employ of the insurer.
(2) Commercial General Liability insurance against claims for
personal injury, bodily injury, death or property damage occurring
upon, in or about the Property, such insurance (i) to be on the
so-called "occurrence" form with a combined single limit of not less
than the amount set forth in the Defined Terms; (ii) to continue at not
less than this limit until required to be changed by Beneficiary in
writing by reason of changed economic conditions making such protection
inadequate; and (iii) to cover at least the following hazards: (a)
premises and operations; (b) products and completed operations on an
"if any" basis; (c) independent contractors; (d) blanket contractual
liability for all written and oral contracts; and (e) contractual
liability covering the indemnities contained in this Deed of Trust to
the extent available.
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(3) Business Income insurance in an amount sufficient to
prevent Grantor from becoming a co-insurer within the terms of the
applicable policies, and sufficient to recover one (1) year's "Business
Income" (as hereinafter defined). The amount shown in the Defined
Terms is the current estimate of one year's "Business Income".
"BUSINESS INCOME" shall mean the sum of (i) the total anticipated gross
income from occupancy of the Property, (ii) the amount of all charges
(such as, but not limited to, operating expenses, insurance premiums
and taxes) which are the obligation of tenants or occupants to Grantor,
(iii) the fair market rental value of any portion of the Property which
is occupied by Grantor, and (iv) any other amounts payable to Grantor
or to any affiliate of Grantor pursuant to leases.
(4) If Beneficiary determines at any time that any part of the
Property is located in an area identified on a Flood Hazard Boundary
Map or Flood Insurance Rate Map issued by the Federal Emergency
Management Agency as having special flood hazards and flood insurance
has been made available, Grantor will maintain a flood insurance policy
meeting the requirements of the current guidelines of the Federal
Insurance Administration with a generally acceptable insurance carrier,
in an amount not less than the lesser of (i) the outstanding principal
balance of the Loan or (ii) the maximum amount of insurance which is
available under the National Flood Insurance Act of 1968, the Flood
Disaster Protection Act of 1973 or the National Flood Insurance Reform
Act of 1994, as amended.
(5) During the period of any construction or renovation or
alteration of the Improvements, a so-called "Builder's All Risk"
insurance policy in nonreporting form for any Improvements under
construction, renovation or alteration including, without limitation,
for demolition and increased cost of construction or renovation, in an
amount approved by Beneficiary including an Occupancy endorsement and
Worker's Compensation Insurance covering all persons engaged in the
construction, renovation or alteration in an amount at least equal to
the minimum required by statutory limits of the Commonwealth of
Virginia.
(6) Workers' Compensation insurance, subject to the statutory
limits Of the Commonwealth of Virginia, and employer's liability
insurance with a limit of at least $1,000,000 per accident and per
disease per employee, and $1,000,000 for disease in the aggregate in
respect of any work or operations on or about the Property, or in
connection with the Property or its operations (if applicable).
(7) Boiler & Machinery insurance covering the major components
of the central heating, air conditioning and ventilating systems,
boilers, other pressure vessels, high pressure piping and machinery,
elevators and escalators, if any, and other similar equipment installed
in the Improvements, in an amount equal to one hundred percent (100%)
of the full replacement cost of all equipment installed in, on or at
the Improvements. These policies shall insure against physical damage
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to and loss of occupancy and use of the Improvements arising out of an
accident or breakdown.
(8) Such other insurance as MAY FROM TIME TO TIME be
reasonably required by Beneficiary against other insurable hazards,
including, but not limited to, vandalism, sinkhole and mine subsidence.
(b) Beneficiary's interest must be clearly stated by endorsement in the
insurance policies described in this SECTION 3.01 as follows:
(1) The policies of insurance referenced in subsections
(a)(1), (a)(3), (a)(4) and (a)(7) of this SECTION 3.01 shall identify
Beneficiary under the New York Standard Mortgagee Clause
(non-contributory) endorsement.
(2) the insurance policy referenced in SUBSECTION 3.01(A)(2)
shall name Beneficiary as an additional insured.
(3) All of the policies referred to in SECTION 3.01 shall
provide for at least thirty (30) days' written notice to Beneficiary in
the event of policy cancellation and/or material change.
(c) All the insurance companies must be authorized to do business in
New York State and the Commonwealth of Virginia and be approved by Beneficiary.
The insurance companies must have a general policy rating of A or better and a
financial class of X or better by A.M. Best Company, Inc. and a claims paying
ability of BBB or better according to Standard & Poors. If there are any
Securities (as defined in SECTION 12.01 hereof) issued with respect to this Loan
which have been assigned a rating by a credit rating agency approved by
Beneficiary (a "Rating Agency"), the insurance company shall have a claims
paying ability rating by such Rating Agency equal to or greater than the rating
of the highest class of the Securities. Grantor shall deliver evidence
satisfactory to Beneficiary of payment of premiums due under the insurance
policies.
(d) Certified copies of the policies, and any endorsements, shall
be made available for inspection by Beneficiary upon request. If any policy
is canceled before the Loan is satisfied, and Grantor fails to immediately
procure replacement insurance, Beneficiary reserves the right but shall not
have the obligation immediately to procure replacement insurance at Grantor's
cost.
(e) Grantor shall be required during the term of the Loan to
continue to provide Beneficiary with original renewal policies or
replacements of the insurance policies referenced in SECTION 3.01(A).
Beneficiary may accept Certificates of Insurance evidencing insurance
referenced in subsections (a)(2), (a)(4), and (a)(6) of this SECTION 3.01
instead of requiring the actual policies. Beneficiary shall be provided with
renewal Certificates of Insurance, or Binders, not less than fifteen (15)
days prior to each expiration. The failure of Grantor to maintain the
insurance required under this ARTICLE III shall not constitute a waiver of
Grantor's obligation to fulfill these requirements.
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(f) All binders, policies, endorsements, certificates, and
cancellation notices are to be sent to the Beneficiary's Address for
Insurance Notification as set forth in the Defined Terms until changed by
notice from Beneficiary.
SECTION 3.02 ADJUSTMENT OF CLAIMS. Grantor hereby authorizes and
empowers Beneficiary to settle, adjust or compromise any claims for damage
to, or loss or destruction of, all or a portion of the Property in an amount
in excess of one percent (1%) of the then outstanding Secured Indebtedness,
regardless of whether there are Insurance Proceeds available or whether any
such Insurance Proceeds are sufficient in amount to fully compensate for such
damage, loss or destruction.
SECTION 3.03 ASSIGNMENT TO BENEFICIARY. In the event of the
foreclosure of this Deed of Trust or other transfer of the title to the
Property in extinguishment of the Secured Indebtedness, all right, title and
interest of Grantor in and to any insurance policy, or premiums or payments
in satisfaction of claims or any other rights under these insurance policies
and any other insurance policies covering the Property shall pass to the
transferee of the Property.
ARTICLE IV
BOOKS, RECORDS AND ACCOUNTS
SECTION 4.01 BOOKS AND RECORDS. Grantor shall keep adequate books
and records of account in accordance with generally accepted accounting
principles ("GAAP"), or in accordance with other methods acceptable to
Beneficiary in its sole discretion. consistently applied and furnish to
Beneficiary:
(a) quarterly certified rent rolls signed and dated by
Grantor, detailing the names of all tenants of the Improvements, the
portion of Improvements occupied by each tenant, the base rent and any
other charges payable under each Lease (as defined in SECTION 5.02
hereof) and the term of each Lease, including the expiration date, and
any other information as is reasonably required by Beneficiary, within
thirty (30) days after the end of each fiscal quarter,
(b) a quarterly operating statement of the Property and year
to date operating statements detailing the total revenues received,
total expenses incurred, total cost of all capital improvements, total
debt service and total cash flow, to be prepared and certified by
Grantor in the form required by Beneficiary, and if available, any
quarterly operating statement prepared by an independent certified
public accountant, within thirty to sixty (30-60) days after the close
of each fiscal quarter of Grantor;
(c) an annual balance sheet and profit and loss statement of
Grantor in the form required by Beneficiary, prepared and certified by
Grantor, as the case may be, or if required by Beneficiary, audited
financial statements for Grantor and any Liable Parties prepared by an
independent certified public accountant
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acceptable to Beneficiary within ninety (90) days after the close of
each fiscal year of Grantor and the Liable Parties, as the case may be;
and
(d) an annual operating budget presented on a monthly basis
consistent with the annual operating statement described above for the
Property including cash flow projections for the upcoming year and all
proposed capital replacements and improvements at least fifteen (15)
days prior to the start of each calendar year.
SECTION 4.02 PROPERTY REPORTS. Upon request from Beneficiary or its
representatives and designees, Grantor shall furnish in a timely manner to
Beneficiary:
(a) a property management report for the Property, showing the
number of inquiries made and/or rental applications received from
tenants or prospective tenants and deposits received from tenants and
any other information requested by Beneficiary, in reasonable detail
and certified by Grantor (or an officer, general partner, member or
principal of Grantor if Grantor is not an individual) under penalty of
perjury to be true and complete, but no more frequently than quarterly;
and
(b) an accounting of all security deposits held in connection
with any Lease of any part of the Property, including the name and
identification number of the accounts in which such security deposits
are held, the name and address of the financial institutions in which
such security deposits are held and the name of the person to contact
at such financial institution, along with any authority or release
necessary for Beneficiary to obtain information regarding such accounts
directly from such financial institutions.
SECTION 4.03 ADDITIONAL MATTERS.
(a) Grantor shall furnish Beneficiary with such other
additional financial or management information (including, without
limitation, State and Federal tax returns) as may, from time to time,
be reasonably required by Beneficiary or the rating agencies in form
and substance satisfactory to Beneficiary or the rating agencies.
(b) Grantor shall furnish Beneficiary and its agents
convenient facilities for the examination and audit of any such books
and records.
ARTICLE V
LEASES AND OTHER AGREEMENTS AFFECTING THE PROPERTY
SECTION 5.01 GRANTOR'S REPRESENTATIONS AND WARRANTIES. Grantor
represents and warrants to Beneficiary as follows:
(a) There are no leases or occupancy agreements affecting the
Property except the leases and amendments listed in the Certification
Regarding Rent Roll dated as of the Execution
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Date, and Grantor has delivered to Beneficiary true, correct and complete
copies of all leases, including amendments (collectively, "EXISTING LEASES")
and all guaranties and amendments of guaranties given in connection with the
Existing Leases (the "GUARANTIES").
(b) All Existing Leases and Guaranties are in full force and effect
without any oral or written modification except as set forth in writing in
the copies delivered to Beneficiary.
(c) There are no defaults by Grantor under the Existing Leases and
Guaranties and, to the best knowledge of Grantor, there are no defaults by
any tenants under the Existing Leases or any guarantors under the Guaranties.
The Existing Leases and the Guaranties are in full force and effect.
(d) To the best knowledge of Grantor, none of the tenants or any
combination of tenants now occupying 10% or more of the Property or having a
current lease affecting 10% or more of the Property, nor any guarantor of any
lease of 10% or more of the Property, is the subject of any bankruptcy,
reorganization or insolvency proceeding or any other debtor-creditor
proceeding.
(e) Except only for rent and additional rent for the current month,
Grantor has not accepted under any of the Leases any payment of advance rent,
additional rent or security deposit in an amount that is more than one
month's rent and additional rent.
(f) Grantor has deposited all security deposits, if any, delivered
in connection with the Existing Leases in accordance with applicable law.
(g) No tenant under any Existing Lease has asserted any defense,
set-off or counterclaim with respect to its tenancy or its obligations under
its lease, and no such defense, set-off or counterclaim exists.
(h) There are no unfulfilled landlord obligations due to tenants for
tenant improvements, moving expenses or rental concessions or other matters,
and all credits required to be paid or contributed by Grantor under the
Existing Leases have been paid or contributed in full.
(i) None of the Existing Leases or Rents and Profits have been
assigned, pledged, hypothecated or otherwise encumbered or transferred by
Grantor except to the extent provided in the Loan Documents.
SECTION 5.02 ASSIGNMENT OF LEASES. In order to further secure
payment of the Secured indebtedness and the performance of Grantor's
obligations under the Loan Documents, Grantor absolutely, presently and
unconditionally grants, assigns and transfers to Beneficiary all of Grantor's
right, title, interest and estate in, to and under (a) all of the Existing
Leases and Guaranties affecting the Property and (b) all of the future leases
and guaranties and (c) the Rents and Profits. Grantor acknowledges that it is
permitted to collect the Rents and Profits pursuant to a revocable license,
unless and until an Event of Default occurs. The Existing Leases and
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Guaranties and all future leases, lease amendments and guaranties are
collectively referred to as the "LEASES".
SECTION 5.03 PERFORMANCE OF OBLIGATIONS.
(a) Grantor shall Perform all Obligations under any and all Leases.
If any of the acts described in this Section are done without the written
consent of Beneficiary, at the option of Beneficiary, they shall be of no
force or effect and shall constitute a default under this Deed of Trust.
(b) Grantor agrees to furnish Beneficiary executed copies of all
future Leases. Grantor shall not, without the express written consent of
Beneficiary, (i) enter into or extend any Lease unless the Lease complies
with the Leasing Guidelines which are attached to this Deed of Trust as
EXHIBIT "B", or (ii) cancel or terminate any Leases (except in the case of a
default) unless Grantor has entered into new Leases covering all of the
premises of the Leases being terminated or surrendered, or (iii) modify or
amend any Leases in any material way or reduce the rent or additional rent,
or (iv) consent to an assignment of the tenant's interest or to a subletting
of any Lease unless the tenant remains liable under the Lease following the
assignment or subletting, or (v) accept payment of advance rents or security
deposits in an amount in excess of one month's rent or (vi) enter into any
options to purchase the Property.
SECTION 5.04 SUBORDINATE LEASES AND NON-DISTURBANCE AGREEMENTS.
(a) Each of the Leases affecting the Property shall be subordinate
to the lien of this Deed of Trust and shall also contain a provision,
satisfactory to Beneficiary, to the effect that in the event of the judicial
or non-judicial foreclosure of the Property, the particular Lease shall not
be terminated and the tenant shall attorn to the purchaser.
(b) If Beneficiary requests, Grantor shall cause a tenant or tenants
to enter into subordination and attornment agreements or nondisturbance
agreement with Beneficiary on forms which have been approved by Beneficiary.
Notwithstanding SECTION 5.03 above, Beneficiary shall have approval rights
with respect to any Lease, including, without limitation, Leases which
otherwise comply with the Leasing Guidelines, in the event Beneficiary is
asked to provide a nondisturbance agreement in connection with such Lease.
Grantor shall pay or, on demand, reimburse Beneficiary for the payment of any
reasonable costs or expenses (including reasonable attorneys' fees and
disbursements) incurred or expended in connection with or incidental to
(i) the review and approval of any Lea requiring a non-disturbance agreement,
and (ii) the preparation and negotiation of a non-disturbance agreement in
connection with any Lease.
SECTION 5.05 LEASING COMMISSIONS. Grantor covenants and agrees that
all contracts and agreements relating to the Property requiring the payment
of leasing commissions, management fees or other similar compensation shall
(a) provide (whether in the agreement itself or a separate subordination
agreement) that the obligation will not be enforceable against Beneficiary
and (b) be subordinate to the lien of this Deed of Trust. Beneficiary will be
provided evidence of Grantor's compliance with this Section upon request.
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ARTICLE VI
ENVIRONMENTAL HAZARDS
SECTION 6.01 REPRESENTATIONS AND WARRANTIES. Grantor hereby
represents, warrants, covenants and agrees to and with Beneficiary that (a)
neither Grantor nor, to the best of Grantor's knowledge, after due inquiry,
any tenant, subtenant or occupant of the Property, has at any time placed,
suffered or permitted, nor at any time will Grantor place, suffer or permit
the presence of any toxic waste or other Hazardous Materials (as defined in
SECTION 6.05 hereof) or any contaminants, oil or pesticides at, on, under,
within or about the Property, except (i) for small amounts in retail
containers used in approved operations and maintenance programs and in
compliance with all Requirements of Environmental Laws, or (ii) as expressly
approved by Beneficiary in writing, (b) neither Grantor nor any portion of
the Property is subject to any existing, pending or threatened investigation
by any governmental authority under any Requirements of Environmental Laws
(as defined in SECTION 6.06 hereof), (c) Grantor has not and is not required
by any Requirements of Environmental Laws to obtain any permits or licenses
to use any portion of the Improvements, fixtures, or equipment on the
Property, (d) all operations or activities upon the Property, and any use or
occupancy of the Property by Grantor are presently and shall in the future be
in compliance with all Requirements of Environmental Laws, (e) Grantor will
use best efforts to assure (i) that any tenant, subtenant or occupant of the
Property shall in the future be in compliance with all Requirements of
Environmental Laws and (ii) that no tenant, subtenant or occupant places,
suffers or permits any toxic waste or other Hazardous Materials, or any
contaminants, oil or pesticides at, on, under, within or about the Property,
and (f) Grantor will comply with all of the requirements and recommendations
set forth in any environmental site assessment performed with respect to the
Property prior to the date hereof as a condition of the Loan and will obtain
and forward to Beneficiary revised environmental site assessments, if
requested by Beneficiary.
SECTION 6.02 REMEDIAL WORK. In the event any investigation or
monitoring of site conditions or any clean-up, containment, restoration,
removal or other remedial work (collectively, the "REMEDIAL WORK") reasonably
necessary or desirable under any Requirements of Environmental Laws (defined
below), Grantor shall within thirty (30) days after written demand by
Beneficiary (or such shorter period of time as may be required under
Requirements of Environmental Laws) perform or cause to be performed the
Remedial Work in compliance with the applicable law, regulation, order or
agreement. All Remedial Work shall be performed by one or more contractors,
selected by Grantor and approved in advance in writing by Beneficiary, and
under the supervision of a consulting engineer, selected by Grantor and
approved in advance in writing by Beneficiary. All costs and expenses of
Remedial Work shall be paid by Grantor including, without limitation, the
charges of the contractor(s) and/or the consulting engineer, and
Beneficiary's reasonable attorneys', architects' and/or consultants' fees and
costs incurred in connection with monitoring or review of the Remedial Work.
In the event Grantor shall fail to timely commence, or cause to be commenced,
or fail to diligently prosecute to completion, the Remedial Work, Beneficiary
may, but shall not be required to, cause such Remedial Work to be performed,
subject to the provisions of SECTIONS 11.05 and 11.06 hereof.
SECTION 6.03 ENVIRONMENTAL SITE ASSESSMENT. Beneficiary shall have
the right, at any time and from time to time, to undertake, at the expense of
Grantor, an environmental site
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assessment on the Property, including any testing that Beneficiary may
determine, in its sole discretion, is necessary or desirable to ascertain the
environmental condition of the Property and the compliance of the Property
with Requirements of Environmental Laws. Grantor shall cooperate fully with
Beneficiary and its consultants performing such assessments and tests.
SECTION 6.04 UNSECURED OBLIGATIONS. No amounts which may become
owing by Grantor to Beneficiary under this ARTICLE VI or under any other
provision of this Deed of Trust as a result of a breach of or violation of
this ARTICLE VI shall be secured by this Deed of Trust. The obligations shall
continue in full force and effect and any breach of this ARTICLE VI shall
constitute an Event of Default. The lien of this Deed of Trust shall not
secure (a) any obligations evidenced by or arising under the Unsecured
Indemnity Agreement ("UNSECURED OBLIGATIONS"), or (b) any other obligations
to the extent that they are the same or have the same effect as any of the
Unsecured Obligations. The Unsecured Obligations shall continue in full
force, and any breach or default of any such obligations shall constitute a
breach or default under this Deed of Trust but the proceeds of any
foreclosure sale shall not be applied against Unsecured Obligations. Nothing
in this Section shall in any way limit or otherwise affect the right of
Beneficiary to obtain a judgment in accordance with applicable law for any
deficiency in recovery of all obligations that are secured by this Deed of
Trust following foreclosure, notwithstanding that the deficiency judgment may
result from diminution in the value of the Property by reason of any event or
occurrence pertaining to Hazardous Materials or any Requirements of
Environmental Laws.
SECTION 6.05 HAZARDOUS MATERIALS. "HAZARDOUS MATERIALS" shall
include without limitation:
(a) Those substances included within the definitions of "hazardous
substances," "hazardous materials," "toxic substances," or "solid waste" in
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980 as amended, 42 U.S.C. Sections 9601 ET SEQ., the Resource Conservation
and Recovery Act of 1976, 42 U.S.C. Sections 6901 ET SEQ., and the Hazardous
Materials Transportation Act, 49 U.S.C. Sections 1801 ET SEQ., and in the
regulations promulgated pursuant to said laws;
(b) Those substances regulated pursuant to or identified in the
Virginia Pesticide Law, Va. Code Ann. Section 3.1-249.27 ET SEQ.; Air
Pollution Control Board Va. Code Ann. Section 10.1-1300 ET SEQ.; Virginia
Waste Management Act Section 10.1-1400 ET SEQ.; Transportation of Hazardous
Radioactive Materials, Va. Code Ann. Section 44-146.30; Virginia Hazardous
Materials Emergency Response Program, Va. Code Ann. Section 44-146.34; State
Water Control Law, Va. Code Ann. Section 62.1-44.2 ET SEQ.; The Groundwater
Act of 1973, Va. Code Ann. Section 62.1-44.83 ET SEQ.; and Miscellaneous
Offenses, Va. Code Ann. Section 62.1-194 ET SEQ., and the regulations
promulgated pursuant to such laws;
(c) Those chemicals determined by any Arlington County or
Commonwealth of Virginia or federal department, board or agency, or any other
agency or governmental board having jurisdiction over any of the Property to
cause cancer or reproductive toxicity;
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(d) Those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto);
(e) Any material, waste or substance which is (i) petroleum, (ii)
asbestos, (iii) polychlorinated biphenyls, (iv) designated as a "hazardous
substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section
1251 ET SEQ. (33 U.S.C. Section 1321) or listed pursuant to Section 307 of
the Clean Water Act (33 U.S.C. Section 1317); (v) a chemical substance or
mixture regulated under the Toxic Substances Control Act of 1976, 15 U.S.C.
Sections 2601 ET SEQ.; (vi) flammable explosives; or (vii) radioactive
materials; and
(f) Such other substances, materials and wastes which are or become
regulated as hazardous or toxic under applicable local, state or federal law,
or the United States government, or which are classified as hazardous or
toxic under federal, state, or local laws or regulations.
SECTION 6.06 REQUIREMENTS OF ENVIRONMENTAL LAWS. "REQUIREMENTS OF
ENVIRONMENTAL LAWS" means all requirements of environmental, ecological,
health, or industrial hygiene laws or regulations or rules of common law
related to the Property, including, without limitation, all requirements
imposed by any environmental permit, law, rule, order, or regulation of any
federal, state, or local executive, legislative, judicial, regulatory, or
administrative agency, which relate to (a) exposure to Hazardous Materials;
(b) pollution or protection of the air, surface water, ground water, land;
(c) solid, gaseous, or liquid waste generation, treatment, storage, disposal,
or transportation; or (d) regulation of the manufacture, processing,
distribution and commerce, use, or storage of Hazardous Materials.
ARTICLE VII
CASUALTY, CONDEMNATION AND RESTORATION
SECTION 7.01 GRANTOR'S REPRESENTATIONS. Grantor represents and warrants
as follows:
(a) Except as expressly approved by Beneficiary in writing, no casualty
or damage to any part of the Property which would cost more than $50,000 to
restore or replace has occurred which has not been fully restored or replaced.
(b) No part of the Property has been taken in condemnation or other
similar proceeding or transferred in lieu of condemnation, nor has Grantor
received notice of any proposed condemnation or other similar proceeding
affecting the Property.
SECTION 7.02 RESTORATION.
(a) Grantor shall give prompt written notice of any casualty to the
Property to Beneficiary whether or not required to be insured against. The
notice shall describe the nature and cause of the casualty and the extent of the
damage to the Property.
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(b) In the event of any damage to or destruction of the Property,
and regardless of whether Net Insurance Proceeds (defined below) are
available therefor, Grantor shall commence and diligently pursue to
completion the Restoration of the Property. Grantor assigns to Beneficiary
all Insurance Proceeds which Grantor is entitled to receive in connection
with a casualty whether or not such insurance is required under this Deed of
Trust. In the event of any damage to or destruction of the Property, and
provided that (1) an Event of Default does not currently exist, and (2)
Beneficiary has determined that (i) there has not been an Impairment of the
Security (as defined in SUBSECTION 7.02 (c) hereof), and (ii) the repair,
restoration and rebuilding of any portion of the Property that has been
partially damaged or destroyed (the "RESTORATION") can be accomplished in
full compliance with all Requirements to the same condition, character and
general utility as nearly as possible to that existing prior to the casualty
and at least equal in value as that existing prior to the casualty, then, if
the amount of Insurance Proceeds is $100,000 or less, Grantor may hold and
disburse such proceeds, and, in the amount of Insurance Proceeds is more than
$100,000, Beneficiary shall hold and disburse the Insurance Proceeds, less
(x) the cost, if any, to Beneficiary of recovering the Insurance Proceeds
including, without limitation, reasonable attorneys' fees and expenses, and
adjusters' fees, and (y) any Business Income Insurance Proceeds received by
Beneficiary (the "NET INSURANCE PROCEEDS"), to Grantor for the Restoration of
the Property.
(c) For the purpose of this ARTICLE VII, "IMPAIRMENT OF THE SECURITY"
shall mean any or all of the following: (i) any of the Leases for more than
15,000 square feet existing immediately prior to the damage, destruction,
condemnation or casualty shall have been canceled, or shall contain any
exercisable right to cancel as a result of the damage, destruction or
casualty, (ii) the casualty or damage occurs during the last year of the term
of the Loan; or (iii) Restoration of the Property is estimated to require
more than one year to complete from the date of the occurrence.
(d) If the Net Insurance Proceeds are to be used for the Restoration
in accordance with this ARTICLE VII, Grantor shall comply with Beneficiary's
Requirements For Restoration as set forth in SECTION 7.04 below. Upon
Grantor's satisfaction and completion of the Requirements For Restoration and
upon confirmation that there is no Event of Default then existing under the
Loan Documents, Beneficiary shall pay any remaining Restoration Funds (as
defined in SECTION 7.04 below) then held by Beneficiary to Grantor.
(e) In the event that the conditions precedent to Beneficiary's
disbursement of the Net Insurance Proceeds for the Restoration set forth in
this Section have not been met, Beneficiary may, at its option, apply the Net
Insurance Proceeds to the reduction of the Secured Indebtedness in such order
as Beneficiary may determine and Beneficiary may declare the entire Secured
Indebtedness immediately due and payable. After payment in full of the
Secured Indebtedness, any remaining Restoration Funds shall be paid to
Grantor.
SECTION 7.03 CONDEMNATION.
(a) If the Property or any part of the Property is taken by reason
of any condemnation or similar eminent domain proceeding, or by a grant or
conveyance in lieu of condemnation or eminent domain ("CONDEMNATION"),
BENEFICIARY shall be entitled to all compensation, awards,
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damages, proceeds and payments or relief for the Condemnation ("CONDEMNATION
PROCEEDS"). At its option, Beneficiary shall be entitled to commence, appear
in and prosecute in its own name any action or proceeding or to make any
compromise or settlement in connection with such Condemnation. Grantor hereby
irrevocably constitutes and appoints Beneficiary as its attorney-in-fact,
which appointment is coupled with an interest, to commence, appear in and
prosecute any action or proceeding or to make any compromise or settlement in
connection with any such Condemnation.
(b) In the event of any Condemnation of the Property, and regardless
of whether Net Condemnation Proceeds are available therefor, Grantor shall
commence and diligently pursue to completion the Restoration of the Property
that has not been taken. Grantor assigns to Beneficiary all Condemnation
Proceeds which Grantor is entitled to receive. In the event of any
Condemnation, and provided that (1) an Event of Default does not currently
exist, and (2) Beneficiary has determined that (i) there has not been an
Impairment of the Security, and (ii) the Restoration of any portion of the
Property that has not been taken can be accomplished in full compliance with
all Requirements to the same condition, character and general utility as
nearly as possible to that existing prior to the taking and at least equal in
value as that existing prior to the taking, then Beneficiary shall hold and
disburse the Condemnation Proceeds, less the cost, if any, to Beneficiary of
recovering the Condemnation Proceeds including, without limitation,
reasonable attorneys' fees and expenses, and adjusters' fees (the "NET
CONDEMNATION PROCEEDS"), to Grantor for the Restoration of the Property.
(c) In the event the Net Condemnation Proceeds are to be used for
the Restoration, Grantor shall comply with Beneficiary's Requirements For
Restoration as set forth in SECTION 7.04 below. Upon Grantor's satisfaction
and completion of the Requirements For Restoration and upon confirmation that
there is no Event of Default then existing under the Loan Documents,
Beneficiary shall pay any remaining Restoration Funds (as defined in SECTION
7.04 below) then held by Beneficiary to Grantor.
(d) In the event that the conditions precedent to Beneficiary's
disbursement of the Net Condemnation Proceeds for the Restoration set forth
in this Section have not been met, Beneficiary may, at its option, apply the
Net Condemnation Proceeds to the reduction of the Secured Indebtedness in
such order as Beneficiary may determine and Beneficiary may declare the
entire Secured Indebtedness immediately due and payable. After payment in
full of the Secured Indebtedness, any remaining Restoration Funds shall be
paid to Grantor.
SECTION 7.04 REQUIREMENTS FOR RESTORATION. Unless otherwise
expressly agreed in a writing signed by Beneficiary, the following are the
Requirements For Restoration:
(a) Prior to the commencement of any Restoration work (the "WORK"),
Grantor shall provide Beneficiary for its review and written approval (i)
complete plans and specifications for the Work which (A) have been approved
by all required governmental authorities, (B) have been approved by an
architect satisfactory to Beneficiary (the "ARCHITECT") and (C) are
accompanied by Architect's signed statement of the total estimated cost of
the Work (the "APPROVED PLANS AND SPECIFICATIONS"); (ii) the amount of money
which Beneficiary reasonably determines will be sufficient when added to the
Net Insurance Proceeds or Condemnation Proceeds to pay the entire
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cost of the restoration (collectively referred to as the "RESTORATION
FUNDS"); (iii) evidence that the Approved Plans and Specifications and the
Work are in compliance with all Requirements; (iv) an executed contract for
construction with a contractor satisfactory to Beneficiary (the "CONTRACTOR")
in a form approved by Beneficiary in writing; and (v) a surety bond and/or
guarantee of payment with respect to the completion of the Work. The bond or
guarantee shall be satisfactory to Beneficiary in form and amount and shall
be signed by a surety or other entities who are acceptable to Beneficiary.
(b) Grantor shall not commence the Work, other than temporary work
to protect the Property or prevent interference with business, until Grantor
shall have complied with the requirements of SUBSECTION (A) of this SECTION
7.04. So long as there does not currently exist an Event of Default and the
following conditions have been complied with or, in Beneficiary's discretion,
waived, Beneficiary shall disburse the Restoration Funds in increments to
Grantor, from time to time as the Work progresses:
(i) Architect shall be in charge of the Work;
(ii) Beneficiary shall disburse the Restoration Funds directly or
through escrow with a title insurance company selected by Grantor and
approved by Beneficiary, upon not less than ten (10) days, prior
written notice from Grantor to Beneficiary and Grantor's delivery to
Beneficiary of (A) Grantor's written request for payment (a "REQUEST
FOR PAYMENT") accompanied by a certificate by Architect in a form
satisfactory to Beneficiary which states that (1) all of the Work
completed to that date has been completed in compliance with the
Approved Plans and Specifications and in accordance with all
Requirements, (2) the amount requested has been paid or is then due and
payable and is properly a part of the cost of the Work, and (3) when
added to all sums previously paid by Beneficiary, the requested amount
does not exceed the value of the Work completed to the date of such
certificate; and (B) evidence satisfactory to Beneficiary that the
balance of the Restoration Funds remaining after making the payments
shall be sufficient to pay the balance of the cost of the Work. Each
Request for Payment shall be accompanied by (x) waivers of liens
covering that part of the Work previously paid for, if any (y) a title
search or by other evidence satisfactory to Beneficiary that no
mechanic's or materialmen's liens or other similar liens for labor or
materials supplied in connection with the Work have been filed against
the Property and not discharged of record, and (z) an endorsement to
Beneficiary's title policy insuring that no encumbrance exists on or
affects the Property other than the Permitted Exceptions;
(iii) The final Request for Payment shall be accompanied by (A) a
final certificate of occupancy or other evidence of approval of
appropriate governmental authorities for the use and occupancy of the
Improvements, (B) evidence that the Restoration has been completed in
accordance with the Approved Plans and Specifications and all
Requirements, (C) evidence that the costs of the Restoration have been
paid in full, and (D) evidence that no mechanic's or similar liens for
labor or material supplied in connection with the Restoration are
outstanding against the Property, including final waivers of liens
covering all of the Work and an endorsement to Beneficiary's title
policy
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insuring that no encumbrance exists on or affects the Property other than
the Permitted Exceptions.
(c) If (i) within sixty (60) days after the occurrence of any
damage, destruction or condemnation requiring Restoration, Grantor fails to
submit to Beneficiary and receive Beneficiary's approval of plans and
specifications or fails to deposit with Beneficiary, within thirty (30) days
of Beneficiary's determination that additional amounts are necessary to
accomplish the Restoration as provided in subparagraph (a) above, the
additional amount so required, or (ii) after such plans and specifications
are approved by all such governmental authorities and Beneficiary, Grantor
fails to commence promptly or diligently continue to completion the
Restoration, or (iii) Grantor becomes delinquent in payment to mechanics,
materialmen or others for the costs incurred in connection with the
Restoration, or (iv) there exists an Event of Default, then, in addition to
all of the rights herein set forth and after ten (10) days' written notice of
the non-fulfillment of one or more of these conditions, Beneficiary may apply
the Restoration Funds to reduce the Secured Indebtedness in such order as
Beneficiary may determine, and at Beneficiary's option and in its sole
discretion, Beneficiary may declare the Secured Indebtedness immediately due
and payable together with any applicable Prepayment Fee under and as such
term is defined in the Note.
ARTICLE VIII
REPRESENTATIONS OF GRANTOR
SECTION 8.01 ERISA. Grantor hereby represents, warrants and
covenants that: (a) it is acting on its own behalf and that it is not an
employee benefit plan as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), which is subject to Title
I of ERISA, nor a plan as defined in Section 4975(e)(1) of the Internal
Revenue Code of 1986, as amended (each of the foregoing hereinafter referred
to collectively as a "PLAN"); (b) Grantor's assets do not constitute "plan
assets" of one or more such Plans within the meaning of Department of Labor
Regulation Section 2510.3-101; and (c) it will not be reconstituted as a Plan
or as an entity whose assets constitute "plan assets".
SECTION 8.02. NON-RELATIONSHIP. Neither Grantor nor any partner,
director, member, stockholder or officer of Grantor nor, to Grantor's
knowledge, any person who is a Grantor's Constituent (as defined in SECTION
8.03 hereof) is (a) a director or officer of Metropolitan Life Insurance
Company ("METLIFE"), (b) a parent, son or daughter of a director or officer
of MetLife, or a descendent of any of them, (c) a stepparent, adopted child,
stepson or stepdaughter of a director or officer of MetLife, or (d) a spouse
of a director or officer of MetLife.
SECTION 8.03 NO ADVERSE CHANGE. Grantor represents and warrants that:
(a) there has been no material adverse change from the
conditions shown in the application submitted for the Loan by
Grantor ("APPLICATION") or in the materials submitted in connection
with the Application in the credit rating or financial condition of
Grantor or the Liable Parties, the partners, shareholders or members
of Grantor or any entity which is a general partner, shareholder or
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member of Grantor, respectively as the case may be (collectively,
"GRANTOR'S CONSTITUENTS").
(b) Grantor has delivered to Beneficiary true and correct
copies of all Grantor's organizational documents and except as
expressly approved by Beneficiary in writing, there have been no
changes in Grantor's Constituents since the date that the
Application was executed by Grantor.
(c) Neither Grantor, nor any Liable Parties or any of the
Grantor's Constituents, is involved in any bankruptcy,
reorganization, insolvency, dissolution or liquidation proceeding,
and to the best knowledge of Grantor, no such proceeding is
contemplated or threatened.
(d) No part of the Property has been damaged and not
repaired, nor taken in condemnation or any like proceeding, and no
part of the Property has been transferred in lieu of condemnation or
other like proceeding, nor is any such proceeding or like proceeding
pending or threatened, nor is there any pending or threatened
litigation or claim which might adversely affect the ownership or
value of the Property.
(e) Neither Grantor, nor any tenant under any lease of any
portion of the Property, is involved in any bankruptcy, reorganization
or insolvency proceeding nor is Grantor in default in the performance
of any obligation in the instruments evidencing, securing, supporting
or transferring the Loan, nor will this transaction cause Grantor to be
insolvent or declared an insolvent.
SECTION 8.04 FOREIGN PERSON. Grantor represents and warrants that
Grantor, nor any partner, member or stockholder of Grantor is or will be,
held, directly or indirectly by a "foreign person" within the meaning of
Sections 1445 and 7701 of the Internal Revenue Code of 1986, the
International Investment and Trade Services Survey Act of 1976, the
Agricultural Foreign Investment Disclosure Act of 1978, the Foreign
Investment in Real Property Tax Act of 1980, the regulations promulgated
pursuant to such acts or any amendments to such acts.
SECTION 8.05 BROKER. Grantor represents that Madison Capital
Advisers ("BROKER") is its broker in connection with the Loan and agrees to
pay the fees of Broker. Beneficiary shall have no obligation for, and Grantor
shall indemnify and hold Beneficiary harmless from, the payment of any
brokerage commissions or fees of any kind and any legal fees and/or expenses
incurred by Beneficiary in connection with any claims for brokerage
commissions or fees with respect to the Loan. Grantor acknowledges that
Beneficiary may be affiliated with, or may have been involved in other
transactions with Broker, and Grantor agrees that it shall have no rights
against Beneficiary or defenses to Grantor's obligations under the Loan
Documents because of any such relationship.
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ARTICLE IX
EXCULPATION AND LIABILITY
SECTION 9.01 LIABILITY OF GRANTOR.
(a) Upon the occurrence of an Event of Default, except as provided
in this SECTION 9.01, Beneficiary will look solely to the Property and the
security under the Loan Documents for the repayment of the Loan and will not
enforce a deficiency judgment against Grantor. However, nothing contained in
this SECTION 9.01 shall limit the rights of Beneficiary to proceed against
Grantor and the general partners of Grantor and/or the Liable Parties, if
any, (i) to enforce any leases entered into by Grantor or its affiliates as
tenant, guarantees, or other agreements entered into by Grantor in a capacity
other than as borrower or any policies of insurance; (ii) to recover damages
for fraud, material misrepresentation, breach of warranty or waste; (iii) to
recover any Condemnation Proceeds or Insurance Proceeds or other similar
funds which have been misapplied by Grantor or which, under the terms of the
Loan Documents, should have been paid to Beneficiary; (iv) to recover any
tenant security deposits, tenant letters of credit or other deposits or fees
paid to Grantor that are part of the collateral for the Loan or prepaid rents
for a period of more than 30 days which have not been delivered to
Beneficiary; (v) to recover Rents and Profits received by Grantor after the
first day of the month in which an Event of Default occurs and prior to the
date Beneficiary acquires title to the Property which have not been applied
to the Loan or in accordance with the Loan Documents to operating and
maintenance expenses of the Property; (vi) to recover damages, costs and
expenses arising from, or in connection with the provisions of this Deed of
Trust pertaining to Hazardous Materials or the Unsecured Indemnity Agreement;
(vii) to recover all amounts due and payable pursuant to SECTIONS 11.06 and
11.07 of this Deed of Trust; and/or (viii) to recover damages arising from
Grantor's failure to comply with the provisions of this Deed of Trust
pertaining to ERISA.
(b) The limitation of liability set forth in this SECTION 9.01 shall
not apply and the Loan shall be fully recourse in the event that Grantor (i)
commences a voluntary bankruptcy or insolvency proceeding or an involuntary
bankruptcy or insolvency proceeding is commenced against Grantor and is not
dismissed within ninety (90) days of filing, or (ii) causes or permits a
Transfer in violation of the provisions of ARTICLE X below, or (iii) incurs
or permits the incurring of any financing in violation of the provisions of
SECTION 10.02 below, except as otherwise approved by Beneficiary in writing.
In addition, this agreement shall not waive any rights which Beneficiary
would have under any provisions of Title 11 of the United States Code
(together with any successor statutes, the "BANKRUPTCY CODE") to file a claim
for the full amount of the Secured Indebtedness or to require that the
Property shall continue to secure all of the Secured Indebtedness.
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ARTICLE X
CHANGE IN OWNERSHIP, CONVEYANCE OF PROPERTY
SECTION 10.01 CONVEYANCE OF PROPERTY, CHANGE IN OWNERSHIP AND COMPOSITION.
(a) Grantor shall not cause or permit, whether voluntary or by
operation of law, without the prior written consent of Beneficiary, which
consent may be withheld in its sole discretion: (i) all or any part of the
Property or any interest in the Property, to be conveyed, transferred,
assigned, encumbered, sold or otherwise disposed of; or (ii) any transfer,
assignment or conveyance of any interest in Grantor or in the partners, or
stockholders, or members or beneficiaries of, Grantor or of any of Grantor's
constituents; or (iii) any merger, reorganization, dissolution or other
change in the ownership structure of Grantor or any of the general partners
of Grantor, including, without limitation, any conversion of Grantor or any
general partner of Grantor from a general partnership to a limited
partnership, a limited liability partnership or a limited liability company
(collectively, "TRANSFERS").
(b) The prohibitions on transfer shall not be applicable to (i)
Transfers as a result of the death of a natural person who is Grantor, (ii)
Transfers in connection with estate planning by a natural person to a spouse,
son or daughter or descendant of either, a stepson or stepdaughter or
descendant of either; (iii) Transfers, provided that, in the reasonable
determination of Beneficiary, after giving effect to such Transfer, The
Washington Corporation shall continue to maintain day-to-day management
control over the Property and the business and affairs of Grantor and owns
more than 51% of the beneficial interest in Grantor; or (iv) Transfers of up
to 51% of the partnership interests in Grantor (consisting of 50% limited
partner interests and one percent (1%) general partner interests) to Allied
Capital Corporation (successor to Allied Capital Commercial Corporation)
("Allied") or an "affiliate" of Allied to secure the Secondary Financing
(defined below) in connection with Allied's realization upon such interests
in foreclosure or transfer in lieu of foreclosure thereunder, provided that,
prior to or concurrent with any Transfers to Allied or its "affiliate" in
foreclosure or in lieu thereof, Allied shall have assumed all of the
obligations and liabilities of a Liable Party under the existing Guaranty
Agreement and Unsecured Indemnity Agreement but only those obligations and
liabilities attributable to events occurring after the date of such Transfer,
and shall have executed, as of the date of such Transfer, a Guaranty
Agreement and an Unsecured Indemnity Agreement in the same form as executed
by the existing Liable Parties on even date herewith, subject to the
foregoing limitation. For purposes of this SECTION 10.01(b), the term
"affiliate" of a company means (a) an entity that directly or indirectly
controls, is controlled by or is under common control with such company or
(b) an entity at least a majority of whose economic interest is owned by such
company and the term "control"' means the power to direct, the management of
such entity through voting rights, ownership or contractual obligations.
SECTION 10.02 PROHIBITION ON SUBORDINATE FINANCING. Grantor shall
not incur or permit the incurring of (a) any financing in addition to the
Loan that is secured by a lien, security interest or other encumbrance of any
part of the Property or (b) any pledge or encumbrance of a partnership,
member or shareholder or beneficial interest in Grantor. Notwithstanding the
foregoing, the Property may be encumbered with the lien of the existing loan
to Allied (the "SECONDARY FINANCING"), pursuant to that certain Deed of Trust
and Security Agreement "B"
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dated as of November 20, 1997 and recorded on November 21, 1997 in Book 2860,
Page 1530 with the Clerk of the Circuit Court of Arlington County, Virginia,
provided that and if and for as long as each and all of the following
conditions are met: (1) Allied shall continue, at all times, to be the holder
of the Secondary Financing; (2) the aggregate indebtedness, including without
limitation principal and interest, secured by the Secondary Financing shall
not exceed $200,000; and (3) such Secondary Financing shall be subject and
subordinate to the Loan in all respects and Allied shall not be permitted to
exercise any of its remedies against Grantor, the Liable Parties, the
Property or any tenant of the property without the prior written consent of
Beneficiary. The Secondary Financing shall be subject to the terms of the
Subordination Agreement between Allied and Beneficiary dated as of even date
herewith.
SECTION 10.03 RESTRICTIONS ON ADDITIONAL OBLIGATIONS. During the
term of the Loan, Grantor shall not, without the prior written consent of
Beneficiary, become liable with respect to any indebtedness or other
obligation except for (a) the Loan, (b) the Secondary Financing, (c) Leases
entered into in the ordinary course of owning and operating the Property for
the Use, (d) other liabilities incurred in the ordinary course of owning and
operating the Property for the Use but excluding any loans or borrowings, (e)
liabilities or indebtedness disclosed in writing to and approved by
Beneficiary on or before the Execution Date, and (f) any other single item of
indebtedness or liability which does not exceed $25,000 or, when aggregated
with other items or indebtedness or liability, does not exceed $100,000.
SECTION 10.04 STATEMENTS REGARDING OWNERSHIP. Grantor agrees to
submit or cause to be submitted to Beneficiary within thirty (30) days after
December 31st of each calendar year during the term of this Deed of Trust and
ten (10) days after any written request by Beneficiary, a sworn, notarized
certificate, signed by an authorized (a) individual who is Grantor or one of
the individuals comprising Grantor, (b) member of Grantor, (c) partner of
Grantor or (d) officer of Grantor, as the case may be, stating whether (i)
any part of the Property, or any interest in the Property, has been conveyed,
transferred, assigned, encumbered, or sold, and if so, to whom; (ii) any
conveyance, transfer, pledge or encumbrance of any interest in Grantor has
been made by Grantor and if so, to whom; or (iii) there has been any change
in the individual(s) comprising Grantor or in the partners, members,
stockholders or beneficiaries of Grantor from those on the Execution Date,
and if so, a description of such change or changes.
ARTICLE XI
DEFAULTS AND REMEDIES
SECTION 11.01 EVENTS OF DEFAULT. Any of the following shall be
deemed to be a material breach of Grantor's covenants in this Deed of Trust
and shall constitute an "EVENT OF DEFAULT":
(a) The failure of Grantor to pay any installment of principal,
interest or principal and interest, any required escrow deposit or any other
sum required to be paid under any Loan Document, whether to Beneficiary or
otherwise, within seven (7) days of the due date of such payment;
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(b) The failure of Grantor to perform or observe any other term,
provision, covenant, condition or agreement under any Loan Document for a
period of more than thirty (30) days after receipt of notice of such failure;
(c) The filing by Grantor or one of the Liable Parties of a
voluntary petition or application for relief in bankruptcy, the filing
against Grantor of an involuntary petition or application for relief in
bankruptcy which is not dismissed within ninety (90) day or Grantor's or
Liable Parties' adjudication as a bankrupt or insolvent, or the filing by
Grantor or Liable Parties of any petition, application for relief or answer
seeking or acquiescing in any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief for itself under any
present or future federal, state or other statute, law, code or regulation
relating to bankruptcy, insolvency or other relief for debtors, or Grantor's
seeking or consenting to or acquiescing in the appointment of any trustee,
custodian, conservator, receiver or liquidator of Grantor or of all or any
substantial part of the Property or of any or all of the Rents and Profits,
or the making of any general assignment for the benefit of creditors, or the
admission in writing of its inability to pay its debts generally as they
become due;
(d) If any warranty, representation, certification, financial
statement or other information made or furnished at any time pursuant to the
terms of the Loan Documents by Grantor, or by any person or entity otherwise
liable under any Loan Document shall be materially false or misleading;
(e) If Grantor shall suffer or permit the Property, or any part of
the Property, to be used in a manner that might (1) impair Grantor's title to
the Property, (2) create rights of adverse use or possession, or (3)
constitute an implied dedication of any part of the Property; or
(f) If Liable Parties shall default under the Guaranty executed by
Liable Parties in favor of Beneficiary.
SECTION 11.02 REMEDIES UPON DEFAULT. Upon the happening of an Event
of Default the Secured Indebtedness shall, at the option of Beneficiary,
become immediately due and payable, without further notice or demand, and
Beneficiary may undertake any one or more of the following remedies:
(a) FORECLOSURE. Institute a foreclosure action in accordance with
the law of the Commonwealth of Virginia, or take any other action as may be
allowed, at law or in equity, for the enforcement of the Loan Documents and
realization on the Property or any other security afforded by the Loan
Documents. In the case of a judicial proceeding, Beneficiary may proceed to
final judgment and execution for the amount of the Secured Indebtedness owed
as of the date of the judgment, together with all costs of suit, reasonable
attorneys' fees and interest on the judgment at the maximum rate permitted by
law from the date of the judgment until paid. If Beneficiary is the purchaser
at the foreclosure sale of the Property, the foreclosure sale price shall be
applied against the total amount due Beneficiary; and/or
(b) POWER OF SALE.
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(i) Direct and empower Trustees to take possession of the Property
and proceed to sell the Property, at public auction, for cash or credit, upon
any terms Trustees shall deem appropriate. Before such sale at public auction
is made, there shall first be required advertisement of the time, place and
terms of sale either (A) for at least three (3) consecutive days, or (B) once
a week for two (2) consecutive weeks, in a newspaper published or having a
general circulation in the county or city in which the Property is located,
either of which shall be at the option of Trustees. A copy of the notice of
sale shall be sent by certified mail to Grantor no less than fourteen (14)
days prior to the date of sale. Trustees shall have the right to make further
public advertisement as they deem advisable. Beneficiary may become the
purchaser of the Property so sold and no purchaser shall be required to see
to the proper application of the purchase money. Grantor agrees that in
addition to all other remedies and rights provided for in this Deed of Trust,
this Deed of Trust shall be construed to impose and confer upon the parties
hereto, and Beneficiary hereunder, all duties, right and obligations
prescribed in Section 55-59 ET SEQ. of the Code of Virginia and in effect as
of the date of the acknowledgment hereof, and further to incorporate herein
the following provisions, by the short-term references below, of Sections
55-59 ET SEQ. and 55-60 of the Code of Virginia:
EXEMPTIONS WAIVED
SUBJECT TO [CALL] UPON DEFAULT
RENEWAL, EXTENSION OR REINSTATEMENT PERMITTED
SUBSTITUTION OF TRUSTEE PERMITTED.
Trustees shall deliver to the purchaser at any such trustee's sale its deed,
without warranty, which shall convey to the purchaser the interest in the
Property which Grantor has or has the power to convey at the time of the
execution of this Deed of Trust, and such as it may have acquired hereafter.
The Trustee's deed shall recite the facts showing that the sale was conducted
in compliance with all the requirements of law and of this Deed of Trust,
which recital shall be prima facie evidence of such compliance and conclusive
evidence thereof in favor of bona fide purchasers and encumbrancers for value.
(ii) If any or all of the Property or any estate or interest therein
is to be sold under the provisions of this Deed of Trust, by virtue of a
judicial sale or otherwise, it may be sold at public auction, as an entirety
or in one or more parcels, by one sale or by several sales held at one time
or at different times, with such postponement of any such sale as Trustees
may deem appropriate and without regard to any right of Grantor or any other
person to the marshaling of assets. Trustees shall hold such sale or sales at
such time or times and at such place or places, and shall make sales upon
such terms and conditions and after such previous public notice as required
by law and as Trustees may deem appropriate. Beneficiary may bid and become
the purchaser at any such sale, and shall, upon presentation of the Note or a
true copy thereof at such sale, be credited for the unpaid balance due under
the Note and any interest accrued and unpaid thereon, and any other amounts
secured hereunder or such portion of such unpaid balance or interest
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or other sums evidenced by the Note and secured by this Deed of Trust as
Beneficiary may specify, against any price bid by Beneficiary thereat. The
terms of sale being complied with, Trustees shall convey to and at the cost
of the purchaser at such sale Grantor's interest in so much of the Property
as is so sold, free of and discharged from all estate, right, title or
interest of Grantor at law or in equity, such purchaser being hereby
discharged from all liability to see to the application of the purchase money.
(iii) Upon sale of Grantor's interest in any or all of the Property,
whether under the power of sale herein granted, or by other foreclosure or
judicial proceedings, Trustees shall apply the proceeds of such sale,
together with any other sum then held as security hereunder or due under any
of the provisions hereof as part of the security of the Note after paying all
expenses of obtaining possession of the Property and all expenses of sale,
including attorneys' fees and a commission to the party making the sale equal
to the commission allowed to trustees for making sales of property under
orders or decrees of a court having competent jurisdiction; and all taxes and
assessments which Trustees or Beneficiary deem it advisable or expedient to
pay and all sums advanced, with interest thereon at the Default Rate (as such
term is defined in the Note), as herein provided to the payment of the
Secured Indebtedness and interest thereon to the date of payment, then due
and owing by Grantor to Beneficiary, including the paying over the surplus,
if any, less the expense, if any, of obtaining possession, to Grantor or any
person entitled thereto upon the surrender and delivery to the purchaser of
possession of the Property.
(iv) Immediately upon the first insertion of any advertisement or
notice of any such sale, there shall become due and owing by Grantor all
expenses incident to such advertisement or notice, all court costs and all
expenses incident to any foreclosure proceedings brought under this Deed of
Trust or otherwise in connection with such sale, and a commission on the
total amount of the Secured Indebtedness then due and owing equal to one-half
of one percent (0.5%) of the commission allowed to trustees for making sales
of property under orders or decrees of a court having competent jurisdiction,
and no party shall be required to receive the principal, interest and
prepayment fee only of the Secured Indebtedness in satisfaction thereof
unless it is accompanied by a tender of payment of such expenses, costs and
commissions.
(v) Notwithstanding the relationship of the parties constituting
Grantor, and as an express inducement to Beneficiary to make the loan or
loans secured hereby, and for other good and valuable consideration to
Grantor in hand paid, receipt whereof is hereby acknowledged, Grantor does
hereby waive for itself (as well as all of its partners), its successors and
assigns, in the event of foreclosure of this Deed of Trust, any equitable
right, otherwise available to it, in respect to marshaling of assets
hereunder.
(vi) in the event of a sale of part of, or interest in, the Property
in satisfaction of part of the debt secured by this Deed of Trust, this Deed
of Trust shall, as to the remaining part of, or interest in, the Property,
continue as a lien for the remainder of the debt.
33
<PAGE>
(c) ENTRY. Enter into possession of the Property, lease the
Improvements, collect all Rents and Profits and, after deducting all costs of
collection and administration expenses, apply the remaining Rents and Profits
in such order and amounts as Beneficiary, in Beneficiary's sole discretion,
may elect to the payment of Impositions, operating costs, costs of
maintenance, restoration and repairs, Premiums and other charges, including,
but not limited to, costs of leasing the Property and fees and costs of
counsel and receivers, and in reduction of the Secured Indebtedness; and/or
(d) RECEIVERSHIP. Have a receiver appointed to enter into possession
of the Property, lease the Property, collect the Rents and Profits and apply
them as the appropriate court may direct. Beneficiary shall be entitled to
the appointment of a receiver without the necessity of proving either the
inadequacy of the security or the insolvency of Grantor or any Liable
Parties. Grantor and Liable Parties shall be deemed to have consented to the
appointment of the receiver. The collection or receipt of any of the Rents
and Profits by Beneficiary or any receiver shall not affect or cure any Event
of Default.
NOTICE - THE DEBT SECURED HEREBY IS SUBJECT TO CALL IN FULL OR THE TERMS
HEREOF BEING MODIFIED IN THE EVENT OF SALE OR CONVEYANCE OF THE PROPERTY
CONVEYED.
SECTION 11.03 APPLICATION OF PROCEEDS OF SALE. In the event of a
sale of the Property pursuant to SECTION 11.02 of this Deed of Trust, to the
extent permitted by law, the Beneficiary shall determine in its sole
discretion the order in which the proceeds from the sale shall be applied to
the payment of the Secured Indebtedness, including without limitation, the
expenses of the sale and of all proceedings in connection with the sale,
including reasonable attorneys' fees and expenses; Impositions, Premiums,
liens, and other charges and expenses; the outstanding principal balance of
the Secured Indebtedness; any accrued interest; any Prepayment Fee; and any
other amounts owed under any of the Loan Documents.
SECTION 11.04 WAIVER OF JURY TRIAL. To the fullest extent permitted
by law, Grantor and Beneficiary HEREBY WAIVE THEIR RESPECTIVE RIGHT TO TRIAL
BY JURY in any action, proceeding and/or hearing on any matter whatsoever
arising out of, or in any way connected with, the Note, this Deed of Trust or
any of the Loan Documents, or the enforcement of any remedy under any law,
statute, or regulation. Neither party will seek to consolidate any such
action in which a jury has been waived, with any other action in which a jury
trial cannot or has not been waived. Each party has received the advice of
counsel with respect to this waiver.
SECTION 11.05 BENEFICIARY'S RIGHT TO PERFORM GRANTOR'S OBLIGATIONS.
Grantor agrees that, if Grantor fails to perform any act or to pay any money
which Grantor is required to perform or pay under the Loan Documents,
Beneficiary may make the payment or perform the act at the cost and expense
of Grantor and in Grantor's name or in its own name. Any money paid by
Beneficiary under this SECTION 11.05 shall be reimbursed to Beneficiary in
accordance with SECTION 11.06.
34
<PAGE>
SECTION 11.06 BENEFICIARY REIMBURSEMENT. All payments made, or funds
expended or advanced by Beneficiary pursuant to the provisions of any Loan
Document, shall (a) become a part of the Secured Indebtedness, (b) bear
interest at the Interest Rate (as defined in the Note) from the date such
payments are made or funds expended or advanced, (c) become due and payable
by Grantor upon demand by Beneficiary, and (d) bear interest at the Default
Rate (as defined in the Note) from the date of such demand. Grantor shall
reimburse Beneficiary within ten (10) days after receipt of written demand
for such amounts.
SECTION 11.07 FEES AND EXPENSES. Grantor shall pay or, on demand,
reimburse Beneficiary for the payment of, all recording and filing fees,
abstract fees, title insurance premiums and fees, U.C.C. search fees, escrow
fees, reasonable attorneys' fees, and disbursements and such other fees and
expenses as may be reasonably incurred by Grantor or Beneficiary in
connection with the granting, administration, closing and consummation
(including, without limitation, the preparation, negotiation, delivery and
execution of this Deed of Trust, the Note, any of the other Loan Documents,
the Guaranty and the Unsecured Indemnity Agreement) of the transactions
contemplated hereunder or under the other Loan Documents, or otherwise
attributable or chargeable to Grantor as owner of the Property. If
Beneficiary becomes a party (by intervention or otherwise) to any action or
proceeding affecting, directly or indirectly, Grantor, the Property or the
title thereto or Beneficiary's interest under this Deed of Trust, or employs
an attorney to collect any of the Secured Indebtedness or to enforce
performance of the obligations, covenants and agreements of the Loan
Documents, Grantor shall reimburse Beneficiary in accordance with SECTION
11.06 for all expenses, costs, charges and legal fees incurred by Beneficiary
(including, without limitation, the fees and expenses of experts and
consultants), whether or not suit is commenced.
SECTION 11.08 WAIVER OF CONSEQUENTIAL DAMAGES. Grantor covenants and
agrees that in no event shall Beneficiary be liable for consequential
damages, and to the fullest extent permitted by law, Grantor expressly waives
all existing and future claims that it may have against Beneficiary for
consequential damages.
SECTION 11.09 ATTORNEY-IN-FACT. Grantor hereby irrevocably appoints
and constitutes Beneficiary as Grantor's true and lawful attorney-in-fact,
coupled with an interest and with full power of substitution, for the purpose
of taking any of the actions described herein and all acts incidental thereto
including, without limitation, the right to collect and receive the Rents and
Profits and to preserve any rights of Grantor whatsoever in respect of any
part of the Property. Grantor hereby releases, discharges and waives all
claims of any kind or nature against Beneficiary arising out of any action
taken or omission made by Beneficiary in exercising such authority. The
exercise by Beneficiary of any of its options or rights pursuant to this Deed
of Trust shall not be considered a waiver by Beneficiary of any default or
Event of Default by Grantor under the Note or this Deed of Trust or any of
the other Loan Documents.
SECTION 11.10 INDEMNIFICATION OF TRUSTEES. Except for gross
negligence and willful misconduct, Trustees shall not be liable for any act
or omission or error of judgment. Trustees may rely on any document believed
by it in good faith to be genuine. All money received by Trustees shall be
held in trust, but need not be segregated (except to the extent required by
law), until used or applied as provided in this Deed of Trust. Trustees shall
not be liable for interest
35
<PAGE>
on the money. Grantor shall protect, indemnify and hold harmless Trustees
against all liability and expenses which Trustees may incur in the
performance of its duties.
SECTION 11.11 ACTIONS BY TRUSTEES. At any time, upon written request
of Beneficiary and presentation of this Deed of Trust and the Note for
endorsement, and without affecting the personal liability of any entity or
the Liable Parties for payment of the Secured Indebtedness or the effect of
this Deed of Trust upon the remainder of the Property, Trustees may take such
actions as Beneficiary may request which are permitted by this Deed of Trust
or by applicable law.
SECTION 11.12 SUBSTITUTION OF TRUSTEES. Beneficiary has the power
and shall be entitled, at any time and from time to time, in its sole
discretion and without cause, to remove Trustees or any successor trustee and
to substitute and appoint another trustee or trustees (either corporate or
individual) in the place and stead of Trustees or any successor trustee, by
written instrument duly executed and recorded in the Office of the Register
of Deeds of the County where the Property is situated, which instrument shall
be conclusive proof of the proper substitution and appointment of such
successor trustee or trustees, who shall have the rights, title, estate,
powers, duties and privileges of the predecessor trustee, without the
necessity of any conveyance from such predecessor. Trustee shall have the
right to resign as trustee hereunder at any time upon not less than ten (10)
days' prior written notice to Grantor and Beneficiary, in which event Lender
shall exercise the right to appoint a successor trustee pursuant to this
Section before such resignation becomes effective.
ARTICLE XII
GRANTOR AGREEMENTS AND FURTHER ASSURANCES
SECTION 12.01 PARTICIPATION AND SALE OF LOAN.
(a) Beneficiary may sell, transfer or assign its entire interest or
one or more participation interests in the Loan and the Loan Documents, the
Unsecured Indemnity Agreement and the Guaranty, at any time and from time to
time, including, without limitation, its rights and obligations as servicer
of the Loan and may issue mortgage pass-through certificates or other
securities evidencing a beneficial interest in a rated or unrated public
offering or private placement, including depositing the Loan Documents with a
trust that may issue securities (the "Securities"). Beneficiary may forward to
each purchaser, transferee, assignee, servicer, participant, investor in such
Securities (collectively, the "INVESTOR"), any prospective Investor or any
rating agency rating or assigning value to such Securities, all documents and
information which Beneficiary now has or may hereafter acquire relating to
the Secured Indebtedness and to Grantor or any Liable Parties and the
Property, whether furnished by Grantor, any Liable Parties or otherwise, as
Beneficiary determines necessary or desirable.
(b) Grantor will cooperate with the Beneficiary and the rating
agencies in furnishing such information and providing such other assistance,
reports and legal opinions as the Beneficiary may reasonably request in
connection with any such transaction. In addition, Grantor acknowledges that
Beneficiary may release or disclose to potential purchasers or transferees of
the Loan, or potential participants in the Loan, originals or copies of the
Loan Documents, title
36
<PAGE>
information, engineering reports, financial statements, operating statements,
appraisals, leases, rent rolls, and all other materials, documents and
information in Beneficiary's possession or which Beneficiary is entitled to
receive under the Loan Documents, with respect to the Loan, Grantor, Liable
Parties or the Property. Grantor shall also furnish to such Investors or such
prospective Investors or such Rating Agency any and all information
concerning the Property, the Leases, the financial condition of Grantor or
any Liable Parties as may be requested by Beneficiary, any Investor or any
prospective Investor or any Rating Agency in connection with any sale,
transfer or participation interest. Grantor and Liable Parties shall provide
estoppel certificates and any other documents to such Investor, such
prospective Investors and/or such Rating Agency as may reasonably be required
by Beneficiary.
(c) Grantor hereby covenants and agrees that, in the event
Beneficiary exercises its right to sell, transfer or assign all or part of
its interests in the Loan pursuant to this SECTION 12.01 and the Investor or
the rating agency requires the use of a lockbox agreement, Grantor shall,
within 30 days after receiving a written notice from Beneficiary thereof,
deliver to Beneficiary an active present lockbox agreement and assignment to
Beneficiary of the Rents and Profits (the "LOCKBOX AGREEMENT"). The Lockbox,
Agreement shall be in a form reasonably requested by Beneficiary and shall
require tenants under the Leases to pay all Rents and Profits directly to the
depository institution selected by Investor to accept Rents and Profits. The
Rents and Profits so paid shall be applied to pay debt service for the Loan
and any other payments required by Investor, including, without limitation,
escrows for Impositions, Premiums and other escrows; or reserves required by
Investor, due in connection with the Property and the balance, if any, shall
be returned to Grantor.
SECTION 12.02 REPLACEMENT OF NOTE. Upon notice to Grantor of the
loss, theft, destruction or mutilation of the Note, Grantor will execute and
deliver, in lieu of the original Note, a replacement note, identical in form
and substance to the Note and dated as of the Execution Date. Upon the
execution and delivery of the replacement note, all references in any of the
Loan Documents to the Note shall refer to the replacement note.
SECTION 12.03 GRANTOR'S ESTOPPEL. Within ten (10) business days
after a request by Beneficiary, Grantor shall furnish an acknowledged written
statement in form satisfactory to Beneficiary (a) setting forth the amount of
the Secured Indebtedness, (b) stating either that no offsets or defenses
exist against the Secured Indebtedness, or if any offsets or defenses are
alleged to exist, their nature and extent, (c) stating whether any default
then exists under the Loan Documents or any event has occurred and is
continuing, which, with the lapse of time, the giving of notice, or both,
would constitute such a default, and (d) any other matters as Beneficiary may
reasonably request. If Grantor does not furnish an estoppel certificate
within the 10-day period, Grantor appoints Beneficiary as its
attorney-in-fact to execute and deliver the certificate on its behalf, which
power of attorney shall be coupled with an interest and shall be irrevocable.
SECTION 12.04 FURTHER ASSURANCES. Grantor shall, without expense to
Beneficiary, execute, acknowledge and deliver all further acts, deeds,
conveyances, mortgages, deeds of trust, assignments, security agreements, and
financing statements as Beneficiary shall from time to time reasonably
require, to assure, convey, assign, transfer and confirm unto Beneficiary the
Property and rights conveyed or assigned by this Deed of Trust or which
Grantor may become bound to
37
<PAGE>
convey or assign to Beneficiary, or for carrying out the intention or
facilitating the performance of the terms of this Deed of Trust or any of the
other Loan Documents, or for filing, refiling, registering, reregistering,
recording or rerecording this Deed of Trust. If Grantor fails to comply with
the terms of this Section, Beneficiary may, at Grantor's expense, perform
Grantor's obligations for and in the name of Grantor, and Grantor hereby
irrevocably appoints Beneficiary as its attorney-in-fact to do so. The
appointment of Beneficiary as attorney-in-fact is coupled with an interest.
SECTION 12.05 SUBROGATION. Beneficiary shall be subrogated to the
lien of any and all encumbrances against the Property paid out of the
proceeds of the Loan and to all of the rights of the recipient of such
payment.
ARTICLE XIII
SECURITY-AGREEMENT
SECTION 13.01 SECURITY AGREEMENT. This Deed of Trust creates a lien
on the property. In addition, to the extent the Property is Personal Property
or fixtures under applicable law, this Deed of Trust constitutes a security
agreement under the Virginia Uniform Commercial Code (the "U.C.C.") and any
other applicable law and is filed as a fixture filing. Upon the occurrence of
an Event of Default, Beneficiary may, at its option, pursue any and all
rights and remedies available to a secured party with respect to any portion
of the Property, and/or Beneficiary may, at its option, proceed as to all or
any part of the Property in accordance with Beneficiary's rights and remedies
with respect to the lien created by this Deed of Trust. This financing
statement shall remain in effect as a fixture filing until this Deed of Trust
is released or satisfied of record.
SECTION 13.02 REPRESENTATIONS AND WARRANTIES. Grantor represents,
warrants and covenants as follows:
(a) Grantor owns the Personal Property free from any lien, security
interest, encumbrance or adverse claim, except as otherwise expressly
approved by Beneficiary in writing. Grantor will notify Beneficiary of, and
will protect, defend and indemnify Beneficiary against, all claims and
demands of all persons at any time claiming any rights or interest in the
Personal Property.
(b) The Personal Property has not been used and shall not be used or
bought for personal, family, or household purposes, but shall be bought and
used solely for the purpose of carrying on Grantor's business.
(c) Grantor will not remove the Personal Property without the prior
written consent of Beneficiary, except the items of Personal Property which
are consumed or worn out in ordinary usage shall be promptly replaced by
Grantor with other Personal Property of value equal to or greater than the
value of the replaced Personal Property.
SECTION 13.03 CHARACTERIZATION OF PROPERTY. The grant of a security
interest to Beneficiary in this Deed of Trust shall not be construed to limit
or impair the lien of this Deed
38
<PAGE>
of Trust or the rights of Beneficiary with respect to any property which is
real property or which the parties have agreed to treat as real property. To
the fullest extent permitted by law, everything used in connection with the
production of Rents and Profits is, and at all times and for all purposes and
in all proceedings, both legal and equitable, shall be regarded as real
property, irrespective of whether or not the same is physically attached to
the Land and/or Improvements.
SECTION 13.04 PROTECTION AGAINST PURCHASE MONEY SECURITY INTERESTS.
It is understood and agreed that in order to protect Beneficiary from the
effect of U.C.C. Section 9-313, as amended from time to time and as enacted
in the Commonwealth of Virginia, in the event that Grantor intends to
purchase any goods which may become fixtures attached to the Property, or any
part of the Property, and such goods will be subject to a purchase money
security interest held by a seller or any other party:
(a) Before executing any security agreement or other document
evidencing or perfecting the security interest, Grantor shall obtain the
prior written approval of Beneficiary. All requests for such written approval
shall be in writing and contain the following information: (i) a description
of the fixtures (ii) the address at which the fixtures will be located; and
(iii) the name and address of the proposed holder and proposed amount of the
security interest.
(b) Grantor shall pay all sums and perform all obligations secured
by the security agreement. A default by Grantor under the security agreement
shall constitute a default under this Deed of Trust. If Grantor fails to make
any payment on an obligation secured by a purchase money security interest in
the Personal Property or any fixtures, Beneficiary, at its option, may pay
the secured amount and Beneficiary shall be subrogated to the rights of the
holder of the purchase money security interest.
(c) Beneficiary shall have the right to acquire by assignment from
the holder of the security interest for the Personal Property or fixtures,
all contract rights, accounts receivable, negotiable or non-negotiable
instruments, or other evidence of indebtedness and to enforce the security
interest as assignee.
(d) The provisions of SUBPARAGRAPHS (B) and (C) of this SECTION
13.04 shall not apply if the goods which may become fixtures are of at least
equivalent value and quality as the Personal Property being replaced and if
the rights of the party holding the security interest are expressly
subordinated to the lien and security interest of this Deed of Trust in a
manner satisfactory to Beneficiary.
ARTICLE XIV
MISCELLANEOUS COVENANTS
SECTION 14.01 NO WAIVER. No single or partial exercise by
Beneficiary, or delay or omission in the exercise by Beneficiary, of any
right or remedy under the Loan Documents shall preclude, waive or limit the
exercise of any other right or remedy. Beneficiary shall at all times have
the right to proceed against any portion of, or interest in, the Property
without waiving any
39
<PAGE>
other rights or remedies with respect to any other portion of the Property.
No right or remedy under any of the Loan Documents is intended to be
exclusive of any other right or remedy but shall be cumulative and may be
exercised concurrently with or independently from any other right and remedy
under any of the Loan Documents or under applicable law.
SECTION 14.02 NOTICES. All notices, demands and requests given or
required to be given by, pursuant to, or relating to, this Deed of Trust
shall be in writing. All notices shall be deemed to have been properly given
if mailed by United States registered or certified mail, with return receipt
requested, postage prepaid, or by United States Express Mail or other
comparable overnight courier service to the parties at the addresses set
forth in the Defined Terms (or at such other addresses as shall be given in
writing by any party to the others) and shall be deemed complete upon receipt
or refusal to accept delivery as indicated in the return receipt or in the
receipt of such United States Express Mail or courier service.
SECTION 14.03 HEIRS AND ASSIGNS; TERMINOLOGY.
(a) This Deed of Trust applies to Beneficiary and Grantor, and their
heirs, legatees, devisees, administrators, executors, successors and assigns.
The term "Grantor" shall include both the original Grantor and any subsequent
owner or owners of any of the Property.
(b) In this Deed of Trust, whenever the context so requires, the
masculine gender includes the feminine and/or neuter, and the singular number
includes the plural.
Section 14.04 SEVERABILITY. If any provision of this Deed of Trust
should be held unenforceable or void, then that provision shall be separated
from the remaining provisions and shall not affect the validity of this Deed
of Trust except that if the unenforceable or void provision relates to the
payment of any monetary sum, then, Beneficiary may, at its option, declare
the Secured Indebtedness immediately due and payable.
SECTION 14.05 APPLICABLE LAW. This Deed of Trust shall be construed
and enforced in accordance with the laws of the Commonwealth of Virginia.
SECTION 14.06 CAPTIONS. The captions are inserted only as a matter
of convenience and for reference, and in no way define, limit, or describe
the scope or intent of any provisions of this Deed of Trust.
SECTION 14.07 TIME OF THE ESSENCE. Time shall be of the essence with
respect to all of Grantor's obligations under this Deed of Trust and the
other Loan Documents.
SECTION 14.08 NO MERGER. In the event that Beneficiary should become
the owner of the Property, there shall be no merger of the estate created by
this Deed of Trust with the fee estate in the Property.
SECTION 14.09 NO MODIFICATIONS. This Deed of Trust may not be
changed, amended or modified, except in a writing expressly intended for such
purpose and executed by Grantor and Beneficiary.
40
<PAGE>
SECTION 14.10 ENTIRE AGREEMENT. This Deed of Trust, the Note, the
other Loan Documents, the Guaranty and the Unsecured Indemnity Agreement
constitute the entire agreement between Grantor and Beneficiary with respect
to the subject matter hereof and all understandings, oral representations and
agreements heretofore or simultaneously had among the parties are merged in,
and are contained in, such documents and instruments.
SECTION 14.11 COUNTERPARTS. This Deed of Trust may be executed in
any number of counterparts, each of which shall be deemed to be an original
and all of which taken together shall constitute one and the same instrument.
Signature and acknowledgment pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature and
acknowledgment pages are physically attached to the same instrument.
SECTION 14.12 NO THIRD-PARTY BENEFICIARIES. Nothing contained herein
is intended or shall be deemed to create or confer any rights upon any third
person not a party hereto, whether as a third-party beneficiary or otherwise,
except as expressly provided herein.
SECTION 14.13 COMMERCIAL LOAN. Grantor hereby represents and
warrants that it is a business or commercial organization organized for the
purpose of holding, developing and managing real estate for profit within the
meaning of Section 6.1-330.76 of the Code of Virginia and further represents
and warrants that the loan was made and transacted solely for the purpose of
carrying on or acquiring a business or commercial investment.
SECTION 14.14 EFFECTIVE DATE. The effective date of this Deed of
Trust shall be the date on the first page hereof notwithstanding that this
Deed of Trust may have been executed and acknowledged on a date prior to such
date.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
41
<PAGE>
IN WITNESS WHEREOF, Grantor has executed this Deed of Trust under
seal, or has caused this Deed of Trust to be executed by its duly authorized
representative(s) as of the Execution Date.
WITNESS:
ARLINGTON SQUARE LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Arlington Square, Inc., a Virginia corporation,
general partner
/s/ Pricilla D. Okay By: /s/ William N. Demas [SEAL]
- ------------------------- -----------------------------
William N. Demas
President
42
<PAGE>
STATE OF DISTRICT OF )
-----------
)ss.:
COUNTY OF COLUMBIA )
----------
On this 24th day of November, 1998, before me personally came
William N. Demas, to me known, who, being by me duly sworn, did depose and
say that he is the President of Arlington Square, Inc., the general partner
of Arlington Square Limited Partnership, the limited partnership described in
and which executed the within instrument as Grantor; and that he signed his
name thereto in such capacity on behalf of said entity as general partner of
and on behalf of said limited partnership.
Veronica Jenkins
----------------------------------
Notary Public
My Commission Expires:
------------------------------------------
[SEAL] VERONICA JENKINS
NOTARY PUBLIC. DISTRICT OF COLUMBIA
\My Commission Expires April 30, 2003
43
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION OF THE LAND
Parcel A, ARLINGTON SQUARE, as duly dedicated, platted, and recorded
in Deed Book 2210, page 994, among the land records of Arlington County,
Virginia.
<PAGE>
EXHIBIT "B"
LEASING GUIDELINES
"LEASING GUIDELINES" shall mean the guidelines approved in writing by
Beneficiary, from time to time, with respect to the leasing of the Property.
The following are the initial Leasing Guidelines:
(a) All Leases shall be on the standard form of lease approved by
Beneficiary in writing;
(b) All Leases shall have an initial term of at least five (5) years
but not more than ten (10) years;
(c) None of the Leases shall be for more than 15,000 square feet of
net leasable area or a full floor, whichever is greater;
(d) All Leases shall have an annual minimum rent payable (including
concessions) which is comparable to the then-prevailing market annual minimum
rent (including concessions) then being charged under new leases for similar
space in Class A office buildings in the Arlington, Virginia metropolitan
area;
(e) No Leases shall be entered into if there is an Event of Default
under any of the Loan Documents;
(f) All "net" Leases shall contain provisions requiring the tenants
to pay its proportionate share of operating expenses and taxes and all other
Leases shall contain provisions requiring the tenant to pay, after the first
year, its proportionate share of increases in taxes and operating expenses;
and
(g) All Leases shall be subordinate to the lien of this Deed of
Trust, but shall provide that Beneficiary may elect to make the Lease
superior to this Deed of Trust and shall require the tenant to attorn to
Beneficiary.
(h) The aggregate net leasable area which may be leased by Grantor
pursuant to these Leasing Guidelines without the prior written consent of
Beneficiary shall not exceed one half (.50) of the aggregate net leasable
area of the Property.
<PAGE>
EXHIBIT "C"
SPECIFIC ITEMS OF PERSONAL PROPERTY
<PAGE>
TOOLS AND EQUIPMENT
INVENTORY
ARLINGTON SQUARE BLDG.
<TABLE>
<CAPTION>
NO. EQUIPMENT:
- ------- -------------------------------
<S> <C>
1 Xerox Memory Writer/Typewriter
6 Tool Carts
4 Tool Bags
35 Hand Tools
1 Key Cutting Machine
1 Snowblower
1 Power Washer with Accessories
1 Lawn Mower
1 Welding Tank/Accessories
1 Drill Press
1 Computer Freon Scale
1 Hand Pipe Threader w dies
10 Hand Tools
1 Freon Recovery Unit
2 Answering Machines
1 Fax Copier
1 Leaf Blower
1 Paint Sprayer
1 Air Compressor
5 Hand Tools
FURNITURE, PHONES
1 Desk
1 Credenza
1 File
4 Chairs
2 Phones
1 6' X 12' Misc Storage Shelving
3 Workbenches/Organizers
1 Hazardous Materials Locker
COMPUTERS. PRINTERS. ETC
1 Computer with Monitor
1 Printer
VEHICLES
1 1997 Dodge Pick-up Truck
</TABLE>
<PAGE>
Exhibit 10.23
-----------------------------------------
ASSIGNMENT OF LEASES
ARLINGTON SQUARE LIMITED PARTNERSHIP,
a Virginia limited partnership
(Assignor)
and
METROPOLITAN LIFE INSURANCE COMPANY,
a New York corporation
(Assignee)
------------------------------------------
Dated: As of November 25, 1998
Location: 4401 N. Fairfax Drive
Description: Parcel A, Arlington
Square, Deed Book 2210,
Page 994
County: Arlington
State: Virginia
------------------------------------------
PREPARED BY AND AFTER RECORDING AND
RETURN TO:
Mayer, Brown & Platt
2000 Pennsylvania Avenue, N.W., Suite 6500
Washington, D.C. 20006
Attention: Keith J. Willner, Esq.
RPC No.: 14017016
<PAGE>
ASSIGNMENT OF LEASES
DEFINED TERMS
- -------------------------------------------------------------------------------
EXECUTION DATE: As of November 25, 1998
- -------------------------------------------------------------------------------
LOAN: A first deed of trust loan in an amount of $21,500,000.00 from Assignee
to Assignor
- ------------------------------------------------------------------------------
ASSIGNOR & ADDRESS: Arlington Square Limited Partnership,
a Virginia limited partnership
c/o The Washington Corporation
4650 East-West Highway, Suite 251
Bethesda, Maryland 20814
Attention: William N. Demas
- -------------------------------------------------------------------------------
ASSIGNEE & ADDRESS: Metropolitan Life Insurance Company,
a New York corporation
200 Park Avenue, 12th Floor
New York, New York 10166
Attention: Senior Vice-President
Real Estate Investments
and: Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010-3690
Attention: Vice-President and Investment Counsel
Real Estate Investments
- -------------------------------------------------------------------------------
NOTE: Promissory Note executed by Assignor in favor of Assignee in the amount of
the Loan dated as of the Execution Date, together with all extensions, renewals,
modifications, restatements and amendments thereof.
- -------------------------------------------------------------------------------
DEED OF TRUST: Deed of Trust, Security Agreement and Fixture Filing dated as of
the Execution Date, executed by Assignor to secure repayment of the Note,
together with all extensions, renewals, modifications, restatements and
amendments thereof. The Deed of Trust will be recorded in the records of the
County in which the Property (defined below) is located.
THIS ASSIGNMENT OF LEASES (this "Agreement") is entered into by
Assignor as of the Execution Date in favor of Assignee and affects the Land
described in EXHIBIT A attached to this Agreement. Capitalized terms which are
not defined in this Agreement shall have the respective meanings set forth in
the Deed of Trust.
RECITALS
A. Assignee has loaned or will loan to Assignor the Loan which is
evidenced by the Note. The payment of the Note is secured by the Deed of Trust
which encumbers Assignor's interest in the real property described in EXHIBIT A
attached to this Agreement (the "LAND" and Assignor's interest in the
improvements and personal property and equipment situated on the Land (the
"IMPROVEMENTS"; collectively with the Land, the "PROPERTY"); and
<PAGE>
B. Assignor desires to absolutely, presently and unconditionally
assign to Assignee all of its right, title and interest in and to (i) all leases
which now exist that affect the Property, (ii) all leases entered into after the
date of this Agreement, (iii) all lease extensions, modifications, amendments,
expansions and renewals of the leases described in (i) and (ii), and (iv) all
guarantees of tenants' obligations and extensions, modifications, amendments and
renewals of any guarantees of any of the leases. The documents described in this
RECITAL B are collectively referred to as the "LEASES".
NOW THEREFORE, in consideration of the Recitals and for good and
valuable consideration, Assignor agrees with Assignee and its successors and
assigns as follows:
1. PAYMENT OF NOTE. Assignor desires to secure (a) the timely payment
of the principal of and interest on the Note and all other indebtedness secured
by the Deed of Trust; and (b) the full compliance with the terms, conditions,
covenants and agreements contained in the Note, the Deed of Trust and the other
documents executed by Assignor in connection with the Loan.
2. PRESENT AND ABSOLUTE ASSIGNMENT OF LEASES. Assignor absolutely,
presently and unconditionally grants, assigns and transfers to Assignee all of
Assignor's right, title and interest in and to the Leases. This grant includes
without limitation: (a) all rent payable under the Leases; (b) all tenant
security deposits held by Assignor pursuant to the Leases; (c) all additional
rent payable under the Leases; (d) all proceeds of insurance payable to Assignor
under the Leases and all awards and payments on account of any taking or
condemnation; and (e) all claims, damages and other amounts payable to Assignor
in the event of a default under or termination of any of the Leases, including
without limitation all of Assignor's claims to the payment of damages arising
from any rejection by a tenant of any Lease under the Bankruptcy Code as amended
from time to time. All of the items referred to in this SECTION 2 are
collectively referred to in this Agreement as the "INCOME".
3. NO CANCELLATION OR MODIFICATION OF LEASES. Assignor covenants
and agrees that it shall not, without the express written consent of Assignee,
(a) enter into or extend any Lease unless the Lease complies with the Leasing
Guidelines which are attached to the Deed of Trust as EXHIBIT B or (b) cancel or
terminate any Leases (except in the case of a default) unless Assignor has
entered into new Leases covering all of the premises of the Leases being
terminated or surrendered, or (c) modify or amend any Leases in any material way
or reduce the rent or additional rent, or (d) consent to an assignment of the
tenant's interest or to a subletting of any Lease unless the tenant remains
liable under the Lease following the assignment or subletting, or (e) accept
payment of advance rents or security deposits in an amount in excess of one
month's rent, or (f) enter into any Leases that contain any option to purchase
the Property.
If any of these acts described in this SECTION 3 are done without the
consent of Assignee, at the option of Assignee, they shall be of no force or
effect and shall constitute a breach of the terms of this Agreement and of the
Deed of Trust.
2
<PAGE>
4. SPECIFIC COVENANTS OF ASSIGNOR. Assignor covenants and agrees:
(a) To perform fully all material obligations, duties, and
agreements of landlord under the Leases.
(b) To deposit all security deposits delivered by tenants in
connection with the Leases in accordance with applicable law;
(c) At Assignor's sole cost and expense, to appear in and
defend any action or proceeding arising under the Leases or which is
connected with the obligations, duties or liabilities of landlord,
tenant or any guarantor and to pay all costs and expenses of Assignee,
including reasonable attorneys' fees, in any action or proceeding in
which Assignee may appear;
(d) If Assignor fails to make any payment or to do any acts
required by this Agreement, then Assignee may in its sole discretion
and without notice to Assignor perform Assignor's obligations under the
Leases as Assignee may deem necessary, at Assignor's cost and expense.
These acts may include without limitation appearing in and defending
any proceeding connected with the Leases, including without limitation
any proceedings of any tenants under the Bankruptcy Code. No action by
Assignee shall release Assignor from its obligation under this
Agreement. Assignor irrevocably appoints Assignee its true and lawful
attorney to exercise it rights under this Agreement, which appointment
is coupled with an interest and with full power of substitution;
(e) To pay immediately upon demand all sums expended by
Assignee under this Agreement, together with interest at the Default
Rate (as defined in the Note), if any. These expenditures shall be
secured by the Deed of Trust;
(f) If a petition under the Bankruptcy Code shall be filed by
or against Assignor and Assignor, as landlord, shall determine to
reject any lease pursuant to Bankruptcy Code Section 365(a), then
Assignee shall have the right, but not the obligation, to demand
that Assignor assume and assign the lease to Assignee; and
(g) Assignee's rights under this Agreement may be exercised
either independently of or concurrently with any other right in this
Agreement, the Deed of Trust or in any other document securing the
Note. No action taken by Assignee under this Agreement shall cure or
waive any default nor affect any notice under the Deed of Trust.
5. LEASING OF PROPERTY. Assignor covenants and agrees to use all
reasonable efforts to keep the Property leased at fair market rental and,
upon demand, to confirm in writing the assignment to Assignee of all
subsequent Leases of the Property upon the terms set forth in this Agreement.
Notwithstanding the preceding sentence, the terms and provisions of this
Agreement shall apply automatically to any Leases entered into after the
Execution Date.
3
<PAGE>
6. REPRESENTATIONS AND WARRANTIES. Assignor makes the following
representations and warranties in connection with the Leases:
(a) There are no leases or occupancy agreements affecting the
Property except the leases and amendments listed on EXHIBIT B hereto
and Assignor has delivered to Assignee true, correct and complete
copies of all leases, including amendments (collectively, "EXISTING
LEASES" and all guaranties and amendments of guaranties given in
connection with the Existing Leases (the "GUARANTIES").
(b) All Existing Leases and Guaranties are in full force and
effect without any oral or written modification except as set forth in
writing in the copies delivered to Assignee.
(c) There are no defaults by Assignor under the Existing
Leases and Guaranties and, to the best knowledge of Assignor, there are
no defaults by any tenants under the Existing Leases or any guarantors
under the Guaranties. The Existing Leases and the Guaranties are in
full force and effect.
(d) To the best knowledge of Assignor, none of the tenants now
occupying 10% or more of the Property or having a current lease
affecting 10% or more of the Property is the subject of any bankruptcy,
reorganization or insolvency proceeding or any other debtor-creditor
proceeding.
(e) Except only for rent and additional rent for the current
month, Assignor has not accepted under any of the Leases any payment of
advance rent, additional rent or security deposit in an amount that is
more than one month's rent and additional rent.
(f) Assignor has deposited all security deposits, if any,
delivered in connection with the Existing Leases in accordance with
applicable law.
(g) No tenant under any Existing Lease has asserted any
defense, set-off or counterclaim with respect to its tenancy or its
obligations under its lease, and no such defense, set-off or
counterclaim exists.
(h) There are no unfulfilled landlord obligations due to
tenants for tenant improvements, moving expenses or rental concessions
or other matters, and all credits required to be paid or contributed by
Assignor under the Existing Leases have been paid or contributed in
full; provided that amounts described in Section 6(g) of the lease with
the United States of America described more fully on EXHIBIT B hereto
are, at the tenant's request, being held by Allied Capital Commercial
Corporation for the benefit of the tenant in lieu of delivering such
amounts directly to tenant.
(i) None of the Leases, Income or Rents and Profits have been
assigned, pledged, hypothecated or otherwise encumbered or transferred
by Assignor except to the extent provided in the Loan Documents.
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<PAGE>
(j) Assignor has not done any act which might prevent Assignee
from exercising its rights under this Agreement.
7. LICENSE TO COLLECT MONIES UNTIL DEFAULT BY ASSIGNOR. So long as no
Event of Default (as defined in the Deed of Trust) exists and so long as there
is no default by Assignor under this Agreement or under any of the Leases (all
of the foregoing are collectively referred to as a "DEFAULT"), Assignor shall
have a license to receive and use all Income. Upon the occurrence of a Default,
whether or not legal proceedings have commenced, and without regard to waste,
adequacy of security for the Secured Indebtedness or solvency of Assignor, the
license herein granted shall automatically expire and terminate, without notice
by Assignee (any such notice being hereby expressly waived by Assignor).
Assignee shall thereupon and thereafter have all right, power and authority to
exercise and enforce any and all of its rights and remedies as provided herein,
under any of the other Loan Documents or by law or in equity. Such rights and
remedies shall expressly include the right to exercise and enjoy, in Assignee's
sole and absolute discretion, all of the rights, powers and benefits under the
Leases assigned to Assignee hereunder, it being understood and agreed that
Assignee shall not be liable, and Assignor shall at all times remain solely
liable, to the tenants to perform any and all duties or obligations owing to
such tenants under the Leases, unless Assignee shall elect, in its sole and
absolute discretion, to undertake such duties or obligations.
8. ENTRY BY ASSIGNEE AND RECEIVER. Assignee is authorized either in
person or by agent, with or without bringing any action or proceeding or having
a receiver appointed by a court, (a) to enter upon, take possession of, manage
and operate the Property and collect the Income, and (b) to make, enforce,
modify, and accept the surrender of the Leases. Assignee is authorized to take
these actions either with or without taking possession of the Property. In
connection with this entry, Assignor authorizes Assignee to perform all acts
necessary for the operation and maintenance of the Property. Assignee may sue
for or otherwise collect all Income, including those past due and unpaid, and
apply the Income, less costs and expenses of operation and collection, including
reasonable attorneys' fees, to the indebtedness secured by the Deed of Trust in
such order as Assignee may determine. Assignee's exercise of its rights under
this SECTION 8 shall not be deemed to cure or waive any Default.
9. INDEMNIFICATION. Assignor shall indemnify Assignee against and hold
it harmless from any and all liability, claims, loss or damage which it may
incur under the Leases or under this Agreement.
10. MORTGAGEE IN POSSESSION. To the fullest extent permitted by law,
neither the assignment of Income to Assignee nor the exercise by Assignee of any
of its rights or remedies under this Agreement, including without limitation,
the entering into possession or the appointment of a receiver shall be deemed to
make Assignee a "mortgagee-in-possession" or otherwise liable with respect to
the Property. Although Assignee has the right to do so, it shall not be
obligated to perform any obligation under the Leases by reason of this
Agreement. To the fullest extent permitted by law, neither this Agreement nor
any action or inaction on the part of Assignee shall constitute an assumption on
the part of Assignee of any obligation or liability under any of the Leases.
5
<PAGE>
11. RECONVEYANCE AND TERMINATION. Upon the payment in full of the
Loan, as evidenced by the recording of an instrument of full reconveyance of the
Deed of Trust, this Agreement shall be void and of no effect.
12. TENANTS ENTITLED TO RELY ON ASSIGNEE'S REQUESTS. Assignor
irrevocably authorizes and directs the tenants and their successors, upon
receipt of any written request of Assignee stating that a Default exists, to pay
to Assignee the Income due and to become due under the Leases. Assignor agrees
that the tenants shall have the right to rely upon any such statement without
any obligation to inquire as to whether a Default actually exists and regardless
of any claim of Assignor to the contrary. Assignor agrees that it shall have no
claim against the tenants for any Income paid by the tenants to Assignee. Upon
the curing of all Defaults, Assignee shall give written notice to the tenants to
recommence paying the rents to Assignor.
13. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
successors and assigns of Assignor and shall inure to the benefit of and be
enforceable by Assignee, its successors and assigns and any trustee appointed
for the benefit of the holder of the Note. If more than one person, corporation,
partnership or other entity shall execute this Agreement, then the obligations
of the parties executing the Agreement shall be joint and several.
14. EXCULPATION. The provisions of Section 9.01 of the Deed of Trust
are incorporated herein by this reference to the fullest extent as if the text
of such section were set forth in its entirety herein.
15. NOTICES. All notices pursuant to this Agreement shall be given in
accordance with the Notice provision of the Deed of Trust, which is incorporated
into this Agreement by this reference.
16. GOVERNING LAW. This Agreement and the rights and obligations of
the parties under this Agreement shall in all respects be governed by, and
construed and enforced in accordance with, the laws of the State in which the
Property is located, without regard to conflict of laws principles.
17. MISCELLANEOUS. This Agreement may be modified, amended, waived, or
terminated only by an instrument in writing signed by the party against which
enforcement of such modification, amendment, waiver, or termination is sought.
No failure or delay in exercising any of these rights shall constitute a waiver
of any Default. Assignor, at its expense, will execute all documents and take
all action that Assignee from time to time may reasonably request to preserve
and protect the rights provided under this Agreement. The headings in this
Agreement are for convenience of reference only and shall not expand, limit or
otherwise affect the meanings of the provisions. This Agreement may be executed
in several counterparts, each of which shall be an original, but all of which
shall constitute one document.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, this Assignment of Leases is executed under seal as
of the Execution Date.
WITNESS:
ARLINGTON SQUARE LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Arlington Square, Inc.,
a Virginia,corporation
its general partner
Briscilla D Okay By: /s/ William N. Demas [Seal]
- ---------------- ---------------------------
William N. Demas
President
7
<PAGE>
STATE OF District of )
------------ )
) ss.
COUNTY OF Columbia )
------------ )
On the 24th day of November in the year 1998 before me, the undersigned, a
notary public in and for said state, personally appeared William N. Demas,
President of Arlington Square, Inc., the general partner of Arlington Square
Limited Partnership, who is personally known to me or proved to me on the basis
of satisfactory evidence to be the individual whose name is subscribed to the
within instrument and acknowledged to me that he executed the same on behalf of
and in his capacity as President of said corporation, the general partner of
said partnership.
/s/ VERONICA JENKINS
--------------------------
My commission expires: ____________________
VERONICA JENKINS
NOTARY PUBLIC, DISTRICT OF COLUMBIA
MY COMMISSION EXPIRES APRIL 30, 2003
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<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
Parcel A, ARLINGTON SQUARE, as duly dedicated, platted, and recorded in
Deed Book 2210, page 994, among the land records of Arlington County, Virginia.
<PAGE>
EXHIBIT B
LIST OF LEASES
1. Lease dated June 22, 1998 between Assignor and the United States of
America, as amended by Supplemental Lease Agreement dated October 20,
1998.
2. Lease dated September 16, 1998 between Assignor and the Department of
the Interior U.S. Fish and Wildlife Service.
<PAGE>
Exhibit 10.24
ASSIGNMENT OF CONTRACTS AND AGREEMENTS
DEFINED TERMS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EXECUTION DATE: As of November 25, 1998
- -------------------------------------------------------------------------------
LOAN: A first deed of trust loan in an amount of $21,500,000.00 from Assignee
to Assignor
- ------------------------------------------------------------------------------
ASSIGNOR & ADDRESS: Arlington Square Limited Partnership,
a Virginia limited partnership
c/o The Washington Corporation
4650 East-West Highway, Suite 251
Bethesda, Maryland 20814
Attention: William N. Demas
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ASSIGNEE & ADDRESS: Metropolitan Life Insurance Company,
a New York corporation
200 Park Avenue, 12th Floor
New York, New York 10166
Attention: Senior Vice-President
Real Estate Investments
and: Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010-3690
Attention: Vice-President and Investment Counsel
Real Estate Investments
- -------------------------------------------------------------------------------
NOTE: Promissory Note executed by Assignor in favor of Assignee in the amount of
the Loan dated as of the Execution Date, together with all extensions, renewals,
modifications, restatements and amendments thereof.
- -------------------------------------------------------------------------------
DEED OF TRUST: Deed of Trust, Security Agreement and Fixture Filing dated as of
the Execution Date, executed by Assignor to secure repayment of the Note,
together with all extensions, renewals, modifications, restatements and
amendments thereof. The Deed of Trust will be recorded in the records of the
County in which the Property (defined below) is located.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
THIS ASSIGNMENT OF CONTRACTS AND AGREEMENTS (this "ASSIGNMENT") is
entered into by Assignor as of the Execution Date in favor of Assignee and
affects Agreements (as defined below). Capital terms which are not defined in
this Assignment shall have the respective meanings set forth in the Deed of
Trust.
RECITALS
A. Assignee has loaned or will loan to Assignor the Loan evidenced
by the Note. Payment of the Note is secured by the Deed of Trust which
encumbers Assignor's interest in the real property more particularly
described in EXHIBIT A attached to Deed of Trust and certain other property
more particularly described in the Deed of Trust and referred to in this
Assignment as the "PROPERTY".
<PAGE>
B. Assignor desires to absolutely, presently and unconditionally
assign to Assignee all of its right, title and interest in and to the
Agreement (defined below) in the manner hereinafter provided.
NOW, THEREFORE, in consideration of the Recitals and for good and
valuable consideration, Assignor agrees with Assignee and its successors and
assigns as follows:
1. PAYMENT OF NOTE. Assignor desires to secure (a) the timely payment
of the principal and interest on the Note and all other indebtedness secured
by the Deed of Trust and (b) the full compliance with the terms, conditions,
covenants and agreements contained in the Note, the Deed of Trust and the other
documents executed by Assignor in connection with the Loan.
2. PRESENT AND ABSOLUTE ASSIGNMENT OF CONTRACTS. Assignor absolutely,
presently and unconditionally grants, assigns and transfers to Assignee all
right, title and interest which Assignor may now or hereafter have under:
(a) each of the contracts, agreements, purchase orders, work
orders, commitments, licenses, guarantees, warranties, permits and
like or similar agreements identified on EXHIBIT A attached hereto,
as the same may be amended, modified, supplemented, extended, renewed,
substituted or replaced from time to time (the "EXISTING AGREEMENTS");
and
(b) all contracts, agreements purchase orders, work orders,
commitments, licenses, guarantees, warranties, permits and like or
similar agreements in which Assignor may hereafter obtain an interest,
relating to the use, maintenance, operation, occupancy, management,
design, construction, development, furnishing, outfitting or equipping
of the Property, as the same may be amended, modified supplemented,
extended, renewed, substituted or replaced from time to time (the
"FUTURE AGREEMENTS"; collectively with the Existing Agreements, the
"AGREEMENTS").
This assignment is made as part of the consideration for the transactions
contemplated by the Deed of Trust and the other Loan Documents, it being
intended by Assignor and Assignee that such assignment constitutes an
absolute assignment and not an assignment for additional security only. The
foregoing assignment encompasses the right of Assignor to terminate any of
the Agreements, to perform thereunder and to compel performance and otherwise
exercise all remedies thereunder, together with the immediate and continuing
right to collect and receive all sums that may become due to Assignor or that
Assignor may now or shall hereafter become entitled to demand or claim,
arising from or out of the Agreements, including claims of Assignor for
refunds or damages arising out of, or for breach of, or default under, any of
the Agreements and all rights of Assignor to receive proceeds of any
insurance, indemnity, warranty or guaranty with respect to any of the
Agreements.
3. NO CANCELLATION OR MODIFICATION OF THE AGREEMENTS. Assignor
covenants and agrees that, without the prior written consent of Assignee and
except as otherwise permitted in the Deed of Trust, Assignor will not:
2
<PAGE>
(a) further sell, pledge, assign, mortgage or otherwise
encumber or transfer (except hereby) the Agreements or any right,
title or interest of Assignor therein;
(b) except as otherwise permitted under the Deed of Trust,
waive, excuse, condone, discount, set off, compromise, or in any
manner release or discharge any party to any of the Agreements of and
from any obligations, covenants, terms, conditions and agreements to
be kept, observed and performed by such party; and
(c) except as otherwise permitted under the Deed of Trust,
amend, modify, extend, terminate or cancel, or permit the amendment,
modification, extension, termination or cancellation, of any of the
Agreements in any material respect or waive any rights of Assignor
thereunder.
If any of these acts described in this SECTION 3 are done without the consent
of Assignee or as otherwise permitted under the Deed of Trust, at the option
of Assignee, they shall be of no force or effect and shall constitute a
breach of the terms of this Agreement and of the Deed of Trust.
4. SPECIFIC COVENANTS OF ASSIGNOR. Assignor covenants and agrees:
(a) to keep, observe, perform, comply with and discharge,
or cause to be kept, observed, performed, complied with and discharged,
in a timely manner all the material terms and provisions of the
Agreements to be kept, observed, performed, complied with and
discharged by Assignor;
(b) to give promptly to Assignee copies of all notices of
default that Assignor shall send or receive under the Agreements;
(c) if Assignor fails to make any payment or to do any acts
required by this Assignment, then Assignee may in its sole discretion
and without notice to Assignor perform Assignor's obligations under the
Agreements as Assignee may deem necessary, at Assignor's cost and
expense. These acts may include without limitation appearing in and
defending any proceeding connected with the Agreements, including
without limitation any proceedings of any parties thereto under the
Bankruptcy Code. No action by Assignee shall release Assignor from its
obligations under this Agreement. Assignor irrevocably appoints
Assignee its true and lawful attorney to exercise its rights under this
Assignment, which appointment is coupled with an interest and with full
power of substitution;
(d) to pay immediately upon demand all sums expended by
Assignee under this Assignment, together with interest at the Default
Rate (as defined in the Note). These expenditures shall be secured by
the Deed of Trust:
(e) if a petition under the Bankruptcy Code shall be filed
by or against Assignor and Assignor, as debtor thereunder, shall
determine to reject any Agreement pursuant to Bankruptcy Code
Section 365(a), then Assignee shall have the right, but not the
obligation, to demand that Assignor assume and assign such Agreement
to Assignee;
3
<PAGE>
(f) except as otherwise permitted under the Deed of Trust,
to enforce and obtain, short of termination thereof, the performance
of each and every material obligation, term, covenant, condition and
agreement in the Agreements to be kept, observed, performed, complied
with and discharged in relation to the other parties to such Agreements
(each such other party, a "CONTRACTOR", and collectively, the
"CONTRACTORS"), and exercise such rights and remedies under each
Agreement and take such other action as may be necessary or proper to
protect the interests of Assignor and Assignee thereunder, unless
expressly released and discharged from such obligation by Assignee in
writing;
(g) to appear in and defend (with counsel reasonably
satisfactory to Assignee) any action or proceeding arising under or in
any manner connected with the Agreements or Assignor's duties or
liabilities thereunder and upon request by Assignee (as an additional
party), to do so in the name and on behalf of Assignee but at the
expense of Assignor, and to pay all reasonable costs and expenses of
Assignee, including reasonable attorney's fees, forum costs and
disbursements, incurred with respect to any such action or proceeding;
(h) to deliver to Assignee at its request executed and
certified copies of the Agreements and all amendments or modifications
thereof;
(i) to obtain, within thirty (30) days after the date
hereof, a written consent to this Assignment, containing an agreement,
in form and substance reasonably satisfactory to Assignee, from the
Contractor under each Existing Agreement in excess of $25,000.00 that,
upon the exercise by Assignee of its rights hereunder, such Contractor
shall continue to perform under this respective Agreement for the
benefit of Assignee, unless, with respect to such Agreement, Assignee
waives such requirement;
(j) to include in each Future Agreement in excess of
$25,000, a provision, in form and substance reasonably satisfactory to
Assignee, pursuant to which the Contractor thereunder consents to this
Assignment and agrees that, upon the exercise by Assignee of its rights
hereunder, such Contractor shall continue to perform under its
respective Agreement for the benefit of Assignee, unless, with respect
to such Agreement, Assignee waives such requirement; provided that
Assignee hereby agrees that, with respect to Future Agreements
consisting of work orders for government tenants, Assignor shall obtain
the Contractor's consent and agreement described above, but such
consent and agreement may be contained in a separate document executed
by the Contractor and need not be included in the work order; and
(k) that Assignee's rights under this Assignment may be
exercised either independently of or concurrently with any other right
in this Assignment, the Deed of Trust, any other Loan Document, the
Guaranty or the Unsecured Indemnity Agreement. No action taken by
Assignee under this Assignment shall cure or waive any default nor
affect any notice under the Deed of Trust.
4
<PAGE>
5. REPRESENTATIONS AND WARRANTIES. Assignor represents and
warrants that:
(a) Assignor has the right, power and authority to sell,
assign, transfer, set over and deliver all of its right, title and
interest in and to the Existing Agreements;
(b) Assignor has duly and timely performed to date all
of the obligations, terms, covenants, conditions and warranties of
the Existing Agreements to be kept, observed and performed by
Assignor and has not done any act which might prevent Assignee from
exercising its rights under this Assignment;
(c) except as set forth on EXHIBIT A, the Contractors
have duly and timely performed to date all of the obligations,
terms, covenants, conditions and warranties of the Existing
Agreements to be kept, observed and performed by each such
Contractor;
(d) Assignor has not previously sold, assigned,
mortgaged, pledged or otherwise transferred or encumbered any of
the Agreements, or any right, title or interest therein and, except
as set forth on EXHIBIT A, none of the Existing Agreements has
expired or been terminated;
(e) the Existing Agreements are in full force and
effect on the date hereof, subject to no defenses, setoffs, claims
or counterclaims whatsoever and have not been amended or modified
in any material respect except as set forth on EXHIBIT A;
(f) the Existing Agreements identified on EXHIBIT A
constitute all contracts, agreements, purchase orders, work orders,
commitments, licenses, guarantees, warranties, permits and like or
similar agreements in which Assignor has an interest relating to
the use, maintenance, operation, occupancy, management, design,
construction, development, furnishing, outfitting or equipping of the
Property, other than leases or occupancy agreements with space
tenants; and
(g) Assignor and the undersigned representatives of
Assignor represent that it and they have full power, authority and
legal right to execute this Assignment and to observe and perform
all of the terms of this Assignment on Assignor's part to be
observed and performed and that this Assignment and the other Loan
Documents constitute valid and binding obligations of Assignor,
enforceable in accordance with their respective terms, except as
such enforcement may be limited by bankruptcy laws and other laws
affecting the rights of creditors generally, or by virtue of the
application of general principals of equity.
6. ASSIGNOR'S LICENSE UNTIL DEFAULT BY ASSIGNOR. So long as no
Event of Default exists and so long as there is no default by Assignor under
this Assignment or under any of the Agreements (all of the foregoing are
collectively referred to as a "DEFAULT"), Assignor shall have a license to
obtain, use and enjoy the benefits of the Agreements, including the right to
collect and retain all sums that may become payable to Assignor under the
Agreements. This license shall be terminated at the sole option of Assignee,
without regard to the adequacy of its security
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<PAGE>
under this Assignment or under the Deed of Trust and without notice to
Assignor, if there is a Default.
7. REVOCATION OF LICENSE. Upon the occurrence of a Default,
whether or not legal proceedings have commenced, and without regard to
waste, adequacy of security for the Secured Indebtedness or solvency of
Assignor, the license herein granted shall automatically expire and
terminate, without notice by Assignee (any such notice being hereby expressly
waived by Assignor). Assignee shall thereupon and thereafter have all right,
power and authority to exercise and enforce any and all of its rights and
remedies as provided herein, under any of the other Loan Documents or by law
or in equity. Such rights and remedies shall expressly include the right to
exercise and enjoy, in Assignee's sole and absolute discretion, all of the
rights, powers and benefits under the Agreements assigned to Assignee
hereunder, it being understood and agreed that Assignee shall not be liable,
and Assignor shall at all times remain solely liable, to the other parties to
such Agreements to perform any and all duties or obligations owing to such
parties under the Agreements, unless Assignee shall elect, in its sole and
absolute discretion, to undertake such duties or obligations.
8. INDEMNIFICATION. Assignor shall indemnify Assignee against and
hold it harmless from any and all liability, claims, loss or damage which it
may incur and which arises out of or relates to any of the Agreements or this
Assignment.
9. SATISFACTION AND TERMINATION. Upon the payment in full of the
Loan, as evidenced by the recording of an instrument of full satisfaction of
the Deed of Trust, this Assignment shall be void and of no effect.
10. NO OBLIGATION. Nothing in this Assignment shall (a) be
construed to obligate Assignee (i) to appear in or defend any action or
proceeding relating to the Agreements or the Property, or (ii) to take any
action or incur any expense or perform or discharge any obligation, duty or
liability under the Agreements, (b) operate to place any obligation or
liability for the control, care, management or repair of the Property upon
Assignee or (c) operate to make Assignee responsible or liable for any waste
committed on the Property by the Contractors or any other person or entity,
or for any dangerous or defective condition of the Property, including the
presence of any Hazardous Materials or for any negligence in the management,
upkeep, repair or control of the Property resulting in loss or injury or
death to any Contractor, tenant, licensee, employee or any other person or
entity. Although Assignee has the right to do so, it shall not be obligated
to perform any obligation under any Agreement by reason of this Assignment.
To the fullest extent permitted by law, neither this Assignment nor any
action or inaction on the part of Assignee shall constitute an assumption on
the part of Assignee of any obligation or liability under any of the
Agreements.
11. CONTRACTORS ENTITLED TO RELY ON ASSIGNEE'S REQUESTS. Assignor
irrevocably authorizes and directs the Contractors and their successors upon
receipt of any written request of Assignee stating that a Default exists, to
make any and all payments due and to become due under such Agreements to
Assignee. Assignor agrees that the Contractors shall have the right to rely
upon any such statement without any obligation to inquire as to whether a
Default actually exists and regardless of any claim of Assignor to the
contrary. Assignor agrees that it shall have
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<PAGE>
no claim against the Contractors for any payments made by the Contractors to
Assignee. Upon the curing of all Defaults, Assignee shall give written notice
to the Contractors to recommence making payments to Assignor.
12. SUCCESSORS AND ASSIGNS. This Assignment shall be binding upon
the successors and assigns of Assignor and shall inure to the benefit of and
be enforceable by Assignee, its successors and assigns and any trustee
appointed for the benefit of the holder of the Note. If more than one person,
corporation, partnership or other entity shall execute this Assignment, then
the obligations of the parties executing the Assignment shall be joint and
several.
13. EXCULPATION. The provisions of Section 9.01 of the Deed of
Trust are incorporated herein by this reference to the fullest extent as if
the text of such section were set forth in its entirety herein.
14. NOTICES. All notices pursuant to this Assignment shall be given
in accordance with the Notice provision of the Deed of Trust, which is
incorporated into this Assignment by this reference.
15. GOVERNING LAW. This Assignment and the rights and obligations
of the parties under this Assignment shall in all respects be governed by,
and construed and enforced in accordance with, the laws of the State in which
the Property is located, without regard to conflict of laws principles.
16. MISCELLANEOUS. This Assignment may be modified, amended,
waived, or terminated only by an instrument in writing signed by the party
against which enforcement of such modification, amendment, waiver, or
termination is sought. No failure or delay in exercising any of these rights
shall constitute a waiver of any Default. Assignor, at its expense, will
execute all documents and take all action that Assignee from time to time may
reasonably request to preserve and protect the rights provided under this
Assignment. The headings in this Assignment are for convenience of reference
only and shall not expand, limit or otherwise affect the meanings of the
provisions. This Assignment may be executed in several counterparts, each of
which shall be an original, but all of which shall constitute one document.
[THE BALANCE OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, Assignor has, by its duly authorized
representatives, duly executed this Assignment under seal as of the day and
year first above written.
ASSIGNOR: ARLINGTON SQUARE LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Arlington Square, Inc.,
a Virginia corporation,
its general partner
By: /s/ William N. Demas [SEAL]
-------------------------------
William N. Demas
President
8
<PAGE>
STATE OF District of )
)ss:
CITY/COUNTY OF: Columbia )
On the 24th day of November in the year 1998 before me, the undersigned, a
notary public in and for said state, personally appeared William N. Demas,
President of Arlington Square, Inc., the general partner of Arlington Square
Limited Partnership, who is personally known to me or proved to me on the
basis of satisfactory evidence to be the individual whose name is subscribed
to the within instrument and acknowledged to me that he executed the same on
behalf of and in his capacity as President of said corporation, the general
partner of said partnership.
/s/ Veronica Jenkins
----------------------------
My Commission Expires:
VERONICA JENKINS
NOTARY PUBLIC, DISTRICT OF COLUMBIA
My Commission Expires April 30, 2003
9
<PAGE>
EXHIBIT A
THE EXISTING AGREEMENTS
1. Service Contracts - see list attached hereto as Exhibit A-1.
2. Management Agreement dated January 1, 1998 by and between Greenway Asset
Management, L.C. and Arlington Square Limited Partnership, for the
management of the property located at 4401 North Fairfax Drive,
Arlington, Virginia.
<PAGE>
EXHIBIT A-1
ARLINGTON SQUARE
SERVICE PROVIDERS
<TABLE>
<CAPTION>
Vendor Service Address
- ------ ------- -------
<S> <C> <C>
CBM Experts Janitorial Contract 1400 Dolley Madison Blvd.
McLean, VA 22101
Datawatch Security Service 4401 East-West Highway
Suite 500
Bethesda, MD 20814
Miller Elevator Elevator Service 5050 Lawrence Place
Hyattsville, MD 20781
Enterprise Communications Answering Service 8100 Stansbury Road
Suite 200
Baltimore, MD 21222
Mid-Atlantic Power Emergency Generator 114 Oak Grove Road
Specialists, Inc. Suite 103
Sterling, VA 22170
EMS Consultants, Inc. HVAC 2134 Espey Court, Suite 7
Crofton, MD 21114
Metrocall Pager Service P.O. Box 79058
Baltimore, MD 21270-0058
Western Termite Pest Control 10843 Main Street
Fairfax, VA 22030
STH, Inc. Pump Maintenance P.O. Box 118
Gaithersburg, MD 20884
BFI Trash Removal P.O. Box 912011
Orlando, Fla 32891-2011
Valcourt Building Window Cleaning 1001 N. Highland Street
Services, Inc. Arlington, VA 22201
</TABLE>
<PAGE>
EXHIBIT 10.25
UNSECURED INDEMNITY AGREEMENT
DEFINED TERMS
EXECUTION DATE: As of November 25, 1998
LOAN: A first deed of trust loan in the amount of $21,500,000.00 from Indemnitee
to Borrower
BORROWER & ADDRESS: Arlington Square Limited Partnership,
a Virginia limited partnership
c/o The Washington Corporation
4650 East-West Highway, Suite 251
Bethesda, Maryland 20814
Attention: William N. Demas
LIABLE PARTIES & ADDRESS: The Washington Corporation,
a Maryland corporation
4650 East-West Highway, Suite 251
Bethesda, Maryland 20814
Attention: William N. Demas
INDEMNITEE & ADDRESS: Metropolitan Life Insurance Company,
a New York corporation
200 Park Avenue, 12th Floor
New York, New York 10166
Attention: Senior Vice-President
Real Estate Investments
and: Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010-3690
Attention: Vice-President and Investment Counsel
Real Estate Investments
As used in this Agreement, the term "INDEMNITEE" shall have the meaning set
forth in Subsection 3(a) below.
NOTE: Promissory Note executed by Borrower in favor of Indemnitee in the amount
of the Loan dated as of the Execution Date, together with all extensions,
renewals, modifications, restatements and amendments thereof.
DEED OF TRUST: Deed of Trust, Security Agreement and Fixture Filing dated as of
the Execution Date and executed by Borrower to secure repayment of the Note,
together with all extensions, renewals, modifications, restatements and
amendments thereof The Deed of Trust will be recorded in the records of the
County in which the Property (defined below) is located.
<PAGE>
THIS UNSECURED INDEMNITY AGREEMENT (this "AGREEMENT") is entered into as
of the Execution Date by Borrower and Liable Parties (collectively,
"INDEMNITORS" and individually, an "INDEMNITOR") in favor of Indemnitee.
Capitalized terms which are not defined in this Agreement shall have the
respective meanings set forth in the Deed of Trust.
RECITALS
A. Indemnitee has loaned or will loan to Borrower the Loan evidenced
by the Note. Payment of the Note is secured by the Deed of Trust which encumbers
the real property more particularly described in EXHIBIT A to this Agreement and
certain other property more particularly described in the Deed of Trust and
referred to therein and in this Agreement as the "PROPERTY".
B. As a condition to making the Loan, Indemnitee requires Indemnitors to
indemnify and hold Indemnitee harmless from any Environmental Claim (as
defined below). Indemnitee would not make the Loan without this Agreement and
Indemnitors acknowledge and understand that this Agreement is a material
inducement for Indemnitee's agreement to make the Loan.
NOW THEREFORE, in consideration of the premises and for other
consideration, Indemnitors jointly and severally agree as follows:
1. DEFINITIONS. For purposes of this Agreement, the following terms
shall have the following meanings:
(a) "ENVIRONMENTAL CLAIM" shall mean any claim, demand, action,
suit, judgment or proceeding (enforcement or otherwise) that seeks to impose
costs, damages, fines, penalties, expenses or liabilities, including, without
limitation, any consequential damages, directly or indirectly related to the
Property, for
(i) pollution or contamination of the air, surface water, ground
water, or land;
(ii) solid, gaseous, or liquid waste generation, handling,
treatment, storage, disposal, or transportation;
(iii) the presence or alleged release of Hazardous Materials
(defined below) on or under the Property, the soil, groundwater, or soil
vapor on or under the Property, or the migration or alleged spreading of
Hazardous Materials from the Property, whether or not known to Indemnitors,
regardless of the source of such presence or release or, except as
expressly provided in this Agreement, regardless of when such release or
presence occurred;
(iv) the manufacture, processing, distribution in commerce, use,
or storage of Hazardous Materials;
(v) injury to or death of any person or persons arising from or
in connection with Hazardous Materials;
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<PAGE>
(vi) destruction or contamination of any property connected with
Hazardous Materials;
(vii) the removal of Hazardous Materials from the Property or the
taking of necessary precautions to protect against the release of Hazardous
Materials from or onto the Property including, without limitation, the air,
ground water or surface water,
(viii) compliance with all Requirements of Environmental Law
(defined below) and/or any asserted breach or violation of any Requirements
of Environmental Law;
(ix) any restriction on use, ownership, transferability as a
result of Hazardous Materials; and
(x) remedial, response, abatement, cleanup, investigative, and
monitoring work in connection with any Hazardous Materials (collectively,
the "REMEDIAL WORK").
(b) "ENVIRONMENTAL PERMIT" means any permit, license, approval, or
other authorization with respect to any activities, operations, or businesses
conducted on the Property under any applicable law, regulation, or other
requirement of the United States of America or any state, municipality, or
other subdivision or jurisdiction related to pollution, protection of health
or the environment, emissions, discharges, or releases or threatened releases
of Hazardous Materials into ambient air, surface water, ground water, or
land, or otherwise relating to the manufacture, processing, distribution,
use, generation, treatment, storage, disposal, transportation, or handling of
Hazardous Materials directly or indirectly related to the Property.
(c) "HAZARDOUS MATERIALS" shall include without limitation the
following:
(i) Those substances included within the definitions of
"hazardous substances", "hazardous materials", "toxic substances", or
"solid waste" in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Sections
9601 ET SEQ., the Resource Conservation and Recovery Act of 1976, 42
U.S.C. Sections 6901 ET SEQ., and the Hazardous Materials
Transportation Act, 49 U.S.C. Sections 1801 ET SEQ., and in the
regulations promulgated pursuant to said laws;
(ii) Those substances defined as "hazardous wastes" in the
Virginia Waste Management Act, Virginia Code Section 10.1-1400
ET SEQ., or the Southeast Interstate Low-level Radioactive Waste
Management Compact, Virginia Code Section 10.1-1500 ET SEQ., and the
regulations promulgated pursuant to such laws;
(iii) Those chemicals known to cause cancer or reproductive
toxicity;
(iv) Those substances listed in the United States Department of
Transportation Table (49 CFR 172.101 and amendments thereto) or by the
Environmental Protection Agency (or any successor agency) as hazardous
substances (40 CFR Part 302 and amendments thereto);
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<PAGE>
(v) Any material, waste or substance which is (i) petroleum,
(ii) asbestos. (iii) polychlorinated biphenyls, (iv) designated as a
"hazardous substance" pursuant to Section 311 of the Clean Water Act,
33 U.S.C. Section 1251 ET SEQ. (33 U.S.C. Section 1321) or listed
pursuant to Section 307 of the Clean Water Act (33 U.S.C.
Section 1317); (v) a chemical substance or mixture regulated under the
Toxic Substances Control Act of 1976, 15 U.S.C. Section
2601 ET SEQ.; (vi)flammable explosives; or (vii) radioactive
materials; and
(vi) Such other substances, materials and wastes which are or
become regulated as hazardous or toxic under applicable local, state
or federal law, or the United States government, or which are
classified as hazardous or toxic under federal, state, or local laws
or regulations.
(d) "REQUIREMENTS OF ENVIRONMENTAL LAWS" means all requirements of
environmental, ecological, health, or industrial hygiene laws or regulations
or rules of common law related to the Property, including, without
limitation, all requirements imposed by any Environmental Permit, law, rule,
order, or regulation of any federal, state, or local executive, legislative,
judicial, regulatory, or administrative agency, which relate to (i) exposure
to Hazardous Materials; (ii) pollution or protection of the air, surface
water, ground water, land; (iii) solid, gaseous, or liquid waste generation,
treatment, storage, disposal, or transportation; or (iv) regulation of the
manufacture, processing, distribution and commerce, use, or storage of
Hazardous Materials.
2. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents, warrants,
covenants and agrees to and with Indemnitee that (a) neither Borrower nor, to
the best of Borrower's knowledge, after due inquiry, any tenant, subtenant or
occupant of the Property, has at any time placed, suffered or permitted, nor
at any time will Borrower place, suffer or permit the presence of any toxic
waste or other Hazardous Materials (as defined in SUBSECTION 1(c) hereof), or
any contaminants, oil or pesticides at, on, under, within or about the
Property except as expressly approved by Indemnitee in writing, (b) neither
Borrower nor any portion of the Property is subject to any existing, or to
the best of Borrower's knowledge, pending or threatened investigation by any
governmental authority under any Requirements of Environmental Laws (as
defined in SUBSECTION 1(d) hereof), (c) Borrower has not and is not required
by any Requirements of Environmental Laws to obtain any permits or licenses
to use any portion of the Improvements, fixtures, or equipment on the
Property, (d) all operations or activities upon the Property, and any use or
occupancy of the Property by Borrower are presently and shall in the future
be in compliance with all Requirements of Environmental Laws, (e) Borrower
will use best efforts to assure (i) that any tenant, subtenant or occupant of
the Property shall in the future be in compliance with all Requirements of
Environmental Laws and (ii) that no tenant, subtenant or occupant places,
suffers or permits any toxic waste or other Hazardous Materials, or any
contaminants, oil or pesticides at, on, under, within or about the Property,
and (f) Borrower will comply with all of the requirements and recommendations
set forth in any environmental site assessment performed with respect to the
Property prior to the date hereof as a condition of the Loan and will obtain
and forward to Indemnitee revised environmental site assessments, if
requested by Indemnitee.
4
<PAGE>
3. INDEMNIFICATION
(a) Indemnitors shall protect, defend, indemnify, and hold harmless
Indemnitee, its successors and assigns and affiliates and their respective
officers, directors, shareholders, and employees (Indemnitee and all such
other persons and entities being referred to in this Agreement individually
as an "INDEMNITEE" and collectively as "INDEMNITEES") from and against all
Environmental Claims (including, without limitation, reasonable attorneys'
fees and disbursements and reasonable environmental investigation costs and
fees incurred by any Indemnitee in connection with such Environmental Claims).
(b) In the event any Remedial Work is reasonably necessary or
desirable under any Requirements of Environmental Laws, Indemnitors shall
within thirty (30) days after written demand by Indemnitee (or such shorter
period of time as may be required under Requirements of Environmental Laws)
commence to perform or cause to be commenced, and diligently prosecute to
completion, the Remedial Work in compliance with the applicable law,
regulation, order or agreement. All Remedial Work shall be performed by one
or more contractors, selected by Indemnitors and approved in advance in
writing by Indemnitee, and under the supervision of a consulting engineer,
selected by Indemnitors and approved in advance in writing by Indemnitee. All
costs and expenses of Remedial Work shall be paid by Indemnitors including,
without limitation, the charges of the contractor(s) and/or the consulting
engineer, and Indemnitee's reasonable attorneys', architects' and/or
consultants' fees and costs incurred in connection with monitoring or review
of the Remedial Work. In the event Indemnitors shall fail to timely commence,
or cause to be commenced, or fail to diligently prosecute to completion, the
Remedial Work, Indemnitee may, but shall not be required to, cause such
Remedial Work to be performed and all costs and expenses incurred in
connection with the Remedial Work shall be an Environmental Claim under this
Agreement.
(c) Indemnitors shall not be liable under this Agreement to the
extent of that portion of the costs and liabilities of any Environmental
Claim attributable to an affirmative act of any Indemnitee which causes (i)
the introduction and initial release of a Hazardous Material at the Property,
or (ii) material aggravation of a then existing Hazardous Material condition
at the Property. In addition, if Indemnitee acquires ownership of the
Property through a foreclosure, trustee's sale or deed in lieu of
foreclosure, Indemnitors shall not be liable under this Agreement for that
portion of costs and liabilities of an Environmental Claim which is
attributable to the introduction and initial release of a Hazardous Material
at the Property by any party, other than an Indemnitor, at any time after
Indemnitee has acquired title to the Property. In all other circumstances,
the liability of Indemnitors under this Agreement shall remain in full force
and effect after Indemnitee acquires title to the Property, including without
limitation with respect to any Hazardous Materials which are discovered at
the Property after the date Indemnitee acquires title but which were actually
introduced to the Property prior to the date of such acquisition, and with
respect to any continuing migration or release of any Hazardous Materials
which commenced prior to the date that Indemnitee acquires title.
5
<PAGE>
4. NOTICE OF ACTIONS.
(a) Borrower shall give immediate written notice to Indemnitee of (i)
any proceeding, inquiry or notice by or from any governmental authority
regarding Hazardous Materials, an Environmental Claim or a Requirement of
Environmental Laws; (ii) all Environmental Claims; (iii) Borrower's discovery
of any occurrence or condition on any real property adjoining or in the
vicinity of the Property that could cause the Property or any part thereof to
be in violation of a Requirement of Environmental Laws or subject to an
Environmental Claim; and (iv) Borrower's receipt of any notice or discovery
of any information regarding the presence or existence of any Hazardous
Material on, under, or about the Property, or any alleged breach or violation
of any Requirements of Environmental Laws pertaining to Borrower or the
Property.
(b) Borrower shall deliver to Indemnitee copies of all Environmental
Claims, and all orders, notices, permits, applications, reports, and other
documents pertaining to the subject matter of the Environmental Claim. If
Indemnitee so elects, Indemnitors may participate in the defense of any such
Claim on behalf of and as it relates to Indemnitors and to employ separate
counsel in connection therewith, but the fees, costs and expenses related
thereto shall be at the expense of Indemnitors.
5. PROCEDURES RELATING TO INDEMNIFICATION.
(a) Indemnitors shall at their own cost, expense, and risk (i) defend
all Environmental Claims that may be brought or instituted against any
Indemnitee; (ii) pay any judgment or decree that may be recorded against any
Indemnitee in connection with any Environmental Claim; and (iii) reimburse
all Indemnitees for the cost of, or for any payment made by any of them, with
respect to any reasonable expenses incurred in connection with Hazardous
Materials and as a result of any Environmental Claims against any Indemnitee
arising out of the obligations of Indemnitors under this Agreement.
(b) Counsel selected by Indemnitors pursuant to SUBSECTION 5(a) shall
be subject to the approval of the Indemnitee asserting a claim under this
Agreement; PROVIDED, HOWEVER, that any Indemnitee may elect to defend any
Environmental Claim at the cost and expense of Indemnitors, if, in the
judgment of the Indemnitee (i) the defense is not proceeding or being
conducted in a satisfactory manner, or (ii) there is a conflict of interest
between any of the parties to the Environmental Claim. If Indemnitee so
elects, Indemnitors may participate in the defense of any such Claim on
behalf of and as it relates to Indemnitors and to employ separate counsel in
connection therewith, but the fees, costs and expenses related thereto shall
be at the expense of Indemnitors.
(c) Notwithstanding anything in this Agreement to the contrary,
Indemnitors shall not, without the prior written consent of Indemnitee (which
consent shall not be unreasonably withheld or delayed), (i) settle or
compromise any Environmental Claim or consent to the entry of any judgment
that does not include the delivery by the claimant or plaintiff to Indemnitee
of a written release of Indemnitee (in form, scope and substance satisfactory
to Indemnitee in its sole discretion) from all liability in respect of the
Environmental Claim; or (ii) settle or compromise any
6
<PAGE>
Environmental Claim in any manner that may materially and adversely affect
Indemnitee as determined by Indemnitee in the good faith exercise of its
discretion.
(d) Indemnitee shall have the right to join and participate in, as a
party if it so elects, any legal proceedings or actions in connection with
the Property involving any Environmental Claim, any Hazardous Material or any
Requirements of Environmental Laws. In any circumstance in which this
indemnity applies, Indemnitee may employ its own legal counsel and
consultants to prosecute, negotiate, or defend any claim, action, or cause of
action, and Indemnitee shall have the right to compromise or settle the same
in the exercise of its good faith discretion. Indemnitors shall reimburse
Indemnitee upon demand for all costs and expenses incurred by Indemnitee,
including the amount of all costs of settlements entered into in good faith,
and the reasonable fees and other costs and expenses of its attorneys and
consultants, including without limitation those incurred in connection with
monitoring and participating in any action or proceeding.
6. EVENTS OF DEFAULT. Any one of the following events shall constitute
an "EVENT OF DEFAULT" under this Agreement: (a) if any certification,
representation or warranty of any Indemnitor contained herein shall prove
false or misleading, or (b) if Indemnitors shall default in the observance or
performance of any obligation, term, covenant, condition or warranty herein,
and such default is not cured within any applicable grace and cure periods.
7. INDEPENDENT NATURE OF AGREEMENT. This Agreement is an independent
obligation of each Indemnitor and is not intended to nor shall it secure
payment of the Note or amounts due to Indemnitee under the Deed of Trust. The
obligations of Indemnitors under this Agreement are not secured by the Deed
of Trust or any of the Loan Documents (as defined in the Deed of Trust).
8. SURVIVAL OF AGREEMENT. This Agreement is not a Loan Document, and all
rights and obligations under this Agreement, shall survive (i) performance
and repayment of the Loan; (ii) satisfaction of the Deed of Trust, and
release of other security provided in connection with the Loan; and (iii)
bankruptcy sale, or trustee's sale or foreclosure under the Deed of Trust
and/or any of the other Loan Documents (whether by deed or other assignment
in lieu of foreclosure); and (iv) transfer of all of Indemnitee's rights in
the Loan, the Loan Documents, and the Property.
9. RIGHTS OF CONTRIBUTION. Nothing contained in this Agreement shall
prevent or in any way diminish or interfere with any rights and remedies,
including without limitation the right to contribution, which Indemnitee may
have against Borrower or any other party under the Federal Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (codified at
Title 42 U.S.C. Section 9601 ET SEQ.), as it may be amended from time
to time, or any other applicable Federal or state laws.
10. BINDING EFFECT. This Agreement shall be binding upon and benefit
Indemnitors and Indemnitee and their respective heirs, personal
representatives, successors and assigns. Any holder of the Note and any
affiliate of Indemnitee which acquires all or part of the Property by any
sale, assignment or foreclosure under the Deed of Trust or by deed or other
assignment in lieu of foreclosure shall be a successor of this Agreement. In
no event shall any Indemnitee be bound by
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<PAGE>
any obligations or liabilities of any Indemnitor even if any such Indemnitee
acquires ownership of all or any part of the Property.
11. LIABILITY OF INDEMNITORS. The obligations of each of the respective
Indemnitors under this Agreement shall be the joint and several obligations
of each of them. The liability of Indemnitors under this Agreement shall not
be limited or impaired by (i) any amendment or modification of the provisions
of the Loan Documents to or with Indemnitee by Borrower or any person or
entity who succeeds Borrower as owner of the Property; (ii) any extensions of
time for performance required by any of the Loan Documents; (iii) any sale,
assignment, or foreclosure of the Note or Deed of Trust or any sale or
transfer of all or part of the Property; (iv) any exculpatory provision in
any of the Loan Documents limiting Indemnitee's recourse to property
encumbered by the Deed of Trust or to any other security, or limiting
Indemnitee's rights to a deficiency judgment against Borrower (including,
without limitation, Section 15 of the Note and Section 9.01 of the Deed of
Trust); (v) the release of Borrower or any other person or entity from
performance or observance of any of the Loan Documents by operation of law,
Indemnitee's voluntary act, or otherwise; or (iv) the release or substitution
in whole or in part of any security for the Note.
12. WAIVER. Indemnitors waive any right or claim of right to cause a
marshaling of the assets of Indemnitors or to cause Indemnitee to proceed
against any of the security for the Loan before proceeding under this
Agreement against Indemnitors or to proceed against Indemnitors in any
particular order. Indemnitors agree that any payments required to be made
under this Agreement shall become due on demand. Indemnitors expressly waive
and relinquish all rights and remedies accorded by applicable law to
indemnitors or guarantors, except any rights of subrogation that Indemnitors
may have. The indemnity provided for under this Agreement shall not be
contingent upon the existence of any such rights of subrogation nor subject
to any claims or defenses that may be asserted in connection with the
enforcement or attempted enforcement of any subrogation rights, including,
without limitation, any claim that the subrogation rights were abrogated by
any acts of Indemnitee. Indemnitors agree to postpone the exercise of any
rights of subrogation to the rights of Indemnitee against Indemnitors under
this Agreement until the Loan shall have been indefeasibly paid in full.
13. DELAY. No delay on the part of any Indemnitee in exercising any
right, power, or privilege under this Agreement or any of the Loan Documents
shall operate as a waiver of any such privilege, power or right.
14. EXECUTION. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original.
15. NOTICES. All notices, consents, approvals, elections and other
communications under this Agreement shall be in writing and shall be deemed
to have been duly given if mailed by United States registered or certified
mail, with return receipt requested, postage prepaid, or by United States
Express Mail or reputable overnight courier service to the parties at the
addresses set forth in the Defined Terms (or at such other addresses as shall
be given in writing by any party to the others pursuant to this SECTION 15.)
and shall be deemed complete upon receipt or refusal to accept delivery as
indicated in the return receipt or in the receipt of such Express Mail or
courier service.
8
<PAGE>
16. ATTORNEYS' FEES. In the event that any Indemnitor or any Indemnitee
brings any suit or other proceeding with respect to the subject matter or
enforcement of this Agreement, including, without limitation, in appellate
proceedings or in any action or participation in, or in connection with, any
case or proceeding under Chapter 7, 11 or 13 of the Bankruptcy Code, 11
United States Code Sections 101 ET SEQ., or any successor statutes,
the prevailing party (as determined by the court, agency or other authority
before which such suit or proceeding is commenced) shall, in addition to such
other relief as may be awarded, be entitled to recover reasonable attorneys'
fees, expenses and costs of investigation.
17. SUCCESSIVE ACTIONS. Separate and successive actions may be brought
under this Agreement to enforce any provision at any time and from time to
time. No action under this Agreement shall preclude any subsequent action,
and Indemnitors waive and covenant not to assert any defense in the nature of
splitting of causes of action or merger of judgments.
18. PARTIAL INVALIDITY. If any provision of this Agreement shall be
determined to be unenforceable in any circumstances by an court of competent
jurisdiction, then the balance of this Agreement shall be enforceable, and the
subject provision shall be enforceable to the extent permitted.
19. INTEREST ON UNPAID AMOUNTS. All amounts required to be paid or
reimbursed to any Indemnitee under this Agreement shall bear interest from
the date of expenditure by the Indemnitee until paid. The interest rate shall
be the lesser of (a) eighteen percent (18%) per annum and (b) the maximum
rate then permitted for the parties to contract for under applicable law.
20. GOVERNING LAW. This Agreement and the rights and obligations of the
parties under this Agreement shall in all respects be governed by, and
construed and enforced in accordance with, the laws of the Commonwealth of
Virginia, without regard to conflict of laws principles.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE>
IN WITNESS WHEREOF, Indemnitors have, by their respective duly
authorized representatives, executed this Unsecured Indemnity Agreement under
seal as of the Execution Date.
ARLINGTON SQUARE LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Arlington Square, Inc.,
a Virginia corporation,
its general partner
By: /s/ William N. Demas [Seal]
--------------------------
William N. Demas
President
THE WASHINGTON CORPORATION,
a Maryland corporation
By: /s/ William N. Demas [Seal]
---------------------------
Name: William N. Demas
Title: President
10
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
Parcel A, ARLINGTON SQUARE, as duly dedicated, platted, and recorded in
Deed Book 2210, page 994, among the land records of Arlington County, Virginia.
11
<PAGE>
Exhibit 10.26
( ) TO BE RECORDED WITH THE STATE CORPORATION COMMISSION, RICHMOND, VIRGINIA
(X) TO BE FILED IN THE FINANCE RECORDS OF ARLINGTON COUNTY, VIRGINIA
( ) TO BE RECORDED WITH THE MARYLAND STATE DEPARTMENT OF ASSESSMENTS AND
TAXATION
THE SECURED PARTY DESIRES THIS FINANCING STATEMENT
TO BE INDEXED AGAINST THE RECORD OWNER OF THE
REAL ESTATE DESCRIBED IN EXHIBIT A ATTACHED HERETO.
FINANCING STATEMENT
Dated: as of November 25, 1998
This Financing Statement is presented to a filing officer for filing
pursuant to the Uniform Commercial Code.
DEBTOR: ARLINGTON SQUARE LIMITED PARTNERSHIP,
a Virginia limited partnership
c/o The Washington Corporation
4650 East West Highway, Suite 251
Bethesda, Maryland 20814
Attention: William N. Demas
SECURED PARTY: METROPOLITAN LIFE INSURANCE COMPANY,
a New York corporation
200 Park Avenue, 12th Floor
New York, New York 10166
Attention: Senior Vice-President Real
Estate Investments
and Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010-3690
Attention: Vice-President and Investment Counsel
Real Estate Investments
1. This Financing Statement covers the following types (or items) of
property:
(i) all of Debtor's present and future estate, right, title
and interest in and to the following which are collectively referred to as "REAL
PROPERTY":
<PAGE>
(a) that certain real property located in Arlington County,
Virginia, which is more particularly described in EXHIBIT "A" attached to the
Deed of Trust or any portion of the real property; all easements, rights-of-way,
gaps, strips and gores of land; streets and alleys; sewers and water rights;
privileges, licenses, tenements, and appurtenances appertaining to the real
property, and the reversion(s), remainder(s), and claims of Debtor with respect
to these items, and the benefits of any existing or future conditions, covenants
and restrictions affecting the real property (collectively, the "LAND");
(b) all things now or hereafter affixed to or placed on the
Land, including all buildings, structures and improvements, all fixtures and all
machinery, elevators, boilers, building service equipment (including, without
limitation, all equipment for the generation or distribution of air, water,
heat, electricity, light, fuel or for ventilating or air conditioning purposes
or for sanitary or drainage purposes or for the removal of dust, refuse or
garbage) and all other equipment, including restaurant equipment, partitions,
appliances, furniture, furnishings, building materials, supplies, computers and
software, window coverings and floor coverings, lobby furnishings, and other
property now or in the future attached, or installed in the improvements and all
replacements, repairs, additions, or substitutions to these items (collectively,
the "IMPROVEMENTS");
(c) all present and future income, rents, revenue, profits,
proceeds, accounts receivable, security deposits, and other benefits from the
Land and/or Improvements and all deposits made with respect to the Land and/or
Improvements, including, but not limited to, any security given to utility
companies by Debtor, any advance payment of real estate taxes or assessments, or
insurance premiums made by Debtor and all claims or demands relating to such
deposits and other security, including claims for refunds of tax payments or
assessments, and all insurance proceeds payable to Debtor in connection with the
Land and/or Improvements whether or not such insurance coverage is specifically
required under the terms of the Deed of Trust;
(d) all damages, payments and revenue of every kind that
Debtor may be entitled to receive, from any person owning or acquiring a right
to the oil, gas or mineral rights and reservations of the Land;
(e) all proceeds and claims arising on account of any damage
to, or Condemnation (as defined in the Deed of Trust) of any part of the Land
and/or Improvements, and all causes of action and recoveries for any diminution
in the value of the Land and/or Improvements;
(f) all licenses, contracts, management agreements,
guaranties, warranties, franchise agreements, permits, or certificates relating
to the ownership, use, operation or maintenance of the Land and/or Improvements;
and
2
<PAGE>
(g) all names by which the Land and/or Improvements may be
operated or known, and all rights to carry on business under those names, and
all trademarks, trade names, and goodwill relating to the Land and/or
Improvements.
(ii) all of Debtor's personal property in all of its forms that Debtor
now or hereafter owns or in which debtor now or hereafter acquires an interest
or right, including, without limitation, those in which Debtor has an interest
in mass or a joint or other interest or right of any kind, those which are now
or hereafter located on or affixed to the Real Property, and those in transit
thereto or in any other location, or used or useful in the operation, use or
occupancy of the Real Property or the construction of any improvements thereon,
including, without limitation, all of Debtor's right, title and interest in and
to the following items (expressly excluding, however, trade fixtures and other
personal property of tenants of the Real Property), all of which are
collectively referred to as "PERSONAL PROPERTY":
(a) any portion of the Real Property which may be personal
property, and all other personal property, whether now existing or
acquired in the future which is attached to, appurtenant to, or used in
the construction or operation of, or in connection with, the Real
Property;
(b) all rights to the use of water, including water rights
appurtenant to the Real Property, pumping plants, ditches for
irrigation, all water stock or other evidence of ownership of any part
of the Real Property that is owned by Debtor in common with others and
all documents of membership in any owner's association or similar group;
(c) all plans and specifications prepared for construction
of the Improvements, and all contracts and agreements of Debtor relating
to the plans and specifications or to the construction of the
Improvements;
(d) all art work located on or used in connection with the
Property or its occupation or occupancy;
(e) all equipment, furniture, furnishings, appliances,
machinery, fixtures, goods and other personal property, at any time
located on or used in connection with the Real Property (expressly
excluding, however, that certain 1997 Dodge T300 truck having a vehicle
identification number of 3B7KF23Z3VM514653);
(f) all sales agreements, deposits, escrow agreements,
other documents and agreements entered into with respect to the sale of
any part of the Real Property, and all proceeds of the sale;
(g) all leases, tenant security deposits, policies of
insurance, accounts (including, without limitation, any escrow account
described in the Deed of Trust and all sums on deposit therein),
documents, instruments and chattel paper, and other agreements and
rights relating to the Real Property, and other general intangibles,
including but not limited
3
<PAGE>
to all governmental permits relating to construction or other activities
on the Real Property, all names under or by which the Real Property may
at any time be operated or known, including, without limitation, the
NAME "Arlington Square" and any similar name. all rights to carry on
business under any such names, or any variant thereof, all trade names,
trademarks and franchises relating in any way to the Real Property, all
good will in any way relating to the Property, all licenses and permits
relating in any way to, or to the operation of, the Property, all
contractual rights, all options, all purchase orders, all manufacturers'
warranties with respect to improvements, all construction contracts, all
maintenance contracts, all service contracts and all of Debtor's claims
and rights arising under or pursuant to Section 365 of the Bankruptcy
Code, 11 U.S.C. Section 365;
(h) the items of personal property listed on EXHIBIT "B"
annexed hereto; and
(i) all proceeds from the voluntary or involuntary
disposition or claim respecting any of the foregoing items (including,
without limitation, judgments, condemnation awards or otherwise) and all
substitutions, replacements of, and additions to, any of the foregoing
items.
All of the Real Property and the Personal Property are collectively
referred to as the "PROPERTY."
II. The above-described goods, property, interest and rights are
located at or relate to the Real Property and the improvements now or hereafter
existing thereon, situate, lying and being in Arlington County, Virginia.
III. This Financing Statement publicizes the Deed of Trust, Security
Agreement and Fixture Filing (the "Deed of Trust") dated as of even date
herewith, executed by Debtor in favor of the trustees named therein for the
benefit of the Secured Party, securing a debt in the amount of Twenty-One
Million Five Hundred Thousand Dollars ($21,500,000.00) to the Secured Party, and
recorded among the Land Records of Arlington County, Virginia.
IV. Proceeds of the collateral are also covered.
DEBTOR:
ARLINGTON SQUARE LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Arlington Square, Inc.,
a Virginia Corporation, general partner
By: /s/ William N. Demas [Seal]
-----------------------
William N. Demas
President
4
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF REAL PROPERTY
Parcel A, ARLINGTON SQUARE, as duly dedicated, platted, and recorded in
Deed Book 2210, page 994, among the land records of Arlington County, Virginia.
5
<PAGE>
EXHIBIT B
Personal Property
6
<PAGE>
TOOLS AND EQUIPMENT
INVENTORY
ARLINGTON SQUARE BLDG.
<TABLE>
<CAPTION>
NO EQUIPMENT:
- ----- --------------------------------------
<S> <C>
1 Xerox Memory Writer/Typewriter
6 Tool Carts
4 Tool Bags
35 Hand Tools
1 Key Cutting Machine
1 Snowblower
1 Power Washer with Accessories
1 Lawn Mower
1 Welding Tank/Accessories
1 Drill Press
I Computer From Scale
1 Hand Pipe Threader w dies
10 Hand Tools
1 Freon Recovery Unit
2 Answering Machines
1 Fax Copier
1 Leaf Blower
1 Paint Sprayer
1 Air Compressor
5 Hand Tools
FURNITURE, PHONES
1 Desk
1 Credenza
1 File
4 Chairs
2 Phones
1 6 x 12" Misc Storage Shelving
a Workbenches/Organizers
1 Hazardous Materials Locker
COMPUTERS, PRINTERS, ETC.
1 Computer with Monitor
1 printer
VEHICLES
1 1987 Dodge Pick-4 Truck
</TABLE>
<PAGE>
SUBORDINATION OF MANAGEMENT AGREEMENT
THIS SUBORDINATION OF MANAGEMENT AGREEMENT (this "AGREEMENT") is made
as of November 25, 1998, by and among THE WASHINGTON CORPORATION, a Maryland
corporation ("MANAGER"), and ARLINGTON SQUARE LIMITED PARTNERSHIP, a Virginia
limited partnership ("OWNER"), for the benefit of METROPOLITAN LIFE INSURANCE
COMPANY, a New York corporation (together with its successors and assigns as
the lender in respect of the Loan referred to below, "LENDER").
RECITALS
A. Owner owns certain real property described on EXHIBIT A attached
hereto (the "PROPERTY"). Manager and Owner or Owner's predecessor-in-interest
are parties to a certain Management Agreement, a copy of which is attached
hereto as EXHIBIT B (such Management Agreement, together with any amendments,
supplements or other modifications thereto as described on EXHIBIT B, the
"MANAGEMENT AGREEMENT"). The Management Agreement describes Manager's and
Owner's respective rights and obligations regarding the management and leasing
of the Property.
B. Lender has made or is about to make a loan (the "LOAN") in the
principal amount of $21,500,000.00 to Owner. In connection with the Loan, Owner
has executed and delivered, or expects to execute and deliver, to Lender (i) a
Promissory Note in the original principal amount of $21,500,000.00 (as the same
may be amended, restated, supplemented or otherwise modified from time to time,
the "NOTE"), (ii) a first priority Deed of Trust, Security Agreement and Fixture
Filing (as the same may be amended, restated, supplemented or otherwise modified
from time to time, the "DEED OF TRUST") and (iii) the other Loan Documents (as
defined in the Deed of Trust). All capitalized terms used herein without
definition shall have the respective meanings ascribed to them in the Deed of
Trust.
C. At Owner's request and in order to facilitate Lender's agreement to
make the Loan to Owner, Manager and Owner desire to subordinate the Management
Agreement, their respective rights under the Management Agreement and their
respective interests in the Property, if any, to the Deed of Trust and the Loan
upon the terms and conditions contained in this Agreement.
D. Manager and Owner intend that the Secured Indebtedness evidenced by
the Note and the lien and security interests of the Deed of Trust and the Loan
Documents be paramount and prior to any and all obligations, expenses and
indebtedness owing to Manager which arise from the Management Agreement and any
and all existing liens or future rights to liens of Manager or any person or
entity claiming by, through or under Manager which arise from any and all
obligations, expenses and indebtedness owing to Manager under or in connection
with the Management Agreement.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which Manager and Owner acknowledge, Manager and Owner agree for
the benefit of Lender as follows:
<PAGE>
1. Manager and Owner hereby unconditionally subordinate and subject
the Management Agreement and all of their respective rights under the Management
Agreement, including, without limitation, any right to receive any amounts as
management fees, leasing commissions or other compensation, to the lien of the
Deed of Trust and Lender's rights and all remedies under the Loan Documents,
including, without limitation, Lender's right to receive payments of principal,
interest and all other sums due and owing from time to time under the Loan
Documents. Manager and Owner agree that the rights of Lender under the Deed of
Trust and the other Loan Documents are senior and prior to any rights of Manager
and Owner under the Management Agreement. Manager and Owner agree that they will
not, without the express written consent of Lender, modify, amend, cancel,
terminate or extend the Management Agreement.
2. Manager and Owner certify and acknowledge to Lender as follows: (a)
Lender would not make and fund the Loan without the execution and delivery of
this Agreement; (b) a true and complete copy of the Management Agreement
(including, without limitation, all modifications and amendments thereto, if
any) is attached to this Agreement as EXHIBIT B; (c) the Management Agreement
represents the entire agreement between Manager and Owner with respect to the
Property; (d) as of the date hereof, management fees (including reimbursement
for Manager's costs) payable to Manager under the Management Agreement are being
paid on a current basis; (e) Manager has no existing defenses or claims against
Owner with respect to the Management Agreement; and (f) as of the date hereof,
to the best knowledge of Manager and Owner, the Management Agreement is in full
force and effect, and no event of default on the part of either party
thereunder, or any event or condition that, with the giving of notice or the
passage of time, or both, would constitute an event of default on the part of
either party thereunder, has occurred and is continuing.
3. Manager and Owner agree that if Lender or any assignee or
transferee of Lender acquires title to the Property through judicial or
nonjudicial foreclosure or otherwise, Lender and/or any such assignee or
transferee following such acquisition of title, may, in its sole discretion,
terminate. the Management Agreement by written notice delivered to Manager, and
Lender shall have no obligations or liability to Manager on account thereof.
4. If Lender or any designee or affiliate of Lender shall acquire
possession of the Property through judicial or nonjudicial foreclosure or
otherwise, Lender or such designee or affiliate shall have the right to cause
Manager to continue its management of the Property by assuming the
obligations of Owner under the Management Agreement, but (a) without any
liability for any act or omission of Owner prior to the date of acquisition,
(b) without being subject to any offsets or advances which Manager may have
had against Owner, and (c) without being bound by any agreement or
modification of the Management Agreement entered into without Lender's
consent. If Lender or any designee or affiliate of Lender assumes the
obligations of Owner under the Management Agreement pursuant to this Section,
and if Lender or such designee or affiliate shall thereafter desire to sell
the Property to a third party, then Lender shall either (i) cause such third
party to assume the obligations of Owner under the Management Agreement or
(ii) terminate the Management Agreement by written notice to Manager without
further obligation thereunder. If a third party shall acquire title to the
Property as a purchaser at a foreclosure sale or otherwise in connection with
the exercise of any remedies
2
<PAGE>
of Lender under the Loan Documents, then such third party, immediately upon
acquiring title to the Property, shall have the right to cause Manager to
continue its management of the Property by assuming the obligations of Owner
under the Management Agreement, but subject to the conditions set forth in
clauses (a) through (c) of this Section. Following any assumption by Lender or
any designee or affiliate of Lender or any such third party, in accordance with
the terms and conditions of this Section, of the obligations of Owner under the
Management Agreement, Manager shall recognize such person or entity as the Owner
under the Management Agreement.
5. Manager agrees that Lender and its successors and assigns shall not
have any liability under the Management Agreement until such time, if any, as
Lender or such successor or assign, as applicable, shall have assumed the
obligations of Owner under the Management Agreement and, in any event, Manager
shall look only to the estate and property of Lender or its successors or
assigns in the Property for the satisfaction of Manager's remedies for the
collection of a judgment (or other judicial process) requiring the payment of
money in the event of any default by Lender or its successors or assigns under
the Management Agreement, and no other property or assets of Lender or its
successors or assigns shall be subject to levy, execution or other enforcement
procedure for the satisfaction of Manager's remedies under or with respect to
the Management Agreement or the relationship of the parties thereunder.
6. Any notice, demand, statement, request or consent made hereunder
shall be effective and valid only if in writing, referring to this Agreement,
signed by the party giving such notice, and delivered either personally to such
other party, or sent by nationally recognized overnight courier delivery service
or by certified mail of the United States Postal Service, postage prepaid,
return receipt requested, addressed to the other party as follows (or to such
other address or person as either party or person entitled to notice may by
notice to the other party specify):
To Lender: Metropolitan Life Insurance Company
Real Estate Investments
200 Park Avenue, 12th Floor
New York, NY 10166
Attention: Senior Vice President
with a copy to: Metropolitan Life Insurance Company
Real Estate Investments
200 Park Avenue, 12th Floor
New York, NY 10166
Attention: Law Department
To Manager: The Washington Corporation
4650 East-West Highway, Suite 251
Bethesda, Maryland 20814
Attention: William N. Demas
3
<PAGE>
with a copy to: Holland & Knight LLP
2100 Pennsylvania Avenue, N.W.
Washington, DC 20037-3202
Attention: William J. Mutryn, Esq.
To Owner: Arlington Square Limited Partnership
c/o The Washington Corporation
4650 East-West Highway, Suite 251
Bethesda, Maryland 20814
Attention: William N. Demas
with a copy to: Bean, Kinney & Korman P.C.
2000 North Fourteenth Street, Suite 100
Arlington, Virginia 22201
Attention: Jonathan C. Kinney, Esq.
Unless otherwise specified, notices shall be deemed given as follows: (i) if
delivered personally, when delivered, (ii) if delivered by nationally recognized
overnight courier delivery service, on the day following the day such material
is sent, or (iii) if sent by certified mail, three (3) days after such notice
has been sent by Lender, Owner or Manager.
7. This Agreement shall be interpreted and construed in accordance with
and governed by the laws of the Commonwealth of Virginia, without regard to
conflict of laws principles.
8. This Agreement shall apply to, bind and inure to the benefit of the
parties hereto and their respective successors and permitted assigns. As used
herein "Lender" shall include any subsequent holder of the Deed of Trust.
9. This Agreement may be executed in any number of counterparts, each
of which shall be deemed to be an original and all of which taken together shall
constitute one and the same instrument. Signature and acknowledgment pages may
be detached from multiple separate counterparts and attached to a single
counterpart so that all signature and acknowledgment pages are physically
attached to the same instrument.
[THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
4
<PAGE>
IN WITNESS HEREOF, Manager and Owner have caused this Agreement to be
duly execute under seal as of the date first set forth above.
MANAGER: THE WASHINGTON CORPORATION,
a Maryland Corporation
/s/ William N. Demas [Seal]
-----------------------------
William N. Demas
President
OWNER: ARLINGTON SQUARE LIMITED
PARTNERSHIP, a Virginia limited
partnership
By: Arlington Square, Inc.,
a Virginia corporation,
its general partner
/s/ William N. Demas [Seal]
-----------------------------
William N. Demas
President
5
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
Parcel A, ARLINGTON SQUARE, as duly dedicated, platted, and recorded in
Deed Book 2210, page 994, among the land records of Arlington County, Virginia.
<PAGE>
EXHIBIT B
MANAGEMENT AGREEMENT
<PAGE>
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT (this "Agreement") is made as of January 1,
1998, by and between THE WASHINGTON CORPORATION (Property Management Division) ,
a Maryland corporation ("Manager"), and ARLINGTON SQUARE LIMITED PARTNERSHIP, a
Virginia limited partnership ("Owner").
W I T N E S S E T H:
WHEREAS, upon the terms and conditions herein contained, Owner desires
that manager supervise and manage the leasing and management of the improved
real property known as Arlington Square located at 4401 North Fairfax Drive in
Arlington, Virginia, as more fully described in Exhibit A attached hereto (the
"Property") , and Manager desires to so supervise and manage the leasing and
management of the Property for Owner.
NOW, THEREFORE, in consideration of the foregoing, of the mutual
promises herein contained, and of other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is agreed as
follows:
1. DESIGNATION AND MANAGEMENT. Owner hereby designates and appoints
Manager as its sole and exclusive agent for the management of the
Property, and Manager hereby accepts such designation and
appointment and agrees to manage the Property in accordance with
the terms and conditions herein provided.
2. TERM. This Agreement shall be effective as of the date hereof and
shall continue in force and effect until December 31, 1998,
unless sooner terminated pursuant to any provision hereof. After
December 31, 1998, this Agreement may be renewed on such terms and
subject to such conditions, as the parties may agree.
3. STANDARDS. Manager shall apply prudent business practices in
managing the Property, and use reasonable care and diligence in
carrying out its responsibilities hereunder.
4. BUDGET. Within 60 days after the effective date hereof. and within
go days prior to the beginning of each fiscal year of Owner
hereafter, Manager shall prepare and submit to Owner, for its
consideration and approval, a budget setting forth the estimated
receipts and expenditures (capital, operating and other) of the
Property for the then upcoming fiscal
<PAGE>
year of Owner, including a reasonable contingency reserve for the
period covered by the budget. Owner shall approve or disapprove
such budget within 30 days of such submission. If Owner does not
respond within 30 days, Manager may deem the proposed budget
approved and proceed in accordance therewith, until advised to
the contrary by Owner. Manager shall make all revisions to the
budget that may be reasonably requested, whether before or after
approval thereof, by Owner. When approved by Owner, Manager shall
implement the budget (as approved, the "Budget"), and shall be
authorized make the expenditures and incur the obligations
provided for in the Budget and shall monitor and analyze the
implementation thereof.
5. GENERAL MAINTENANCE, OPERATION AND REPAIRS. Subject to the
limitations hereinafter provided, owner authorizes Manager to make
or cause to be made, in the name and at the expense of Owner,
repairs and capital improvements to the Property as may be
advisable or necessary to maintain the Property in good order, to
purchase such supplies and operating equipment as may be advisable
or necessary, to enter into contracts and to pay bills for
electricity, gas fuel, telephone, extermination, trash collection,
water, rent, and other normal operating services, as Manager shall
deem necessary or advisable. Manager shall secure the written
approval of owner for all expenditures or the incurring of any
obligation involving a sum in excess of Ten Thousand Dollars
($10,000) for any one item, except for expenditures made and
obligations incurred (i) for emergency repairs if, in the opinion
of Manager, such repairs are necessary to protect the Property or
any part thereof from damage and there is not sufficiency time to
obtain Owner's approval; (ii) to maintain services to the tenants
as called for by their leases; or (iii) pursuant to the Budget.
Manager shall promptly notify owner of all expenditures or
obligations in excess of $10,000 for emergency repairs that have
been incurred and for which there was not sufficient time to
obtain Owner's prior approval. In the event that approval by Owner
is required pursuant to this paragraph, if Owner shall not
disapprove such expenditures within tan (10) business days after
the request has been submitted, such expenditures shall be deemed
and approved.
6. COLLECTION OF RENTS AND ENFORCEMENT OF LEASES. Owner appoints
Manager its true and lawful attorney-in-fact to collect all rents
due from tenants of the Property and any other income from the
Property. Manager shall monitor percentage rents, if any, due
2
<PAGE>
from tenants and, where advisable, obtain ac the expense of owner,
an independent audit to verify the accuracy of any such percentage
rents. In addition, manager shall monitor all CPI, and any other
rent escalations, pass-thru expenses, and common area operating
charges that may be due from time to time from each tenant,
according to the particular terms of each tenant's lease
agreement. Manager shall take all proper actions to collect rent
and to enforce compliance with the terms of all leases, including
the filing and prosecution of actions to recover possession of any
leased space or to recover any rent, and, subject to Owner's prior
approval, to settle, compromise or release such actions. All
necessary legal fees and costs of any such actions shall be borne
by owner.
7. BOOKS RECORDS AND REPORTS. Manger shall keep complete and accurate
books of account with respect to the operation of the property.
Such books shall be maintained at Manager's office, or such other
place as the parties hereto may agree upon, and Owner shall have
access to such books at all reasonable times. Such books shall be
kept on the basis of Owner's fiscal year, using such method of
accounting as Owner may direct. With Owner's prior approval,
Manager shall consult with Owner's accountants with regard to tax
matters and prepare reports and recommendations to Owner as may be
necessary or appropriate. Manager shall monitor and analyze
refinancing alternatives for the Property and report to Owner
periodically on the results of such analyses. In addition to
furnishing to Owner copies of all executed leases and the monthly
reports required pursuant to Paragraph 13 hereof, if requested by
Owner, Manager shall render to Owner an annual report within 60
days after the end of each fiscal year showing the receipts and
disbursements for such year and a comparison with the Budget
therefor. Upon the request of Owner, such report shall be
certified by a certified public accountant and Owner shall
reimburse Manager for any additional cost incurred as a result of
such certification. The annual report shall also include all
income tax information and a copy of the tax return, including a
balance sheet and operating statement for the Property (the
preparation of which shall be the responsibility of Manager), the
status of any and all leases of the property, including whether
any defaults exist under any leases, all other material
information regarding the Property and any other information
regarding the property that may be requested by the Owner.
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8. PERSONNEL AND EMPLOYEES. Manager shall assign to the management of
the Property on a full or part-time basis, as appropriate, such of
its executive and office personnel and general bookkeeping staff
as may be required to provide proper supervision and management of
the Property. Such staff shall be comprised at all times of
sufficient personnel to carry out efficiently the duties,
obligations and functions of manager hereunder. Manager shall
supervise the work of and, in the name and at the expense of
Owner, hire, discharge and pay salaries and wages of. all
managers, engineers, janitors and other building employees
necessary to accomplish the day-to-day responsibilities of
manager, including general maintenance and repair work. Manager
agrees to use reasonable care and diligence in the hiring of such
employees. Owner shall pay, or bear the cost of, all applicable
wages and other compensation (including social security taxes,
workers, compensation and unemployment insurance) of such or.site
employees in an amount proportionate to the percentage of their
working time that is devoted to the Property. Manager will not
discriminate against any employee or applicant for employment
because of race, creed, color, national origin or sex, and will
use its best efforts to comply with all applicable federal and
local laws and ordinances respecting employment practices.
9. TENANT ALTERATION AND INSTALLATIONS: MAJOR CONSTRUCTION WORK.
(a) TENANT ALTERATIONS AND INSTALLATIONS. Manger shall review
plans and specifications for tenant alterations and
installations other than initial tenant improvement work
taking place prior to the occupancy of the tenant and may,
with the prior consent of the Owner, consent to and approve
such alterations and installations provided for in the
respective leases of the tenants, subject to compliance by
the tenants with the terms and conditions of their leases.
With respect to alterations and installations not
specifically provided for by such leases, Manager, with the
consent of Owner, is authorized to consent to and approve
such work provided: (i) such alterations and installations
are not in violation of any other tenant leases; (ii) such
alterations and installations are made solely at the tenant's
expense and in accordance with all applicable laws; (iii)
such alterations and installations do not affect the basic
structure or systems of
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the building or interfere with other tenants; and (iv) the
tenant has agreed in writing (whether in an amendment to its
lease or otherwise) that, at the expiration or termination of
its lease and at the election of the landlord, it shall
remove any such alterations and installations. Manager shall
supervise all tenant: alterations and installations and shall
insure that all such work is completed in a timely, good and
workmanlike manner and that any work that is to be performed
at Owner's expense is kept to the minimum expense required
and full value is received for such expense. No additional
fee shall be paid by Owner to Manager for Manager's
supervision of any tenant alterations and improvements.
Manager shall employ with prior approval of the owner and, at
Owner's expense, such outside professionals as Manager and
Owner may deem necessary, including, but not limited to,
architects, engineers and construction managers.
(b) MAJOR CONSTRUCTION WORK. In the event that Owner decides to
undertake any major renovation or construction project
related to the Property excluding tenant alterations, and
Owner aid Manager desire that Manager oversee such project,
Owner and Manager shall enter into a senate agreement
governing the respective obligations and duties of the
parties and the compensation of Manager with respect thereto,
it being understood that supervision of any such project by
Manager is beyond the scope of Manager's duties hereunder.
For purposes hereof, a "major renovation or construction
project" shall be deemed to be any project which would cost
in excess of Fifty Thousand Dollars ($50,000).
10. COMPLIANCE WITH LAW. Manager shall take all actions to obtain and
renew all government approvals, licenses and permits applicable
to' the Property, and shall take all actions to remain apprised of
and to effect substantial compliance with all laws, rules,
ordinances, statutes and regulations of any governmental authority
applicable to the Property or as to any provisions of the leases.
in the event such compliance is undertaken in the name and on
behalf of Owner, such compliance shall be at owner's expense. Upon
obtaining knowledge thereof, Manager shall promptly notify Owner
of any violation of any applicable law and shall advise Owner as
to any potential violation of
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any new applicable law. in either case, Manager shall advise Owner
of steps required to cure such violation or possible future
violation. including a recommendation as to whether or not Owner
should contest such violation or such applicable law or the
application thereof to the Property or Owner. Unless owner shall
elect to contest such violation or applicable law, and subject to
the limitations set forth in Paragraph 6 hereof, manager shall
take the steps necessary to correct such violation or otherwise
necessary to comply with applicable law. If Owner elects to
contest such violation of applicable law, Manager shall assist
owner in such contest and shall supervise and consult with any
professional advisers retained to conduct such contest. Nothing
herein s1hall be construed to permit Manager to fail to cure
promptly any such violation or fail to comply promptly with any
applicable law, if such failure would or might expose Manager or
Owner to criminal liability.
11. PROPERTY TAXES - Manager shall pay promptly when due all ad
valorem taxes, real estate taxes, special assessments, personal
property taxes, water and sewer charges, if any, and all other
taxes, assessment or charges which may be levied or assessed
against the Property from time to time. manager shall receive and
verify bills or statements for such taxes, assessments and other
charges. Manager shall also make arrangements to transmit copies
of paid receipts for such taxes or assessments to any lender of
owner, if requested by Owner. Manager shall advise Owner as to
any material increase in such taxes, assessments and other
charges, as to whether the amount thereof should be challenged and
as to any means available for the reduction of same, together with
its recommendations as to the foregoing. At Owner's request,
Manager shall institute, in Owner's name, appropriate protests or
challenges to such taxes, assessments or other charges and shall
take other appropriate steps to have the same reduced.
12. INSPECTIONS. Manager shall make regular physical inspections of
the Property and shall make recommendations to Owner regarding
maintenance or conservation work which may be necessary or
appropriate to preserve or improve the value and profitability of
the Property. Manager shall promptly notify Owner of any
substantial damage to the Property or any personal injury or
property damage suffered by any person on or with respect to the
Property of which Manager has knowledge, and shall make
recommendations with respect thereto.
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Manager shall forward to Owner all summonses, subpoenas and other
legal documents served upon Manager with respect to the Property
relating to actual or alleged liability or owner, Manager or the
Property, together with its recommendations with respect thereto;
provided, however, that Manager shall take no action in response
to any such documents without the prior written consent of owner,
except in cases of emergency.
13. DISBURSEMENTS AND REMITTANCES. Manager shall disburse, deduct and
pay from the rents all amounts required to be disbursed or paid in
connection with the repair, maintenance and operation of the
Property, including actions necessary to comply with all
applicable statutes, ordinances, laws, rules, and regulations of
any governmental authority having jurisdictions over the
Property and in the carrying out of Manager's duties hereunder.
Manager shall render to Owner a monthly statement of rents and
other revenues collected, expenses and other costs paid and
reserves set aside, in accordance with the Budget, and remit any
net balance shown to be due Owner on or before the fifteenth
(15th) day of the following month. The disbursements for expenses
and other costs shall include the compensation of Manager on the
basis provided for hereinafter. In the event that the
disbursements paid by Manager exceed the lease rentals and other
amounts collected for the account of owner by Manager, Owner
agrees to pay such excess to Manager promptly upon demand.
However, nothing herein shall obligate Manager to advance any
funds on behalf of Owner.
14. COMMISSIONS AND FEES.
(a) MANAGEMENT FEE. At the end of each month, owner shall pay to
Manager as compensation for its services under this Agreement
an amount equal to five percent (5%) of the Gross Receipts
(as defined below) from the operations of the Property for
such month, but in no event shall such an amount be less than
$3,000 each month. Such compensation shall be in Addition to
all amounts paid to or retained by Manager pursuant to this
Agreement as reimbursement for fees and expenses incurred on
behalf of Owner. The term "Gross Receipt" shall mean all
operational revenues of every kind and nature received from
the use or occupancy of the Property. Any rebate or discount
obtained by Manager in connection with fees and expenses
incurred on behalf of Owner shall inure to the benefit of
Owner.
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(b) LEASING COMMISSIONS. Owner shall pay any and all leasing
commissions which are payable to third party leasing agents
who are hired or retained by Manager. Manager shall not be
entitled to receive leasing commissions with respect to lease
agreements as to which a commission is paid to a third party
leasing agent. In the event Manager procures a tenant without
the assistance of a third party leasing agent (or if any
tenant expands its leased premises at the Property), Manager
shall be entitled to receive a separate real estate
commission therefor, which commission shall not exceed an
amount that would have been payable to a third party leasing
agent in the Washington, D.C. area. Manager shall not be
entitled to any commission under this Paragraph 14.b) on
account of the renewal of any lease with a tenant as to which
a third party leasing commission has already been paid.
15. INSURANCE AND SETTLEMENT OF CLAIMS. Manager shall obtain and
maintain on behalf of Owner fire and extended coverage insurance,
general comprehensive public liability policies and all other
insurance, in amounts specified by Owner. Manager shall be named
as co-insured with owner an the public liability insurance.
Manager shall have the authority, on behalf of Owner, to settle or
release any insurance claims; provided, however, that no
settlement or release of a claim in excess of five hundred dollars
($500) shall be agreed to without Owner's prior written consent.
16. INDEMNIFICATION. Owner agrees (a) to indemnify and hold Manager
and its subcontractors free and harmless from all damage suits in
connection with the leasing and management of the property and
from liability for injuries suffered by any employee or other
person; (b) to reimburse Manager upon demand for any sums which
Manager is required to pay as an expense in defense of, or in
settlement of or in connection with, any claim, civil or criminal
action, proceeding, charge or prosecution made, instituted or
maintained against Manager or its subcontractors, or Owner and
Manager or its subcontractors, jointly or severally affecting or
due to the condition or use of the Property, or acts or omissions
of manager or its employees or subcontractors in connection
therewith, or otherwise; (c) to defend promptly and diligently, at
Owner's sole expense, any claim, action or proceeding brought
against Manager or its subcontractors, or Owner and Manager or its
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subcontractors, jointly or severally, arising out of or in
connection with any of the foregoing, and to hold harmless and
fully indemnify Manager from any judgment, loss or settlement on
account thereof; provided, however, that (i) Manager shall
maintain its own policy of liability insurance and (ii) nothing
herein contained shall cause Owner to incur any liability for, or
relieve Manager or its subcontractors from, liability or
responsibility to owner or any other party for Manager's or its
subcontractors' gross negligence or willful misconduct, and
Manager agrees to indemnify and hold harmless Owner for any
liability, cost or expense incurred by Owner by reason of
manager's gross negligence or willful misconduct. Manager and
Owner shall promptly notify each other of any claims made against
Owner, Manager or any subcontractor of Manager.
17. SUBCONTRACTING BY MANAGER. Nothing herein shall preclude Manager
from subcontracting all or any portion of its duties and
obligations hereunder with Owner's prior written approval;
however, Manager shall remain solely responsible for fulfilling
its obligations to Owner under the terms of this Agreement. In no
event shall any such subcontracts create or give rise to any
rights, claims or actions by such subcontractor against Owner.
Manager is specifically authorized and directed to enter into an
appropriate agreement for the management and operation of the
garage, on such terms as Owner may approve.
18. TERMINATION. This Agreement shall be terminable by either party
under 60 days written notice, upon the happening of either of the
following events: (i) a material breach of this Agreement by the
party to which notice of termination is given, which breach is not
cured within 45 days following written notice thereof; or (ii) a
sale or foreclosure of the Property. Upon termination hereof, all
rights and obligations of the parties hereto shall cease, provided
that all monies then due and owing from either party to the other
shall be paid. Upon termination of this Agreement for any reason,
Manager shall deliver the following to Owner or to Owner's duly
appointed agent within 2.5 days after the date of termination.
(a) The books and records relating to the Property, together with
a final accounting, reflecting the balance of income and
expenses for the Property as of the date of termination;
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(b) Cash in an amount equal to all amounts then due Owner
hereunder, including any security deposits or other payments
of tenants in the Property held by Manager, less all amounts
due Manager an account of management and leasing commissions
and any other sums owed Manager hereunder;
(c) Assignment of any escrow accounts in form approved by Owner;
and
(d) All contracts for services and supplies, all space plans and
drawings, leases and lease files, unpaid bills, all other
documents executed by or on behalf of owner, and copies of
all other documents relating to Manager's services under
this Agreement, as Owner may request.
19. NOTICES All notices hereunder shall be given in writing and either
personally delivered or mailed by registered or certified mail,
postage prepaid, addressed as follows:
IF TO OWNER:
Arlington Square Limited Partnership
c/o The Washington Corporation
465O East-West Highway, Suite 251
Bethesda, Maryland 20814
IF TO MANAGER:
The Washington Corporation
4650 East-West Highway, Suite 251
Bethesda, Maryland 20814
Such addresses may be changed from time to time by either party by
serving notice as provided above.
20. INDEPENDENT CONTRACTOR RELATIONSHIP. Nothing herein shall be
deemed to have created any joint venture or partnership
relationship between Owner and Manager. At all times during the
performance of its duties and obligations hereunder, Manager shall
be deemed to be acting as an independent contractor.
21. GOVERNING LAW. This Agreement shAll be governed by the laws of the
state in which the Property is located.
22. MISCELLANEOUS PROVISIONS.
(a) SUCCESSORS AND ASSIGNS. Subject to the restrictions on
assignment set forth below, this Agreement shall be binding
upon the
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parties hereto and their successors and assigns.
(b) AMENDMENT; WAIVER. This Agreement may not be changed orally
but only by a writing executed by both parties hereto. No
waiver of any breach of any covenant, condition or agreement
contained herein shall be construed to be a subsequent waiver
of that covenant, condition or agreement or of any subsequent
breach thereof or of this Agreement. Any such waiver or
consent shall be effective only in the specific. instance and
for the purposes for which given.
(c) ASSIGNMENT. This Agreement may not be assigned by Manager
without the prior written consent of Owner. owner retains
full rights to assign its rights under this Agreement to any
party to which title to the Property is hereafter transferred
by Owner.
(d) NO THIRD PARTY BENEFICIAL RIGHTS CREATED. The parties hereto
expressly declare that it is their joint and mutual intention
that this Agreement shall not be construed as giving or
conferring any rights or benefits whatsoever to or upon any
other persons or entities other than Manager and Owner.
(e) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement and understanding Of the parties with respect to
the subject matter hereof, and supersedes all prior
agreements, negotiations and discussions between the parties
concerning the subject matter hereof.
(f) SEVERABILITY. if any one or more of the provisions contained
in this Agreement should be held invalid, illegal or
unenforceable in any respect, the validity, legality and
enforceability of the remaining provisions contained herein
shall not in any way be affected or impaired thereby.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement,
effective as of the day and year first above written.
MANAGER:
THE WASHINGTON CORPORATION
By: /s/ William N. Demas
--------------------------------
William N. Demas, President
OWNER:
ARLINGTON SQUARE LIMITED PARTNERSHIP,
a Virginia limited partnership
By: Arlington Square, Inc.,
its General Partner
By: /s/William N. Demas, President
--------------------------------
William N. Demas, President
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Exhibit 10.28
GUARANTY AGREEMENT
DEFINED TERMS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
EXECUTION DATE: As of NOVEMBER 25, 1998.
- -------------------------------------------------------------------------------
Loan: A first deed of trust loan in the amount of $21,500,000.00 from Lender
to Borrower
- -------------------------------------------------------------------------------
Guarantor & Address: THE WASHINGTON CORPORATION,
a Maryland corporation
4650 East-West Highway, Suite 251
Bethesda, MD 20814
Attention: William N. Demas
- -------------------------------------------------------------------------------
Borrower & Address: ARLINGTON SQUARE LIMITED PARTNERSHIP,
a Virginia limited partnership
c/o The Washington Corporation,
a Maryland corporation
4650 East-West Highway, Suite 251
Bethesda, MD 20814
Attention: William N. Demas
- -------------------------------------------------------------------------------
Lender & Address: Metropolitan Life Insurance Company,
a New York corporation
200 Park Avenue, 12th Floor
New York, New York 10 166
Attention: Senior Vice-President
Real Estate Investments
and: Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010-3690
Attention: Vice-President and Investment Counsel
Real Estate Investments
- -------------------------------------------------------------------------------
NOTE: Promissory Note executed by Borrower in favor of Lender in the amount of
the Loan dated as of the Execution Date, together with all extensions,
renewals, modifications, restatements and amendments thereof.
- -------------------------------------------------------------------------------
DEED OF TRUST: Deed of Trust, Security Agreement and Fixture Filing dated as of
the Execution Date and executed by Borrower to secure repayment of the Note,
together with all extensions, renewals, modifications, restatements and
amendments thereof. The Deed of Trust will be recorded in the records of the
County in which the Property (defined below) is located.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
THIS GUARANTY AGREEMENT is entered into by Guarantor as of the
Execution Date in favor of Lender. Capitalized terms which are not defined in
this Agreement shall have the respective meanings set forth in the Deed of
Trust.
R E C I T A L S
A. Lender will loan to Borrower the Loan to be evidenced by the
Note. Payment of the Note is secured by the Deed of Trust which encumbers
Borrower's interest in the real property described in EXHIBIT A attached to
the Deed of Trust (the "LAND") and Borrower's interest in certain other
property more particularly described in the Deed of Trust and referred to in
this Agreement as the "PROPERTY"; and
B. Lender is willing to make the Loan to Borrower only if Guarantor
agrees to guaranty payment of the Guaranteed Obligations (defined below) to
Lender in the manner hereinafter provided.
NOW, THEREFORE, for valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Guarantor hereby irrevocably
and unconditionally guarantees to Lender the full and prompt payment and
performance of the Guaranteed Obligations (as defined below), this Guaranty
Agreement being upon the following terms:
1. The term "INDEBTEDNESS" as used herein shall mean all
obligations, indebtedness and liabilities of Borrower to Lender evidenced by
the Note and the other Loan Documents.
2. The term "GUARANTEED OBLIGATIONS" as used herein means:
(a) The prompt and complete payment in full when
due, whether at stated maturity, by required prepayment,
declaration, acceleration, demand or otherwise (including amounts
that would become due but for the operation of the automatic stay
under Section 362(a) of the Bankruptcy Code) of all or any portion
of the Indebtedness as to which Borrower has recourse or personal
liability pursuant to Section 9.01 of the Deed of Trust
(collectively, the "PERFORMANCE SUMS"); plus
(b) The prompt payment of interest at the Default
Rate (as defined in the Note) which accrues on the Performance Sums
from the date of written demand for payment under this Guaranty
Agreement from Lender to Guarantor until the Performance Sums are
paid in full; plus
(c) The prompt payment upon demand of all costs
and expenses of any collection or other realization under, this
Guaranty Agreement, including reasonable compensation to Lender and
its agents and counsel, and all expenses, liabilities and advances
made or incurred by Lender in connection therewith.
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<PAGE>
3. This instrument is an absolute, continuing, irrevocable,
and unconditional guaranty of payment and performance, and not a guaranty of
collection, and Guarantor shall remain liable on its obligations hereunder
until the payment and performance in full of the Guaranteed Obligations. No
set-off, counterclaim, recoupment, reduction, or diminution of any
obligation, or any defense of any kind or nature which Borrower may have
against Lender or any other party, or which Guarantor may have against
Borrower, Lender, or any other party, shall be available to, or shall be
asserted by, Guarantor against Lender or any subsequent beneficiary of this
Guaranty Agreement or any portion of the Indebtedness.
4. If Guarantor becomes liable for any indebtedness owing
by Borrower to Lender by endorsement or otherwise, other than under this
Guaranty Agreement, such liability shall not be in any manner impaired or
affected hereby, and the rights of Lender hereunder shall be in addition to
any and all other rights that Lender may ever have against Guarantor. The
exercise by Lender of any right or remedy hereunder or under any other
instrument, or at law or in equity, shall not preclude the concurrent or
subsequent exercise of any other right or remedy, the rights and remedies
hereunder being cumulative and not exclusive of any remedies provided at law
or elsewhere.
5. In the event of default by Borrower in payment or
performance of the Guaranteed Obligations, or any part thereof, when such
Guaranteed Obligations are due to be paid or performed by Borrower, Guarantor
shall promptly pay or perform the Guaranteed Obligations then due and payable
or to be performed without notice or demand, and it shall not be necessary
for Lender, in order to enforce such payment by Guarantor of the Guaranteed
Obligations, first to institute suit or exhaust its remedies against Borrower
or others, or to enforce any rights against any collateral which shall ever
have been given to secure such Indebtedness. Without limiting any other
provisions of this Guaranty Agreement, Guarantor acknowledges and agrees
that, to the extent Lender realizes any proceeds under any documents which
secure the Indebtedness (including, without limitation, voluntary payments,
insurance or condemnation proceeds or proceeds from the sale at foreclosure
of any collateral securing the Indebtedness), such proceeds shall, to the
extent permitted by law, not be applied to or credited against the Guaranteed
Obligations. FURTHER, NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN
THIS GUARANTY AGREEMENT, GUARANTOR HEREBY IRREVOCABLY AGREES THAT, UNTIL
PAYMENT IN FULL TO LENDER OF THE INDEBTEDNESS AND PAYMENT AND PERFORMANCE OF
THE GUARANTEED OBLIGATIONS, GUARANTOR SHALL HAVE NO RIGHT TO RECOVER FROM
BORROWER ANY CLAIMS GUARANTOR HAS OR MIGHT HAVE AGAINST BORROWER (AS SUCH
TERM "CLAIM" IS DEFINED IN THE UNITED STATES BANKRUPTCY CODE 11 U.S.C.
SECTION 101(5) AS AMENDED FROM TIME TO TIME) IN CONNECTION WITH PAYMENTS MADE
BY OR ON BEHALF OF GUARANTOR TO LENDER UNDER THIS GUARANTY AGREEMENT
INCLUDING, WITHOUT LIMITATION, ALL RIGHTS GUARANTOR MAY NOW OR HEREAFTER HAVE
UNDER ANY AGREEMENT OR AT LAW OR IN EQUITY (INCLUDING, WITHOUT LIMITATION,
ANY LAW SUBROGATING GUARANTOR TO THE RIGHTS OF LENDER) TO ASSERT ANY CLAIM
AGAINST OR SEEK CONTRIBUTION, INDEMNIFICATION OR ANY OTHER FORM OF
REIMBURSEMENT FROM BORROWER OR ANY OTHER PARTY LIABLE FOR PAYMENT OF ANY OR
ALL OF THE INDEBTEDNESS.
6. If acceleration of the time for payment by Borrower of
all or any portion of the Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, the
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Guaranteed Obligations shall nonetheless be payable by Guarantor hereunder
forthwith on demand by Lender.
7. Guarantor hereby agrees that its obligations under this
Guaranty Agreement shall not be released, discharged, diminished, impaired,
reduced, or affected for any reason or by the occurrence of any event,
including, without limitation, one or more of the following events, whether
or not with notice to or the consent of Guarantor: (a) the taking or
accepting of collateral as security for any or all of the Indebtedness or the
release, surrender, exchange, or subordination of any collateral now or
hereafter securing any or all of the Indebtedness; (b) the full or partial
release of Borrower or any other guarantor from liability for any or all of
the Indebtedness or the Guaranteed Obligations; (c) the dissolution,
insolvency, or bankruptcy of Borrower, Guarantor, or any other party at any
time liable for the payment of any or all of the Indebtedness; (d) any
renewal, extension, modification, waiver, amendment, or rearrangement of any
or all of the Indebtedness or any instrument, document, or agreement
evidencing, securing, or otherwise relating to any or all of the Guaranteed
Obligations; (e) any adjustment, indulgence, forbearance, waiver, or
compromise that may be granted or given by Lender to Borrower or any other
party ever liable for any or all of the Indebtedness; (f) any neglect, delay,
omission, failure, or refusal of Lender to take or prosecute any action for
the collection of any of the Guaranteed Obligations from Borrower or
Guarantor or to foreclose or take or prosecute any action in connection with
any instrument, document, or agreement evidencing, securing, or otherwise
relating to any or all of the Indebtedness or any or all of the Guaranteed
Obligations; (g) the unenforceability or invalidity of any or all of the
Indebtedness or the Guaranteed Obligations or any instrument, document, or
agreement evidencing, securing, or otherwise relating to any or all of the
Indebtedness or the Guaranteed Obligations; (h) any payment by Borrower or
any other party to Lender is held to constitute a preference under applicable
bankruptcy or insolvency law or if for any other reason Lender is required to
refund any payment or pay the amount thereof to someone else; (i) the
settlement or compromise of any of the Indebtedness or the Guaranteed
Obligations; (j) the non-perfection of any security interest or lien securing
any or all of the Indebtedness; (k) any impairment of any collateral securing
any or all of the Indebtedness; (l) any change in the corporate existence,
structure, or ownership of Borrower; (m) the application against the
Indebtedness of the proceeds realized by Lender under any documents which
secure the Indebtedness (including, without limitation, voluntary payments,
insurance or condemnation proceeds or proceeds from the sale at foreclosure
of any collateral securing the Indebtedness), except as provided in SECTION 5
of this Guaranty Agreement; or (n) any other circumstance which might
otherwise constitute a defense available to, or discharge of, Borrower or
Guarantor, or any other party liable for any or all of the Indebtedness or
the Guaranteed Obligations.
8. Guarantor represents and wan-ants to Lender as follows:
(a) Guarantor has the power and authority and
legal right to execute, deliver, and perform its obligations under this
Guaranty Agreement and this Guaranty Agreement constitutes the legal, valid,
and binding obligation of Guarantor, enforceable against Guarantor in
accordance with its terms, except as limited by bankruptcy, insolvency, or
other laws of general application relating to the enforcement of creditor's
rights.
4
<PAGE>
(b) The execution, delivery, and performance by
Guarantor of this Guaranty Agreement do not and will not violate or conflict
with any law, rule, or regulation or any order, writ, injunction, or decree
of any court, governmental authority or agency, or arbitrator and do not and
will not conflict with, result in a breach of, or constitute a default under,
or result in the imposition of any lien upon any assets of Guarantor pursuant
to the provisions of any indenture, mortgage, deed of trust, security
agreement, franchise, permit, license, or other instrument or agreement to
which Guarantor or his properties are bound.
(c) No authorization, approval, or consent of, and
no filing or registration with, any court, governmental authority, or third
party is necessary for the execution, delivery, or performance by Guarantor
of this Guaranty Agreement or the validity or enforceability thereof.
(d) The value of the consideration received and to
be received by Guarantor as a result of Lender making extensions of credit to
Borrower and Guarantor executing and delivering this Guaranty Agreement is
reasonably worth at least as much as the liability and obligation of
Guarantor hereunder, and such liability and obligation and such extensions of
credit have benefited and may reasonably be expected to benefit Guarantor
directly and indirectly.
(e) Guarantor has, independently and without
reliance upon Lender and based upon such documents and information as
Guarantor has deemed appropriate, made its own analysis and decision to enter
into this Guaranty Agreement.
9. Guarantor covenants and agrees that, as long as the
Indebtedness or the Guaranteed Obligations or any part thereof is outstanding
or not fully satisfied:
(a) Guarantor will furnish to Lender as soon as
available, and in any event within ninety (90) days after the end of each
fiscal year, beginning with the fiscal year ending December 31, 1998, (i) a
copy of the audited financial statements of Guarantor for such fiscal year
and (ii) a certificate of Guarantor to Lender (A) stating that no default
under this Guaranty Agreement and no event which with notice or lapse of time
or both would be a default under this Guaranty Agreement has occurred and is
continuing, or if in Guarantor's opinion a default under this Guaranty
agreement has occurred and is continuing, a statement as to the nature
thereof and (B) disclosing and certifying as to all material changes in
Guarantor's debt or net worth or otherwise certifying that there has been no
material change in Guarantor's personal debt or net worth since the previous
financial statement delivered to Lender.
(b) Guarantor will furnish promptly to Lender
written notice of the occurrence of any default under this Guaranty Agreement.
(c) Guarantor will furnish promptly to Lender such
additional information concerning Guarantor as Lender may reasonably request.
(d) Guarantor will obtain at any time and from
time to time all authorizations, licenses, consents or approvals as shall now
or hereafter be necessary or desirable under all applicable laws or
regulations or otherwise in connection with the execution, delivery and
performance of this Guaranty Agreement and will promptly furnish copies
thereof to Lender.
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<PAGE>
(e) Except for transfers permitted under the Note and the
other Loan Documents, Guarantor will at all times own directly or indirectly
and free and clear of all liens and encumbrances whatsoever at least the same
percentage interest in Borrower, if any, as Guarantor owns directly or
indirectly on the date hereof.
10. (a) From and after the occurrence of an Event of
Default, Guarantor hereby agrees that the Subordinated Indebtedness (as
hereinafter defined) shall be subordinate and junior in right of payment to
the prior payment in full of all Indebtedness, and Guarantor hereby assigns
the Subordinated Indebtedness to Lender as security for the payment of the
Guaranteed Obligations. If any sums shall be paid to Guarantor by Borrower or
any other person or entity on account of the Subordinated Indebtedness, such
sums shall be held in trust by Guarantor for the benefit of Lender and shall
forthwith be paid to Lender without affecting the liability of Guarantor
under this Guaranty Agreement and may be applied by Lender against the
Indebtedness or the Guaranteed Obligations in such order and manner as Lender
may determine in its sole discretion. Upon the request of Lender, Guarantor
shall execute, deliver, and endorse to Lender such documents and instruments
as Lender may request to perfect, preserve, and enforce its rights hereunder.
For purposes of this Guaranty Agreement, the term "SUBORDINATED INDEBTEDNESS"
means all indebtedness, liabilities, and obligations of Borrower to
Guarantor, whether such indebtedness, liabilities, and obligations now exist
or are hereafter incurred or arise, or whether the obligations of Borrower
thereon are direct, indirect, contingent, primary, secondary, several, joint
and several, or otherwise, and irrespective of whether such indebtedness,
liabilities, or obligations are evidenced by a note, contract, open account,
or otherwise, and irrespective of the person or persons in whose favor such
indebtedness, obligations, or liabilities may, at their inception, have been,
or may hereafter be created, or the manner in which they have been or may
hereafter be acquired by Guarantor; PROVIDED, HOWEVER, that the term
"Subordinated Indebtedness" shall not mean or include any distributions by
Borrower to its partners pursuant to the limited partnership agreement of
Borrower at any time when no Event of Default exists.
(b) Guarantor agrees that any and all liens, security
interests, judgment liens, charges, or other encumbrances upon Borrower's
assets securing payment of any Subordinated Indebtedness shall be and remain
inferior and subordinate to any and all liens, security interests, judgment
Hens, charges, or other encumbrances upon Borrower's assets securing payment
of the Indebtedness or any part thereof, regardless of whether such
encumbrances in favor of Guarantor or Lender presently exist or are hereafter
created or attached. Without the prior written consent of Lender until the
Indebtedness has been paid in full, Guarantor shall not (i) file suit against
Borrower or exercise or enforce any other creditor's right it may have
against Borrower, or (ii) foreclose, repossess, sequester, or otherwise take
steps or institute any action or proceedings (judicial or otherwise,
including without limitation the commencement of, or joinder in, any
liquidation, bankruptcy, rearrangement, debtor's relief or insolvency
proceeding) to enforce any liens, security interests, collateral rights,
judgments or other encumbrances held by Guarantor on any assets of Borrower.
(c) In the event of any receivership, bankruptcy,
reorganization, rearrangement, debtor's relief, or other insolvency
proceeding involving Borrower as debtor, Lender shall have the right to prove
and vote any claim under the Subordinated Indebtedness and to receive
directly from the receiver, trustee or other court custodian all dividends,
distributions,
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<PAGE>
and payments made in respect of the Subordinated Indebtedness. Lender may
apply any such dividends, distributions, and payments against the Guaranteed
Obligations in such order and manner as Lender may determine in its sole
discretion. Guarantor hereby appoints Lender as Guarantor's attorney-in-fact,
which appointment is coupled with an interest and is irrevocable and with
full power of substitution, to enable Lender to act in the place of Guarantor
with respect to (i) any claim under the Subordinated Indebtedness or (ii) the
receipt of any such dividends, distributions and payments.
(d) Guarantor agrees that all promissory notes,
accounts receivable, ledgers, records, or any other evidence of Subordinated
Indebtedness shall contain a specific written notice thereon that the
indebtedness evidenced thereby is subordinated under the terms of this
Guaranty Agreement.
11. No amendment or waiver of any provision of this
Guaranty Agreement nor consent to any departure by Guarantor therefrom shall
in any event be effective unless the same shall be in writing and signed by
Lender. No failure on the part of Lender to exercise, and no delay in
exercising, 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 further exercise thereof or the
exercise of any other right, power, or privilege.
12. Any acknowledgment or new promise, whether by payment
of principal or interest or otherwise and whether by Borrower or others
(including, without limitation, Guarantor), with respect to any of the
Indebtedness shall, if the statute of limitations in favor of Guarantor
against Lender shall have commenced to run, toll the running of such statute
of limitations and, if the period of such statute of limitations shall have
expired, prevent the operation of such statute of limitations.
13. This Guaranty Agreement is for the benefit of Lender
and its successors and assigns, and in the event of an assignment of the
Indebtedness, or any part thereof, the rights and benefits hereunder, to the
extent applicable to the portion of the Indebtedness so assigned, may be
transferred with such Indebtedness. This Guaranty Agreement is binding not
only on Guarantor, but on Guarantor's successors and assigns.
14. Guarantor recognizes that Lender is relying upon this
Guaranty Agreement and the undertakings of Guarantor hereunder in making the
Loan to Borrower and further recognizes that the execution and delivery of
this Guaranty Agreement is a material inducement to Lender in making the Loan
to Borrower. Guarantor hereby acknowledges that there are no conditions to
the full effectiveness of this Guaranty Agreement.
15. This Guaranty Agreement is executed and delivered as an
incident to a lending transaction negotiated, consummated, and performable in
Arlington County, Virginia, and shall be governed by, and construed and
entered in accordance with the laws of the Commonwealth of Virginia, without
regard to conflict of laws principles. Any action or proceeding against
Guarantor under or in connection with this Guaranty Agreement may be brought
in any state or federal court in Arlington County, Virginia. Guarantor hereby
irrevocably (a) submits to the nonexclusive jurisdiction of such courts, and
(b) waives any objection it may now or hereafter have as to the venue of any
such action or proceeding brought in such court or
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<PAGE>
that such court is an inconvenient forum. Guarantor agrees that service of
process and/or notice upon it may be made by certified or registered mail,
return receipt requested, at its address specified on the first page hereof
Nothing herein shall affect the right of Lender to serve process in any other
matter permitted by law or shall limit the right of Lender to bring any
action or proceeding against Guarantor or with respect to any of Guarantor's
property in courts in other jurisdictions. Any action or proceeding by
Guarantor against Lender shall be brought only in a court located in
Arlington County, Virginia.
16. Guarantor hereby waives promptness, diligence, notice
of any default under the Indebtedness or of Borrower's failure to pay or
perform the Guaranteed Obligations, demand of payment, notice of acceptance
of this Guaranty Agreement, presentment, notice of protest, notice of
dishonor, notice of the incurring by Borrower of additional indebtedness, and
all other notices and demands with respect to the Indebtedness and this
Guaranty Agreement. Guarantor waives all rights accorded to it under Sections
49-25 and 49-26 of the Virginia Code.
17. Guarantor hereby represents and warrants to Lender that
Guarantor has adequate means to obtain from Borrower on a continuing basis
information concerning the financial condition and assets of Borrower and
that Guarantor is not relying upon Lender to provide (and Lender shall have
no duty to provide) any such information to Guarantor either now or in the
future.
18. In case any one or more of the provisions contained in
this Guaranty Agreement shall for any reason be held to be invalid, illegal
or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and this
Guaranty Agreement shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein.
19. THIS GUARANTY AGREEMENT EMBODIES THE FINAL, ENTIRE
AGREEMENT OF PAYMENT AND PERFORMANCE OF GUARANTOR AND LENDER WITH RESPECT TO
GUARANTOR'S GUARANTY OF THE GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL
PRIOR COMMITMENTS, AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER
WRITTEN OR ORAL RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY
AGREEMENT IS INTENDED BY GUARANTOR AND LENDER AS A FINAL AND COMPLETE
EXPRESSION OF THE TERMS OF THE GUARANTY AGREEMENT, AND NO COURSE OF DEALING
BETWEEN GUARANTOR AND LENDER, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES,
AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE USED TO
CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY AGREEMENT.
THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, Guarantor has duly executed this
Guaranty Agreement under seal as of the Execution Date.
WITNESS: THE WASHINGTON CORPORATION,
a Maryland corporation
By: William N. Demas [SEAL]
- ---------------------- -------------------------------
NAME: William N. Demas
TITLE: President
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<PAGE>
STATE OF District of )
)ss:
COUNTY OF Columbia )
On this 24th day of November, 1998, before me personally came
William Demas to me known, being duly sworn, did depose and say that he/she
is the President of The Washington Corporation, a Maryland corporation, the
corporation described in and which executed the within instrument as
Guarantor, and that he/she signed his/her name thereto in such capacity of
said corporation.
Veronica Jenkins
------------------------------
Notary Public
My Commission Expires:
----------------------
[SEAL]
VERONICA JENKINS
NOTARY PUBLIC, DISTRICT OF COLUMBIA
My Commission Expires April, 30 2003
10
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE LAND
Parcel A, ARLINGTON SQUARE, as duly dedicated, platted, and recorded
in Deed Book 2210, page 994, among the land records of Arlington County,
Virginia.
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<PAGE>
SUBORDINATION AGREEMENT
THIS SUBORDINATION AGREEMENT (this "AGREEMENT") is entered into as
of November 25, 1998 between ARLINGTON SQUARE LIMITED PARTNERSHIP, a Virginia
limited partnership ("BORROWER"), ALLIED CAPITAL CORPORATION, a Maryland
corporation and the successor to Allied Capital Commercial Corporation
("JUNIOR LENDER") and METROPOLITAN LIFE INSURANCE COMPANY, a New York
corporation ("SENIOR LENDER").
RECITALS
A. Junior Lender has made a loan to Borrower in the original
principal amount of One Million Dollars ($1,000,000.00) (the "JUNIOR LOAN")
evidenced by that certain Promissory Note dated as of November 20, 1997 from
Borrower to Junior Lender and that certain Allonge and Modification to
Promissory Note dated April 23, 1998 (collectively, the "JUNIOR NOTE") and
secured by, among other things, (i) that certain Deed of Trust and Security
Agreement "B" (the "JUNIOR TRUST") dated as of November 20, 1997, executed by
Borrower to Walker Title and Escrow Company, Inc., as trustee for the benefit
of Junior Lender recorded in Deed Book 2860, Page 1530 in the Land Records of
Arlington County, Virginia (the "OFFICIAL RECORDS") and encumbering the real
property described on EXHIBIT A attached hereto and incorporated herein by
reference (the "PROPERTY"), and (ii) a separate Guaranty Agreement executed
by each of the Borrower's partners, whereby each such partner guarantees
repayment of all sums owing to Junior Lender under the Junior Loan
(collectively, the "GUARANTEES") secured by those Pledge Agreements dated as
of even date herewith of 51 percent of the partnership interests in Borrower
(collectively, the "PLEDGE AGREEMENTS"). All or a portion of the principal
amount of the Junior Loan has this date has been curtailed by Borrower
leaving certain sums owing from Borrower to Junior Lender thereunder
(including specifically principal of not more than $1,000 and Junior Lender's
"participation interest" under and as defined in the Junior Note). The
documents evidencing, securing or relating to the Junior Loan are hereafter
referred to collectively as the "JUNIOR LOAN DOCUMENTS," and the Borrower
hereby represents that all of the Junior Loan Documents are listed in Exhibit
B attached hereto and incorporated herein by reference.
B. Senior Lender has agreed to make a loan to Borrower in the original
principal amount of Twenty-One Million, Five Hundred Thousand Dollars
($21,500,000.00) (the "SENIOR LOAN"), evidenced by that certain Promissory Note
of even date herewith from Borrower to Senior Lender and secured by, among other
things, that certain Deed of Trust, Security Agreement and Fixture Filing of
even date herewith executed by Borrower to Keith J. Willner and Scott A.
Morehouse, as trustees for the benefit of Senior Lender, recorded concurrently
herewith in the Official Records and encumbering the Property (the "SENIOR
TRUST"). The documents evidencing, securing or relating to the Senior Loan are
hereafter referred to collectively as the "SENIOR LOAN DOCUMENTS."
C. Senior Lender has indicated that it will not extend credit to
Borrower unless Junior Lender executes this Agreement.
<PAGE>
NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged by each party hereto, the parties
hereby agree as follows:
1. DEFINITIONS. As used herein,
(a) "INDEBTEDNESS" shall mean all advances, debts, obligations
and liabilities of Borrower heretofore, now or hereafter made,
incurred, suffered or created, whether voluntary or involuntary and
however arising, whether due or not due, absolute or contingent,
liquidated or unliquidated, determined or undetermined, and whether
Borrower may be liable individually or jointly or in its capacity as a
general partner of a borrower, including without limitation obligations
and liabilities arising after the commencement of any bankruptcy or
insolvency proceeding by or against Borrower;
(b) "JUNIOR INDEBTEDNESS" shall mean all Indebtedness now or
hereafter remaining owing from Borrower to Junior Under in connection
with the Junior Loan, including specifically its participation interest
under the Junior Note; and
(c) "SENIOR INDEBTEDNESS" shall mean all Indebtedness now or
hereafter owing from Borrower to Senior Lender in connection with the
Senior Loan, excluding, however, any increase in the principal amount
of the Senior Loan beyond the amount stated in the Senior Trust.
2. SUBORDINATION. Junior Lender hereby unconditionally subordinates all
Junior Indebtedness, and the lien or charge and each and all of the terms of all
of the Junior Loan Documents, to all Senior Indebtedness, and the lien or charge
and each and all of the terms of all of the Senior Loan Documents.
3. RESTRICTIONS UPON EXERCISE OF REMEDIES. So long as the Senior Trust
shall remain on the Property or any part thereof, Junior Lender will not, even
if entitled to, exercise any of its rights against Borrower or the Property or
any part thereof then subject to the Junior Trust (including, without
limitation, commencing a foreclosure of the lien of the Junior Trust or
exercising any right to receive the rents for the Property) available to Junior
Lender under the Junior Trust without Senior Lender's prior written consent.
Junior Lender covenants and agrees that, from and after Junior Lender's receipt
of notice that a default exists under the Senior Trust and thereafter until
Junior Lender shall have received notice from Senior Lender that all defaults
under the Senior Loan have been cured and are no longer in existence, Junior
Lender shall not, even if entitled to, collect or receive from Borrower any
"participation interest" under and as such term is defined in the Junior Note.
The above notwithstanding, until its receipt of such notice of default under the
Senior Loan, and, if any such notice of default under the Senior Loan is given
to the Junior Lender after Junior Lender's receipt of notice from the Senior
Lender that such default has been cured and for so long as Junior Lender has not
received another notice of default, Junior Lender shall be permitted to receive
regularly scheduled payments under the Junior Indebtedness, including
specifically its participation interest under the Junior Note. Junior
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<PAGE>
Lender hereby agrees to vote in accordance with Senior Lender's instructions for
the purpose of accepting or rejecting any plan of reorganization or otherwise in
acting on behalf of or voting Junior Lender's claim in any proceeding under
applicable bankruptcy laws, all at no material out of pocket cost to Junior
Lender. The provisions of this SECTION 3 shall be for the benefit of Senior
Lender as holder of the Senior Loan Documents. However, Senior Lender hereby
acknowledges the execution and delivery of the Guarantees and the Pledge
Agreements and the performance of the respective parties' obligations
thereunder, and further agrees that Allied may enforce its rights under the
Guarantees and the Pledge Agreements (subject only to the provisions of this
Section 3 and Section 6(a) hereof) as against the guarantors thereunder and
their property (but not against the Borrower or property of the Borrower) in the
event of a default under any of the Junior Loan Documents and further agrees
that Allied or its "affiliate" may acquire up to 51% of the partnership
interests in the Borrower (consisting of 50% limited partner interests and one
percent general partner interests) in realization by Allied upon such interests
in foreclosure or transfer in lieu of foreclosure under the Pledge Agreements,
provided that, prior to or concurrent with any transfers to Allied or its
"affiliate" in foreclosure or in lieu thereof, Allied shall have assumed all of
the obligations and liabilities of a Liable Party under the existing Guaranty
Agreement and Unsecured Indemnity Agreement but only those obligations and
liabilities attributable to events occurring after the date of such transfer,
and shall have executed, as of the date of such transfer, a Guaranty Agreement
and an Unsecured Indemnity Agreement in the same form as executed by the
existing Liable Parties on even date herewith, subject to the foregoing
limitation. For purposes of this Section 3, the term "affiliate" of a company
means (a) an entity that directly or indirectly controls, is controlled by or is
under common control with such company or (b) an entity at least a majority of
whose economic interest is owned by such company and the term "control" means
the power to direct, the management of such entity through voting rights,
ownership or contractual obligations. For purposes of this Section 3, the terms
"Liable Party," "Guaranty Agreement" and "Unsecured Indemnity Agreement" shall
have their meanings as defined in the Senior Trust.
4. DISPOSITION OF EVIDENCE OF JUNIOR INDEBTEDNESS. Junior Lender
warrants to Senior Lender that it has not heretofore assigned, transferred,
hypothecated or disposed of any Junior Indebtedness to any third party. Junior
Lender shall not assign, transfer, hypothecate or dispose of the Junior
Indebtedness or any claim it has or may have against Borrower while any Senior
Indebtedness remains outstanding; provided that Junior Lender may assign or
transfer the Junior Indebtedness to a Qualified Real Estate Investor, as
hereinafter defined. "Qualified Real Estate Investor" is defined as any
reputable Institutional Investor (hereinafter defined) with a minimum net
worth of $400,000,000 (or in the case of a foreign real estate investment
trust, $750,000,000) minimum net worth, which shall acquire its ownership
interest through a United States entity based in the United States free from
any bankruptcy, reorganization or insolvency proceedings or any criminal
charges or proceedings and shall not be, at the time of transfer, plaintiff
or defendant adverse to Lender in any suit brought against or by Lender.
Lender agrees to be reasonable in the review of such qualifications.
"Institutional Investor" is defined as (i) any United States bank, Taft
Hartley plan, union or profit sharing plan, commingled real estate fund,
group trust, insurance company, pension fund, real estate investment trust,
charitable foundation, or (ii) a foreign bank, insurance company, pension
fund or real estate investment
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<PAGE>
trust or United States entity controlled or established by one of the foregoing
in connection with the intended transaction.
5. AGREEMENT TO BE CONTINUING, APPLIES TO BORROWER'S EXISTING SENIOR
INDEBTEDNESS AND ANY SENIOR INDEBTEDNESS HEREAFTER ARISING. This Agreement
shall be a continuing agreement and shall apply to any and all Senior
Indebtedness of Borrower to Senior Lender now existing or hereafter advanced
or outstanding under the Senior Loan or relating to the protection of the
security therefor including any Senior Indebtedness advanced or outstanding
under the Senior Loan or relating to the protection of the security therefor
of any receiver, trustee, debtor-in-possession or the similar person or
entity that is a successor in interest of Borrower in the event of Borrower's
insolvency.
6. NOTICES OF DEFAULT, MODIFICATIONS UNDER THE JUNIOR LOAN.
(a) DEFAULTS. Junior Lender shall provide Senior Lender with a
copy of each and every notice of default or other notice given to
Borrower under any of the Junior Loan Documents at the same time such
notice is served upon Borrower, and no such notice to Borrower shall be
effective unless and until a copy thereof is served upon Senior Lender.
A default under any of the Junior Loan Documents shall, at the sole and
exclusive option of Senior Lender, constitute a default under the
Senior Trust. If any default under any of the Junior Loan Documents is
not cured by Borrower within the applicable grace period, if any,
Junior Lender agrees that, before giving any notice or taking any
action the result of which may be the acceleration of the Junior
Indebtedness, foreclosure upon the security granted by the Junior
Trust, the taking of possession or sale of all or any part of the
Property, or the exercise of any other remedy under the Junior Loan
Documents, Junior Lender shall give an additional notice of the
continuing default to Senior Lender and shall allow Senior Lender an
additional grace period of twenty (20) days to cure any such continuing
default (but without any obligation on the part of Senior Lender so as
to cure any such default). Junior Lender shall not take any action
which may result in the acceleration of the Junior Indebtedness, the
foreclosure upon the security granted by the Junior Trust or the taking
of possession or sale of all or any part of the Property or exercise
any of its rights upon default by Borrower under the Junior Loan
Documents if (i) in the case of a default in the payment of any sum of
money payable to Junior Lender under the Junior Trust, Senior Lender,
within the additional grace period, shall pay such sum, or cure such
default, or (ii) in the case of any nonmonetary default which is
susceptible of being cured by Senior Lender, Senior Lender shall
promptly commence to cure the default, and shall thereafter diligently
prosecute such cure to completion. In addition, if any default under
the Junior Trust is not cured by Borrower within the applicable grace
period, if any, Junior Lender agrees that, before exercising any of its
remedies under the Junior Trust, including the foreclosure upon the
security granted by the Junior Trust or the taking of possession or
sale of all or any part of the Property secured by the Junior Trust or
exercise any of its rights upon default by Borrower under the Junior
Trust, Junior Lender shall obtain Senior Lender's prior written consent
as provided in SECTION 3 above.
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<PAGE>
(b) MODIFICATIONS AND TERMINATION. Junior Lender covenants and agrees
that, without Senior Lender's prior written consent, Junior Lender shall not (i)
modify, amend or extend the Junior Loan Documents, (ii) extend any additional
credit or make any additional loans to Borrower secured by the Property or any
part thereof, or (iii) terminate or permit the termination of this Agreement for
any reason.
7. MODIFICATIONS UNDER THE SENIOR LOAN. No notice, consent or approval
shall be required to, by or from Junior Lender in connection with (i) any
extension, amendment or other modification of the documents evidencing and
securing the Senior Loan (provided such amendment or modification does not
increase in the principal amount of the Senior Loan beyond the amount stated in
the Senior Trust), or (ii) any refinancing of the Senior Indebtedness, it being
understood and agreed by Junior Lender that Junior Lender waives any rights it
may otherwise have at law and/or in equity to so receive and/or give notice,
consent or approval to any such amendment, extension, or other modification of
the documents evidencing and securing that Senior Loan or any refinancing of the
Senior Loan. If requested by Borrower or Senior Lender, Junior Lender shall
execute such additional subordination agreements or other documentation as may
be required to confirm the subordination of the Junior Loan Documents to the
documents evidencing any loan obtained by Borrower to refinance the Senior
Indebtedness.
8. CASUALTY AND CONDEMNATION. Junior Lender, its successors and assigns
hereby assign and release unto Senior Lender, as beneficiary under the Senior
Trust:
(a) all of its right, title and interest or claim, if any, in and to
the proceeds of all policies of insurance covering the Property for
application upon the Indebtedness secured by, or other disposition
thereof in accordance with the provisions of, the Senior Trust and of
the Assignment of Leases, relating thereto; and
(b) all of its right, title and interest or claim, if any, in and to
all awards or other compensation made for any taking of any part of the
Property, to be applied upon the Indebtedness secured by, or disposed of
in accordance with, the provisions of the Senior Trust and of the said
Assignment of Leases.
Junior Lender acknowledges and agrees that, consistent with the
foregoing, the application and disposition of insurance proceeds shall be
governed by and in accordance with the terms of the Senior Loan Documents.
In the event that following any such application and disposition of the
insurance proceeds and condemnation award and other compensation, any balance
remains, then such excess shall be made payable to the order of Junior Lender
hereunder or its successors or assigns to the extent that Junior Lender has an
interest therein under the terms of the Junior Loan Documents and subject to the
provisions of any other agreements between the parties hereto and any third
parties. If the holder of the Senior Trust shall at any time release to Borrower
any such insurance proceeds or condemnation awards for the purpose of
restoration of the Property, or
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<PAGE>
if any such amounts shall be paid to Junior Lender in accordance with the
provisions of the foregoing sentence, such releases shall not be deemed to be an
additional advance under the Senior Trust.
9. NO LIENS. So long as the Senior Trust shall remain on the Property
or any part thereof, Junior Lender shall not acquire by subrogation, contract or
otherwise any lien upon the estate, right or interest in the Property which may
arise as a result of payment by Junior Lender of real estate taxes, assessments
or other governmental charges levied by the state, county or federal government,
which is or may be prior in right to the Senior Trust.
10. APPROVAL RIGHTS. Any approval rights of Junior Lender under the
Junior Loan Documents with regard to the Property, are expressly subject and
subordinate to any related approval rights of Senior Lender arising under the
Senior Loan Documents, for so long as the Senior Trust shall remain on the
Property or any part thereof.
11. INFORMATION, OTHER AGREEMENTS. Junior Lender shall advise Senior
Lender, at Senior Lender's request from time to time, of the status of the
performance of Borrower's obligations under the Junior Loan Documents. Junior
Lender agrees that Senior Lender shall have no obligation to inform Junior
Lender or keep Junior Lender informed of the financial and other information
pertaining to Borrower's financial condition. Junior Lender assumes the
responsibility to keep itself adequately informed by such means of any facts,
events or circumstances which might in any way affect Junior Lender's risks
hereunder, and Junior Lender agrees that Senior Lender shall not have any
obligation to disclose to Junior Lender any information or material acquired by
Senior Lender in the course of Senior Lender's relationship with Borrower.
Should Senior Lender elect to provide information to Junior Lender as a
courtesy, Junior Lender understands that, by providing such information, Senior
Lender shall not be deemed to have warranted the accuracy, completeness or value
of the information so provided, and Junior Lender agrees that Senior Lender
shall not have any liability to Junior Lender for providing inaccurate,
incomplete, erroneous or outdated information. Junior Lender understands that
there may be various agreements between Senior Lender and Borrower evidencing
and governing the Senior Indebtedness, and Junior Lender acknowledges and agrees
that such agreements are not intended to confer any benefits on Junior Lender
and that Senior Lender shall have no obligation to Junior Lender or any other
person to exercise any rights, enforce any remedies, or take any other actions
which may be available to them under such agreements. Nothing in this Agreement
shall obligate Senior Lender to give any notice of any default or event of
default to Junior Lender at any time, provided that nothing in this Agreement
shall constitute a waiver by Junior Lender of any notice rights provided by
applicable law in connection with a foreclosure of the Senior Trust.
12. TRANSFER OF ASSETS OR REORGANIZATION OF BORROWER. As a material
inducement to Senior Lender to make the Senior Loan to Borrower, and for so long
as any of the Senior Indebtedness remains unpaid or any of Borrower's
obligations under the Senior Loan documents remain unperformed, Junior Lender
hereby agrees that it shall not file or consent to an involuntary bankruptcy
proceeding with respect to Borrower or any of its general partners, or
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<PAGE>
join in any such filing, without the prior written consent of Senior Lender,
which Senior Lender may grant or withhold in its sole discretion. In the event
Borrower enters into or is the subject of any bankruptcy proceeding,
receivership, insolvency, assignment for the benefit of creditors,
reorganization, whether or not pursuant to bankruptcy laws, sale of all or
substantially all of its assets, dissolution, liquidation or any other
marshaling of the assets and liabilities of Borrower, then in any such event any
payment or distribution of any of Borrower's assets, whether in cash, securities
or other property, shall be paid or delivered first to Senior Lender until all
Senior Indebtedness is paid in full. In the event Junior Lender receives any
such payment or distribution that is payable to Senior Lender pursuant to the
terms of this Agreement, Junior Lender shall hold such payment or distribution
and forthwith deliver same in kind to Senior Lender.
13. NO WAIVER BY SENIOR LENDER. No delay or failure of Senior Lender in
exercising any right or remedy hereunder shall be deemed a waiver of such right
or remedy. Any waiver, permit, consent or approval of any kind by, Senior Lender
must be in writing and shall be effective only to the extent set forth in such
writing.
14. WAIVERS AND CONSENTS BY JUNIOR LENDER. All of the Senior
Indebtedness shall be deemed to have been made or incurred in reliance upon this
Agreement, and, except as otherwise expressly provided herein, Junior Lender
expressly waives all notice of the acceptance by Senior Lender of the
subordination and other provisions of this Agreement and all other notices
whatsoever (except as set forth herein), and Junior Lender expressly waives
reliance by Senior Lender upon the subordination and other agreements as herein
provided.
Junior Lender agrees (a) that Senior Lender has not made any warranties
or representations to Junior Lender with respect to the due execution, legality,
validity, completeness or enforceability of the Senior Loan Documents, or the
collectibility of the Senior Indebtedness, and (b) that Senior Lender shall not
have any liability to Junior Lender for, and Junior Lender waives any claim or
defense which Junior Lender may now or hereafter have against Senior Lender
arising out of (i) any and all actions which Senior Lender takes or omits to
take (including, without limitation, actions with respect to the creation,
perfection or continuation of liens or security interests in any collateral,
actions with respect to the occurrence of any default or event of default,
actions with respect to the foreclosure upon, sale, release of, depreciation of
or failure to realize upon, any collateral and actions with respect to the
collection of any claim for all or any part of the Senior Indebtedness from any
account debtor, guarantor or any other party) with respect to the Senior Loan
Documents in effect from time to time, (ii) Senior Lender's election, in any
proceeding instituted under Title 11 of the United States Code (11 U.S.C. ss.101
et seq.) (the "BANKRUPTCY CODE"), of the application or nonapplication of
Section 1111(b)(2) of the Bankruptcy Code, and/or (iii) any borrowing or grant
of a security interest by Borrower, as debtor-in-possession, under Section 364
of the Bankruptcy Code.
Senior Lender acknowledges that Junior Lender has made no warranties or
representations to Senior Lender with respect to the due execution, legality,
validity,
-7-
<PAGE>
completeness or enforceability of the Junior Loan Documents or the
collectibility of the Junior Indebtedness.
Senior Lender, at any time and from time to time, may enter into such
agreements with Borrower as Senior Lender may deem proper, extending the time
for payment of, or renewing or otherwise altering the terms of all or any of the
Senior Indebtedness or affecting any security underlying any or all of such
Senior Indebtedness, or may exchange, sell, release, surrender or otherwise deal
with any such security, without in any way impairing or affecting this Agreement
thereby; provided, however that Senior Lender may not amend the Senior Loan
Documents to increase the principal amount of the Senior Loan beyond the amount
stated in the Senior Trust without Junior Lender's prior written consent. Senior
Lender shall not be required to proceed against Borrower or any surety or
guarantor or against any collateral heretofore or hereafter provided by Borrower
or any surety or guarantor prior to or as a condition of exercising or enforcing
its rights thereunder.
Junior Lender waives any right to challenge, attack or seek to avoid
the Senior Indebtedness, or any liens on collateral securing same, under
Virginia law, to the extent applicable, Bankruptcy Code Section 548, or any
other law or statute, and agrees that the Senior Indebtedness was incurred, and
any liens securing same were granted, in good faith, for reasonably equivalent
value, and upon the basis of balance sheets and cash flow statements
demonstrating the solvency and adequate capitalization and cash flow of
Borrower. Even in the event any of the Senior Indebtedness, or any lien securing
same, should be invalidated, avoided or set aside, the subordination provided
for herein nevertheless shall continue in full force and effect and, as between
Senior Lender and Junior Lender, the Senior Indebtedness shall be deemed to
remain in full force and effect.
In the event that all or any part of the Senior Indebtedness at any
time is secured by any deeds of trust or mortgages or other instruments creating
or granting liens on any interest in real property (which event has occurred and
is contemplated to occur), Junior Lender authorizes Senior Lender, upon the
occurrence of and during the continuance of any event of default under the
Senior Indebtedness, at its sole option, without notice or demand and without
affecting any obligations of Junior Lender hereunder, the enforceability of this
Agreement, or the validity or enforceability of any liens of Senior Lender on
any collateral, to foreclose any and all of such deeds of trust or mortgages or
other instruments by judicial or nonjudicial sale. The above notwithstanding,
Senior Lender shall endeavor to give Junior Lender notices of default under the
Senior Indebtedness; provided, however, that Senior Lender's failure to
deliver such notice shall not constitute a breach of this Agreement and shall
have no legal effect on the terms and conditions of this Agreement or the
obligations and rights of the parties hereunder. Except to the extent required
by applicable law relating to such foreclosure or sale, Junior Lender expressly
waives any right to receive notice of any judicial or nonjudicial foreclosure or
sale of any real property or interest therein subject to any such deeds of trust
or mortgages or other instruments and Junior Lender's failure to receive any
such notice shall not impair or affect Junior Lender's obligations to Senior
Lender or the enforceability of this Agreement or any liens created or granted
hereby.
-8-
<PAGE>
15. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and
warrants to Senior Lender as follows:
(a) The outstanding principal balance of the Junior
Indebtedness, as of the date hereof, is not more than $1,000 (not
including the Junior Lender's participation interest). Borrower has
delivered to Senior Lender a true, correct and complete statement of
the outstanding balance of the Junior Indebtedness prepared by Junior
Lender and dated not earlier than 15 days prior to the date hereof.
(b) Borrower has delivered to Senior Lender true, correct and
complete copies of each and all of the Junior Loan Documents. The
Junior Loan Documents have not been amended, modified or assigned and
are in full force and effect without default thereunder.
16. APPLICATION OF PAYMENTS. Junior Lender agrees that Senior Lender
may apply payments received from Borrower in such manner or fashion as Senior
Lender in its discretion deems appropriate, and Junior Lender shall have no
right to direct the manner or fashion in which Senior Lender applies such
payments.
17. MISCELLANEOUS. This Agreement binds and inures to the benefit of
the successors and assigns of the parties, including without limitation the
holders of any participation interests purchased from Senior Lender, provided
that Junior Lender may not assign the Junior Indebtedness except as set forth in
Section 4 above. This Agreement may not be amended, modified or terminated
except by a written instrument signed by the party or parties to be charged.
18. APPLICABLE LAW. This Agreement shall be governed by and construed
in accordance with the local laws of the Commonwealth of Virginia, without
reference to choice of law rules.
19. COUNTERPART EXECUTION. This Agreement may be executed in
counterparts and shall become effective as of the date first set forth above
when each party shall have delivered executed counterparts hereof to the other
parties, whereupon all such counterparts shall be deemed originals and, when
taken together, shall constitute but one agreement.
20. AUTHORITY. Junior Lender hereby certifies to Senior Lender that
Junior Lender has all necessary authority to grant the subordination evidenced
hereby and to execute this Agreement.
21. COSTS AND EXPENSES OF PROCEEDINGS. In the event of any litigation,
arbitration, hearing or other proceeding relating to this Agreement, the
prevailing party shall be entitled to recover its reasonable costs and expenses,
including attorneys' fees. As used in this Agreement, the term "attorneys' fees"
or "attorneys' fees and costs" shall mean the fees and expenses of counsel to
the parties hereto, which may include printing, photostating, duplicating and
other
-9-
<PAGE>
expenses, air freight charges, and fees billed for law clerks, paralegals,
librarians and others not admitted to the bar but performing services under the
supervision of an attorney. The terms "attorneys' fees" or "attorneys' fees and
costs" shall also include, without limitation, all such fees and expenses
incurred with respect to appeals, arbitrations, bankruptcy proceedings and any
post-Judgment proceedings to collect any judgment, and whether or not any action
or proceeding is brought with respect to the matter for which said fees and
expenses were incurred. The provisions allowing for the recovery of
post-judgment fees, costs and expenses are separate and several and shall
survive the merger of this Agreement into any judgment.
22. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR (B) IN
ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES
HERETO OR ANY OF THEM WITH RESPECT TO THIS AGREEMENT OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY, AND THAT ANY
PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO
TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. AS BETWEEN JUNIOR LENDER AND
BORROWER ONLY, THE FOREGOING WAIVER SHALL NOT BE DEEMED TO APPLY TO ANY OF THE
JUNIOR LOAN DOCUMENTS OTHER THAN THIS AGREEMENT, UNLESS SET FORTH IN SUCH
DOCUMENTS.
23. NOTICES. Any notice, or other document or demand required or
permitted under this Agreement shall be in writing addressed to the appropriate
address set forth below and shall be deemed delivered upon the earliest of (a)
actual receipt, (b) the next business day after the date when sent by recognized
overnight courier, or (c) the second business day after the date when sent by
registered or certified mail, postage prepaid. Any party may, from time to time,
change the address at which such written notice or other documents or demands
are to be sent, by giving the other party written notice of such change in the
manner hereinabove provided.
To Senior Lender: Metropolitan Life Insurance Company
a New York corporation
200 Park Avenue, 12th Floor
New York, New York 10166
Attention: Senior Vice President
Real Estate Investments
-10-
<PAGE>
with a copy to: Metropolitan Life Insurance Company
One Madison Avenue
New York, New York 10010-3690
Attention: Vice-President and Investment Counsel
Real Estate Investments
To Borrower: Arlington Square Limited Partnership
c/o The Washington Corporation
4650 East West Highway, Suite 251
Bethesda, Maryland 20814
Attention: William N. Demas
with a copy to: Bean, Kinney & Korman, P.C.
2000 North Fourteenth Street, Suite 100
Arlington, Virginia 22201
Attention: Jonathan C. Kinney
To Junior Lender: Allied Capital Corporation
1919 Pennsylvania Avenue, NW
Washington, DC 20006-3434
Attention: John M. Scheurer, President
with a copy to: Dickstein, Shapiro, Morin & Oshinsky. LLP
2101 L Street, NW
Washington, DC 20037-1526
Attention: Allan B. Goldstein, Esq.
24. FURTHER ASSURANCES. Junior Lender shall, at any time and from time
to time, upon the request of Senior Lender, execute, acknowledge and deliver all
such further documents and instruments, and take all such further actions, as
shall be necessary or reasonable to give effect to the agreements set forth
herein.
IN WITNESS WHEREOF, each of the undersigned has caused this
Subordination Agreement to be executed under seal by its duly authorized
representative as of the day and year first above written.
[SIGNATURE PAGE FOLLOWS]
-11-
<PAGE>
SENIOR LENDER:
WITNESS: METROPOLITAN LIFE INSURANCE
COMPANY, a New York corporation
/s/ ILLEGIBLE By: /s/ Michael J. Curran [Seal]
- ------------------------------------- ------------------------------
Name: Michael J. Curran
------------------------------
Title: AVP
------------------------------
BORROWER:
ARLINGTON SQUARE LIMITED[ITED
PARTNERSHIP, a Virginia limited
partnership
By: Arlington Square, Inc.,
a Virginia corporation,
its general partner
/s/ Priscilla D. Okay By: /s/ William N. Demas [Seal]
- ------------------------------------- ------------------------------
William N. Demas
President
JUNIOR LENDER:
ALLIED CAPITAL CORPORATION, a
Maryland corporation
By: [Seal]
- ------------------------------------- ------------------------------
Name:
------------------------------
Title:
------------------------------
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<PAGE>
SENIOR LENDER:
WITNESS: METROPOLITAN LIFE INSURANCE
COMPANY, a New York corporation
By:
- ------------------------------------- ------------------------------
Name:
------------------------------
Title: [Seal]
------------------------------
BORROWER:
ARLINGTON SQUARE LIMITED[ITED
PARTNERSHIP, a Virginia limited
partnership
By: Arlington Square, Inc.,
a Virginia corporation,
its general partner
By: [Seal]
- ------------------------------------- ------------------------------
William N. Demas
President
JUNIOR LENDER:
ALLIED CAPITAL CORPORATION, a
Maryland corporation
/s/ Allan B. Goldal By: /s/ Michael J. Grisius [Seal]
- ------------------------------------- ------------------------------
Name: /s/ Michael J. Grisius
------------------------------
Title: Principal
------------------------------
-12-
<PAGE>
DISTRICT OF )
)ss:
COLUMBIA )
I HEREBY CERTIFY that on this 24th day of November, 1998, before the
subscriber a Notary Public in and for the jurisdiction aforesaid, personally
appeared Michael Curran, the AVP of Metropolitan Life Insurance Company,
personally well known to me or proven to be the person who executed the
foregoing and annexed Subordination Agreement, and acknowledged that he/she
executed the same on behalf of the said corporation, for the purposes therein
contained.
IN WITNESS WHEREOF I hereunto set my hand and official seal.
/s/ Veronica Jenkins
-------------------------------------------------
Notary Public
My Commission Expires: April 30, 2003
[NOTARIAL SEAL]
-13-
<PAGE>
DISTRICT OF )
)ss:
COLUMBIA )
I HEREBY CERTIFY that on this 24th day of November, 1998, before the
subscriber, a Notary Public in and for the jurisdiction aforesaid, personally
appeared William N. Demas, President of Arlington Square, Inc., the general
partner of Arlington Square Limited Partnership, personally well known to me
or proven to be the person who executed the foregoing and annexed
Subordination Agreement, and acknowledged that he executed the same on behalf
of the said corporation, as the general partner of Arlington Square Limited
Partnership, for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Veronica Jenkins
-------------------------------------------------
Notary Public
My Commission Expires: April 30, 2003
[NOTARIAL SEAL]
-14-
<PAGE>
DISTRICT OF )
)ss:
COLUMBIA )
I HEREBY CERTIFY that on this 24th day of November, 1998, before the
subscriber, a Notary Public in and for the jurisdiction aforesaid, personally
appeared Michael J. Grisius, the Principal of Allied Capital Corporation,
personally well known to me or proven to be the person who executed the
foregoing and annexed Subordination Agreement, and acknowledged that he/she
executed the same on behalf of the said Allied Capital Commercial
Corporation, for the purposes therein contained.
IN WITNESS WHEREOF, I hereunto set my hand and official seal.
/s/ Amelia Mitchem
-------------------------------------------------
Notary Public
My Commission Expires: October 31, 2002
[NOTARIAL SEAL]
-15-
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION OF THE PROPERTY
Parcel A, ARLINGTON SQUARE, as duly dedicated, platted, and recorded in
Deed Book 2210, page 994, among the land records of Arlington County, Virginia.
<PAGE>
EXHIBIT B
JUNIOR LOAN DOCUMENTS
Promissory Note dated as of November 20, 1997 from Borrower to Junior Lender.
Allonge and Modification to Promissory Note dated April 23, 1998 from Borrower
to Junior Lender
Loan Agreement dated November 20, 1998 among Borrower, The Washington
Corporation and Junior Lender.
Deed of Trust dated November 20, 1997 from Borrower to Walker Title and
Escrow Company, Inc., Trustee, recorded November 21, 1997, in Deed Book 2860,
Page 1530.
Assignment of Leases and Rents dated November 20, 1997 from Borrower to Junior
Lender recorded in Deed Book 2860, Page 1560 and Deed Book 2860, Page 1568.
Guarantees dated of even date herewith from each of Borrower's partners to
Junior Lender.
Assignment of Partnership interests As Collateral dated of even date herewith
from each of Borrower's partners to Junior Lender.
Consent, Certification and Agreement to Assignment of Partnership Interests As
Collateral dated of even date herewith from each of Borrower's partners to
Junior Lender.
<PAGE>
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
METROPOLITAN LIFE INSURANCE COMPANY
("LENDER")
UNITED STATES OF AMERICA-GENERAL SERVICES ADMINISTRATION
("TENANT")
AND
ARLINGTON SQUARE LIMITED PARTNERSHIP
("LANDLORD")
-------------------------------
DATED: AS OF NOVEMBER 25, 1998
LOCATION: 4401 NORTH FAIRFAX DRIVE
ARLINGTON, VIRGINIA
BLOCK: ARLINGTON SQUARE
LOT: PARCEL A
COUNTY: ARLINGTON
STATE: VIRGINIA
-------------------------------
RECORD AND RETURN TO:
MAYER, BROWN & PLATT
2000 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20006-1882
ATTENTION: KEITH J. WILLNER
<PAGE>
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
This SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this
"Non-Disturbance Agreement") made as of the 25TH day of NOVEMBER, 1998, by
and among METROPOLITAN LIFE INSURANCE COMPANY, having an office at 200 Park
Avenue, 12th Floor, New York, New York 10166 ("LENDER"), UNITED STATES OF
AMERICA-GENERAL SERVICES ADMINISTRATION, having an office at 7TH AND D
STREET, S.W., WASHINGTON, D.C. 20407 ("TENANT") and ARLINGTON SQUARE LIMITED
PARTNERSHIP, having an office at 4650 EAST-WEST HIGHWAY, SUITE 251,
BETHESDA, MARYLAND 20814 ("LANDLORD").
WITNESSETH:
WHEREAS, Lender has made or is about to make a loan (the "L0AN") of
$21,500,000.00 to Landlord;
WHEREAS, the Loan is or will be evidenced by a promissory note (the
"NOTE") made by Landlord to order of Lender and is or will be secured by,
among other things, mortgage, security agreement and fixture filing
(collectively, the "MORTGAGE") made by Landlord to or for the benefit of
Lender covering, among other things, the land (the "LAND") described on
SCHEDULE A hereto and all improvements (the "IMPROVEMENTS") now or hereafter
located on the Land (the Land and the Improvements hereinafter collectively
referred to as the "PREMISES");
WHEREAS, by an agreement of lease COMMENCING OCTOBER 1, 1998, AND ENDING
ON SEPTEMBER 30, 2008 (the "LEASE"), Landlord has leased or will lease to
Tenant a portion of the Premises BEING ALL OF THE LEASABLE PREMISES LOCATED
WITHIN THE BUILDING KNOWN AS "ARLINGTON SQUARE", as more particularly
described therein;
WHEREAS, a memorandum of the Lease is to be recorded in the official
records of the CLERK OF THE CIRCUIT COUNTY OF ARLINGTON COUNTY, VIRGINIA prior
to the recording of this Non-Disturbance Agreement; and
WHEREAS, the parties hereto desire to make the Lease subject and
subordinate to the Mortgage.
NOW, THEREFORE, the parties hereto, in consideration of the covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, hereby agree as follows:
1. The Lease, as the same may hereafter be modified, amended or
extended, and all of Tenant's right, title and interest in and to the
Premises (including, without limitation, any option, right of first refusal
or other rights to acquire all or any portion of the Premises), are and shall
be subject and subordinate to the Mortgage and the lien thereof, to all the
terms, conditions and provisions of the Mortgage to the extent that such do
not conflict with the terms of the Lease, and to each and every advance made
or hereafter made under the Mortgage, and to all renewals, modifications,
consolidations, replacements, substitutions and extensions of the Mortgage,
so that at all times the Mortgage shall be and remain a lien on the Premises
prior and superior to the Lease for all purposes; PROVIDED, HOWEVER, and
Lender agrees, that so long as (a) no default by Tenant has occurred which
has continued to exist for such period of time (after notice, if any,
required by the Lease) as would entitle Landlord to terminate the Lease, (b)
neither the rent nor any other charges or expenses payable by Tenant under
the Lease shall have been reduced in any way except as allowed under the
Lease, (c) Tenant shall pay to Lender or its successor or assign all rental
and other payments payable to Landlord under the Lease in the amounts and at
the times set forth in the Lease, (d) Tenant shall duly confirm its
attornment to Lender or its successor or assign by written instrument as set
forth in PARAGRAPH 2 hereof or enter into the New Lease (as such term is
hereinafter defined) as set forth in such PARAGRAPH 2, (e) Lender or its
successors or assigns shall not be liable under any warranty of construction
contained in the Lease or any implied warranty of construction, (f) Tenant
shall have performed all of its covenants contained herein, and (g) all
representations and warranties made herein by Tenant shall be true and
correct as of the date of such attornment or New Lease; then, and in such event
(i) Lender shall not join Tenant as a party defendant in any foreclosure
action or proceeding which may be instituted or taken by Lender under the
Mortgage by reason of any default thereunder, unless such joinder is
necessary to foreclose the Mortgage and then only for such purpose and not
for the purpose of terminating the Lease, (ii) Tenant's leasehold estate under
the Lease shall not be terminated or disturbed and Lender will accept the
attornment of Tenant or, if Lender
<PAGE>
so elects, the New Lease, pursuant to PARAGRAPH 2 hereof, and (iii) other than
as set forth herein, none of Tenants rights under the Lease shall be affected
in any way by reason of any default under the Mortgage.
2. Without limitation of any of the provisions of the Lease, Tenant
hereby agrees that in the event of any act, omission or default by Landlord
or Landlord's agents, employees, contractors, licensees or invitees which
would give Tenant the right, either immediately or after the lapse of a
period of time, to terminate the Lease, or to claim a partial or total
eviction, unless the act, omission or default occasioning such termination or
claim presents a health, safety or life-threatening situation, Tenant will
endeavor to provide, in advance of any action by Tenant, written notice of
such act, omission or default to Lender by delivering notice of such act,
omission or default, addressed to Lender at Lender's address as given hereby
or at the last address of Lender furnished to Tenant in writing, or to any
successor to Lender's interest under the Mortgage, provided that Lender or
such successor notifies Tenant of the name and address of the party Tenant is
to notify; provided, however, Tenant's failure to deliver such notice shall
not constitute a breach of this Non-Disturbance Agreement and shall have no
legal effect on the terms and conditions of this Non-Disturbance Agreement or
the rights and obligations of the parties hereunder or under the Lease.
3. Without limitation of any of the provisions of the Lease, in the
event that, by reason of any default under the Mortgage on the part of
Landlord, Lender or its successors or assigns shall succeed to the interest
of Landlord or any successor to Landlord, then, subject to the provisions of
this Non-Disturbance Agreement, including, without limitation, PARAGRAPH I
above, the Lease shall nevertheless continue in full force and effect and
Tenant shall and does hereby agree to attorn to and accept Lender as its
successors or assigns and to recognize Lender or its successors or assigns as
its Landlord under the Lease for the then remaining balance of the term
thereof, and upon request of Lender or its successors or assigns, Tenant
shall execute and deliver to Lender or its successors or assigns an agreement
of attornment satisfactory to Lender or any such successor or assign.
Alternatively, upon the written request of Lender or its successors or
assigns, Tenant shall enter a new lease (the "New Lease") of the Premises
with Lender or such successor or assign for the then remaining term of the
Lease, upon the same terms and conditions as contained in the Lease.
4. Lender and its successors or assigns shall have no personal liability
as successor to Landlord and Tenant shall look only to the estate and
property of Lender or its successors or assigns in the Premises for the
satisfaction of Tenants remedies for the collection of a judgment (or other
judicial process) requiring the payment of money in the event of any default
by Lender or its successors or assigns as Landlord under the Lease, and no
other property or assets of Lender or its successors or assigns shall be
subject to levy, execution or other enforcement procedure for the
satisfaction of Tenants remedies under or with respect to the Lease, the
relationship of Landlord and Tenant thereunder or Tenants use or occupancy of
the Premises.
5. Tenant agrees that no prepayment of rent or additional rent due
under the Lease of more than one month in advance shall be made.
6. From and after Tenant's receipt of written notice in accordance with
31 U.S.C. 3727 Assignment of Claims directing Tenant to pay all rent and
additional rent thereafter due under the Lease to Lender (a "RENT PAYMENT
NOTICE") and of a Supplemental Lease Agreement to change the named payee in
the Lease, Tenant shall pay all rent and additional rent to Lender or as
Lender shall direct in writing, until such time as Lender directs otherwise
in writing. Tenant shall comply with any Rent Payment Notice notwithstanding
any contrary instruction, direction or assertion from Landlord. Lender's
delivery to Tenant of a Rent Payment Notice, or Tenants compliance therewith,
shall not be deemed to (a) cause Lender to succeed to or to assume any
obligations or responsibilities as the landlord under the Lease, all of which
shall continue to be performed and discharged solely by Landlord, or (b)
relieve Landlord of any obligations under the Lease. Landlord hereby
irrevocably directs Tenant to comply with any Rent Payment Notice,
notwithstanding any contrary direction, instruction or assertion by Landlord.
Tenant shall be entitled to rely on any Rent Payment Notice. Tenant shall be
under no duty to controvert or challenge any Rent Payment Notice. Tenants
compliance with a Rent Payment Notice shall not be deemed to violate the
Lease. Landlord hereby releases Tenant from, and shall indemnify and hold
Tenant harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses (including the payment of reasonable
attorneys' fees, forum costs and disbursements) arising from any claim based
on Tenants compliance with any Rent Payment Notice. Landlord shall look
solely to Lender with respect to any claims Landlord may have on account of
an incorrect or wrongful Rent Payment Notice. Tenant shall be entitled to
full credit under the
2
<PAGE>
Lease for any Rent paid to Lender pursuant to a Rent Payment Notice to the
same extent as if such Rent were paid directly to Landlord.
7. Landlord represents and warrants that the Lease was duly executed by
Landlord and all consents, resolutions or other approvals required for
Landlord to execute the Lease were obtained. Tenant represents and warrants
that the Lease was duly executed by Tenant and all consents, resolutions or
other approvals required for Tenant to execute the Lease were obtained. In
the event the Lease was guaranteed pursuant to a guaranty of lease (the
"GUARANTY"), Tenant represents and warrants that the Guaranty was duly
executed by the guarantor named therein and all consents, resolutions and
other approvals required for such named guarantor to execute the Guaranty
were obtained.
8. Tenant and Landlord shall provide a document similar to this to any
lender making a loan secured by property including the Premises, the proceeds
of which loan are used to repay the Loan in whole or part as may be agreed to
by such lender and subject to such reasonable modifications as may be
requested by such lender.
9. Tenant agrees that to the extent any assignment of the Lease or
subletting of all or any portion of the Premises by Tenant requires the
consent of Landlord under the Lease, such assignment or subletting shall not
be effective unless Lender's prior written consent shall also have been
obtained. Any assignment or subletting that is permitted under the Lease
without the consent of Landlord shall not require the consent of Lender
hereunder.
10. Tenant, shall, from time to time, within thirty (30) days after
receipt of a joint written request by Landlord and Lender, execute and
deliver to Landlord a lease status report by Tenant verifying, subject to the
conditions specified in 48 CFR 552.270-35 (a) that the Lease is unmodified
and in full force and effect (or if there have been modifications, that the
same is in full force and effect as modified and stating the modifications),
(b) the amounts of fixed rent, additional rent, percentage rent, or other
sums, if any, which are payable in respect of the Lease and the commencement
date and expiration date of the Lease, (c) the dates to which the fixed rent
additional rent, percentage rent, if any, and other sums which are payable in
respect to the Lease have been paid, (d) whether or not Tenant is entitled to
credits or offsets against such rent, and, if so, the reasons therefor and
the amount thereof, (e) that Tenant is not in default in the performance of
any of its obligations under the Lease and no event has occurred which, with
the giving of notice or the passage of time, or both, would constitute such a
default, (f) whether or not, to the best knowledge of the person certifying
on behalf of Tenant, Landlord is in default in the performance of any of its
obligations under the Lease, and, if so, specifying the same, (g) whether or
not, to the best knowledge of such person, any event has occurred which with
the giving of such notice or passage of time, or both would constitute such a
default, and, if so, specifying each such event, and (h) whether or not, to
the best knowledge of such person, Tenant has any claims, defenses or
counterclaims against Landlord under the Lease, and, if so, specifying the
same. Tenant also shall include in any such statement such other information
concerning the Lease as Lender may reasonably request.
11. This Non-Disturbance Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute and be construed as one and the same instrument.
Signature and acknowledgment pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature and
acknowledgment pages are physically attached to the same instrument.
12. All remedies which Lender may have against Landlord provided herein,
if any, are cumulative and shall be in addition to any and all other rights
and remedies provided by law and by other agreements between Lender and
Landlord or others. If any party consists of multiple individuals or
entities, each of same shall be jointly and severally liable for the
obligations of such party hereunder.
13. The reasonable cost of attorneys' fees and disbursements for any
legal action or arbitration between or among the parties arising out of any
dispute or litigation relating to enforcement of this NON-DISTURBANCE AGREEMENT
shall be borne by the party or parties against whom a final decision is
rendered, where so directed by Federal law.
14. Any notice, demand, statement, request or consent made hereunder
shall be effective and valid only if in writing, referring to this
Non-Disturbance Agreement, signed by the party giving such notice, and
delivered either personally to such other party, or sent by nationally
recognized overnight courier delivery service or by certified mail
3
<PAGE>
of the United States Postal Service, postage prepaid, return receipt
requested, addressed to the other party as follow (or to such other address
or person as either party or person entitled to notice may by notice to the
other party specify):
To Lender: Metropolitan Life Insurance Company
Real Estate Investments
200 Park Avenue, 12th Floor
New York, New York 10166
Attention: Senior Vice President
with a copy to: Metropolitan Life Insurance Company
Real Estate Investments
200 Park Avenue, 12th Floor
New York, New York 10166
Attention: Law Department
To Tenant: GENERAL SERVICES ADMINISTRATION
7TH AND D STREETS, S.W.
WASHINGTON, D.C., 20407
Attention: CONTRACTING OFFICER FOR 4401 NORTH
FAIRFAX DRIVE, ARLINGTON, VIRGINIA
To Landlord: ARLINGTON SQUARE LIMITED PARTNERSHIP
4650 EAST-WEST HIGHWAY, SUITE 251
Bethesda, Maryland 20815
Attention: William N. Demas
Unless otherwise specified, notices shall be deemed given as follows: (i) if
delivered personally, when delivered, (ii) if delivered by nationally recognized
overnight courier delivery service, on the day following the day such material
is sent, or (iii) if sent by certified mail, three (3) days after such notice
has been sent by Lender, Landlord or Tenant.
15. This Non-Disturbance Agreement shall be interpreted and construed in
accordance with and governed by Federal law and by the laws of the State of
New York, without regard to conflict of laws principles, where no Federal law
addresses the dispute.
16. This Non-Disturbance Agreement shall apply to, bind and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns. As used herein "Lender" shall include any subsequent holder of the
Mortgage.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
SCHEDULE A
LEGAL DESCRIPTION
Parcel A, Arlington Square, as duly dedicated, platted and recorded in Deed
Book 2210, at page 994, among the Land Records of Arlington County, Virginia.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Non-Disturbance Agreement as of the day and year first above written.
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ Michael Curran
--------------------------------
Name: Michael Curran
Title: AVP
ARLINGTON SQUARE LIMITED PARTNERSHIP,
a VIRGINIA LIMITED PARTNERSHIP
BY: ARLINGTON SQUARE, INC., GENERAL PARTNER
By: /s/ William N. Demas
----------------------------------------
Name: William N. Demas
Title: President
UNITED STATES OF AMERICA
BY: GENERAL SERVICES ADMINISTRATION
By: /s/ Monica R. Sias
----------------------------------------
Name: Monica R. Sias
Title: Contracting Officer
5
<PAGE>
STATE OF DISTRICT OF )
) SS.:
COUNTY OF COLUMBIA )
ON THE 24TH DAY OF NOVEMBER IN THE YEAR 1998 BEFORE ME, THE
UNDERSIGNED, A NOTARY PUBLIC IN AND FOR SAID STATE, PERSONALLY APPEARED MICHAEL
CURRAN, PERSONALLY KNOWN TO ME OR PROVED TO ME ON THE BASIS OF SATISFACTORY
EVIDENCE TO BE THE INDIVIDUAL(S) WHOSE NAME(S) IS (ARE) SUBSCRIBED TO THE WITHIN
INSTRUMENT AND ACKNOWLEDGED TO ME THAT HE/SHE/THEY EXECUTED THE SAME IN
HIS/HER/THEIR CAPACITY(IES), AND THAT BY HIS/HER/THEIR SIGNATURE(S) ON THE
INSTRUMENT, THE INDIVIDUAL(S), OR THE PERSON UPON BEHALF OF WHICH THE
INDIVIDUAL(S) ACTED, EXECUTED THE INSTRUMENT.
/s/ Veronica Jenkins
----------------------------------------------------------
(SIGNATURE AND OFFICE OF INDIVIDUAL TAKING ACKNOWLEDGEMENT)
VERONICA JENKINS
NOTARY PUBLIC DISTRICT OF COLUMBIA
MY COMMISSION EXPIRES APRIL 30, 2003
STATE OF VIRGINIA )
) SS.:
COUNTY OF ARLINGTON )
ON THE 19TH DAY OF NOVEMBER IN THE YEAR 1998 BEFORE ME, THE
UNDERSIGNED, A NOTARY PUBLIC IN AND FOR SAID STATE, PERSONALLY APPEARED WILLIAM
N. DEMAS, PERSONALLY KNOWN TO ME OR PROVED TO ME ON THE BASIS OF SATISFACTORY
EVIDENCE TO BE THE INDIVIDUAL(S) WHOSE NAME(S) IS (ARE) SUBSCRIBED TO THE WITHIN
INSTRUMENT AND ACKNOWLEDGED TO ME THAT HE/SHE/THEY EXECUTED THE SAME IN
HIS/HER/THEIR CAPACITY(IES), AND THAT BY HIS/HER/THEIR SIGNATURE(S) ON THE
INSTRUMENT, THE INDIVIDUAL(S), OR THE PERSON UPON BEHALF OF WHICH THE
INDIVIDUAL(S) ACTED, EXECUTED THE INSTRUMENT.
/s/ Priscilla D. Okay
----------------------------------------------------------
(SIGNATURE AND OFFICE OF INDIVIDUAL TAKING ACKNOWLEDGEMENT)
My Commission expires 10/31/2002
DISTRICT OF COLUMBIA )
) SS.:
CITY OF WASHINGTON )
ON THE 13TH DAY OF NOVEMBER IN THE YEAR 1998 BEFORE ME, THE
UNDERSIGNED, A NOTARY PUBLIC IN AND FOR SAID STATE, PERSONALLY APPEARED
MONICA SEAS, PERSONALLY KNOWN TO ME OR PROVED TO ME ON THE BASIS OF
SATISFACTORY EVIDENCE TO BE THE INDIVIDUAL(S) WHOSE NAME(S) IS (ARE)
SUBSCRIBED TO THE WITHIN INSTRUMENT AND ACKNOWLEDGED TO ME THAT HE/SHE/THEY
EXECUTED THE SAME IN HIS/HER/THEIR CAPACITY(IES), AND THAT BY HIS/HER/THEIR
SIGNATURE(S) ON THE INSTRUMENT, THE INDIVIDUAL(S), OR THE PERSON UPON BEHALF
OF WHICH THE INDIVIDUAL(S) ACTED, EXECUTED THE INSTRUMENT.
/s/ Paul Jonell
----------------------------------------------------------
(SIGNATURE AND OFFICE OF INDIVIDUAL TAKING ACKNOWLEDGEMENT)
My Commission expires December 14, 1998
<PAGE>
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
METROPOLITAN LIFE INSURANCE COMPANY
("LENDER")
UNITED STATES OF AMERICA, DEPARTMENT OF THE INTERIOR.
U.S. FISH AND WILDLIFE SERVICE
("TENANT")
AND
ARLINGTON SQUARE LIMITED PARTNERSHIP
("LANDLORD")
-------------------------------
DATED: AS OF NOVEMBER 25, 1998
LOCATION: 4401 NORTH FAIRFAX DRIVE
ARLINGTON, VIRGINIA
BLOCK: ARLINGTON SQUARE
LOT: PARCEL A
COUNTY: ARLINGTON
STATE: VIRGINIA
-------------------------------
RECORD AND RETURN TO:
MAYER, BROWN & PLATT
2000 PENNSYLVANIA AVENUE, N.W.
WASHINGTON, D.C. 20006-1882
ATTENTION: KEITH J. WILLNER
<PAGE>
SUBORDINATION, NON-DISTURBANCE
AND ATTORNMENT AGREEMENT
This SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this
"Non-Disturbance Agreement") made as of the 18th day of November, 1998, by
and among METROPOLITAN LIFE INSURANCE COMPANY, having an office at 200 Park
Avenue, 12th Floor, New York, New York 10166 ("Lender"), UNITED STATES OF
AMERICA, DEPARTMENT OF THE INTERIOR, U.S. FISH AND WILDLIFE SERVICE having an
office at Arlington Square Building, 4401 North Fairfax Drive, Arlington,
Virginia 22203 ("Tenant") and ARLINGTON SQUARE LIMITED PARTNERSHIP, having an
office at 4650 East-West Highway, Suite 251, Bethesda, Maryland 20815
("Landlord").
WITNESSETH:
WHEREAS, Lender has made or is about to make a loan (the "L0AN") of
$21,500,000.00 to Landlord;
WHEREAS, the Loan is or will be evidenced by a promissory note (the
"Note") made by Landlord to order of Lender and is or will be secured by,
among other things, mortgage, security agreement and fixture filing
(collectively, the "Mortgage") made by Landlord to or for the benefit of
Lender covering, among other things, the land (the "Land") described on
SCHEDULE A hereto and all improvements (the "Improvements") now or hereafter
located on the Land (the Land and the Improvements hereinafter collectively
referred to as the "PREMISES");
WHEREAS, by an agreement of lease dated as of SEPTEMBER 16, 1998
(the "Lease"), Landlord has leased or will lease to Tenant a portion of the
Premises being the entire parking garage located beneath the building known
as "Arlington Square" as more particularly described therein;
WHEREAS, a memorandum of the Lease is to be recorded in the official
records of the CLERK OF THE CITY COUNTY OF ARLINGTON COUNTY, VIRGINIA prior
to the recording of this Non-Disturbance Agreement; and
WHEREAS, the parties hereto desire to make the Lease subject and
subordinate to the Mortgage.
NOW, THEREFORE, the parties hereto, in consideration of the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, hereby agree as
follows:
1. The Lease, as the same may hereafter be modified, amended or
extended, and all of Tenant's right, title and interest in and to the
Premises (including, without limitation, any option, right of first refusal
or other rights to acquire all or any portion of the Premises), are and shall
be subject and subordinate to the Mortgage and the lien thereof, to all the
terms, conditions and provisions of the Mortgage to the extent that such do
not conflict with the terms of the Lease, and to each and every advance made
or hereafter made under the Mortgage, and to all renewals, modifications,
consolidations, replacements, substitutions and extensions of the Mortgage,
so that at all times the Mortgage shall be and remain a lien on the Premises
prior and superior to the Lease for all purposes; PROVIDED, HOWEVER, and
Lender agrees, that so long as (a) no default by Tenant has occurred which
has continued to exist for such period of time (after notice, if any,
required by the Lease) as would entitle Landlord to terminate the Lease, (b)
neither the rent nor any other charges or expenses payable by Tenant under
the Lease shall have been reduced in any way except as allowed under the
Lease, (c) Tenant shall pay to Lender or its successor or assign all rental
and other payments payable to Landlord under the Lease in the amounts and at
the times set forth in the Lease, (d) Tenant shall duly confirm its
attornment to Lender or its successor or assign by written instrument as set
forth in PARAGRAPH 2 hereof or enter into the New Lease (as such term is
hereinafter defined) as set forth in such PARAGRAPH 2 (e) Lender or its
successors or assigns shall not be liable under any warranty of construction
contained in the Lease or any implied warranty of construction, (f) Tenant
shall have performed all of its covenants contained herein, and (g) all
representations and warranties made herein by Tenant shall be true and
correct as of the date of such attornment or New Lease; then, and in such
event (i) Lender shall not join Tenant as a party defendant in any
foreclosure action or proceeding which may be instituted or taken by Lender
under the Mortgage by reason of any default thereunder, unless such joinder
is necessary to foreclose the Mortgage and then only for such purpose and not
for the purpose of terminating the Lease, (ii) Tenants leasehold
<PAGE>
estate under the Lease shall not be terminated or disturbed and Lender will
accept the attornment of Tenant or, if Lender so elects, the New Lease,
pursuant to PARAGRAPH 2 hereof, and (iii) other than as set forth herein,
none of Tenant's rights under the Lease shall be affected in any way by reason
of any default under the Mortgage.
2. Without limitation of any of the provisions of the Lease, Tenant
hereby agrees that in the event of any act, omission or default by Landlord or
Landlord's agents, employees, contractors, licensees or invitees which would
give Tenant the right, either immediately or after the lapse of a period of
time, to terminate the Lease, or to claim a partial or total eviction, unless
the act, omission or default occasioning such termination or claim presents a
health, safety or life-threatening situation, Tenant will endeavor to provide,
in advance of any action by Tenant, written notice of such act, omission or
default to Lender by delivering notice of such act, omission or default,
addressed to Lender at Lender's address as given hereby or at the last address
of Lender furnished to Tenant in writing, or to any successor to Lender's
interest under the Mortgage, provided that Lender or such successor notifies
Tenant of the name and address of the party Tenant is to notify; provided,
however, Tenant's failure to deliver such notice shall not constitute a breach
of this Non-Disturbance Agreement and shall have no legal effect on the terms
and conditions of this Non-Disturbance Agreement or the rights and obligations
of the parties hereunder or under the Lease.
3. Without limitation of any of the provisions of the Lease, in the
event that, by reason of any default under the Mortgage on the part of
Landlord, Lender or its successors or assigns shall succeed to the interest
of Landlord or any successor to Landlord, then, subject to the provisions of
this Non-Disturbance Agreement, including, without limitation, PARAGRAPH 1
above, the Lease shall nevertheless continue in full force and effect and
Tenant shall and does hereby agree to attorn to and accept Lender as its
successors or assigns and to recognize Lender or its successors or assigns as
its Landlord under the Lease for the then remaining balance of the term
thereof, and upon request of Lender or its successors or assigns, Tenant
shall execute and deliver to Lender or its successors or assigns an agreement
of attornment satisfactory to Lender or any such successor or assign.
Alternatively, upon the written request of Lender or its successors or
assigns, Tenant shall enter a new lease (the "NEW LEASE") of the Premises
with Lender or such successor or assign for the then remaining term of the
Lease, upon the same terms and conditions as contained in the Lease.
4. Lender and its successors or assigns shall have no personal
liability as successor to Landlord and Tenant shall look only to the estate
and property of Lender or its successors or assigns in the Premises for the
satisfaction of Tenant's remedies for the collection of a judgment (or other
judicial process) requiring the payment of money in the event of any default
by Lender or its successors or assigns as Landlord under the Lease, and no
other property or assets of Lender or its successors or assigns shall be
subject to levy, execution or other enforcement procedure for the
satisfaction of Tenant's remedies under or with respect to the Lease, the
relationship of Landlord and Tenant thereunder or Tenant's use or occupancy
of the Premises.
5. Tenant agrees that no prepayment of rent or additional rent due
under the Lease of more than one month in advance shall be made.
6. From and after Tenant's receipt of written notice in accordance
with 31 U.S.C. 3727 Assignment of Claims directing Tenant to pay all rent and
additional rent thereafter due under the Lease to Lender (a "RENT PAYMENT
NOTICE") and of a Supplemental Lease Agreement to change the named payee in
the Lease, Tenant shall pay all rent and additional rent to Lender or as
Lender shall direct in writing, until such time as Lender directs otherwise
in writing. Tenant shall comply with any Rent Payment Notice notwithstanding
any contrary instruction, direction or assertion from Landlord. Lender's
delivery to Tenant of a Rent Payment Notice, or Tenants compliance therewith,
shall not be deemed to (a) cause Lender to succeed to or to assume any
obligations or responsibilities as the landlord under the Lease, all of which
shall continue to be performed and discharged solely by Landlord, or (b)
relieve Landlord of any obligations under the Lease. Landlord hereby
irrevocably directs Tenant to comply with any Rent Payment Notice,
notwithstanding any contrary direction, instruction or assertion by Landlord.
Tenant shall be entitled to rely on any Rent Payment Notice. Tenant shall be
under no duty to controvert or challenge any Rent Payment Notice. Tenant's
compliance with a Rent Payment Notice shall not be deemed to violate the
Lease. Landlord hereby releases Tenant from, and shall indemnify and hold
Tenant harmless from and against, any and all losses, claims. damages,
liabilities, costs or expenses (including the payment of reasonable
attorneys' fees, forum costs and disbursements) arising from any claim based
on Tenant's compliance with any Rent Payment Notice. Landlord shall look
solely to Lender with respect to any claims Landlord
2
<PAGE>
may have on account of an incorrect or wrongful Rent Payment Notice. Tenant
shall be entitled to full credit under the Lease for any Rent paid to Lender
pursuant to a Rent Payment Notice to the same extent as if such Rent were paid
directly to Landlord.
7. Landlord represents and warrants that the Lease was duly executed by
Landlord and all consents, resolutions or other approvals required for Landlord
to execute the Lease were obtained. Tenant represents and warrants that the
Lease was duly executed by Tenant and all consents, resolutions or other
approvals required for Tenant to execute the Lease were obtained. In the event
the Lease was guaranteed pursuant to a guaranty of lease (the "Guaranty"),
Tenant represents and warrants that the Guaranty was duly executed by the
guarantor named therein and all consents, resolutions and other approvals
required for such named guarantor to execute the Guaranty were obtained.
8. Tenant and Landlord shall provide a document similar to this to any
lender making a loan secured by property including the Premises, the proceeds of
which loan are used to repay the Loan in whole or part as may be agreed to by
such lender and subject to such reasonable modifications as may be requested by
such lender.
9. Tenant agrees that to the extent any assignment of the Lease or
subletting of all or any portion of the Premises by Tenant requires the consent
of Landlord under the Lease, such assignment or subletting shall not be
effective unless Lender's prior written consent shall also have been obtained.
Any assignment or subletting that is permitted under the Lease without the
consent of Landlord shall not require the consent of Lender hereunder.
10. Tenant, shall, from time to time, within thirty (30) days after
receipt of a joint written request by Landlord and Lender, execute and
deliver to Landlord a lease status report by Tenant verifying, subject to the
conditions specified in 48 CFR 552.270-35 (a) that the Lease is unmodified
and in full force and effect (or if there have been modifications, that the
same is in full force and effect as modified and stating the modifications),
(b) the amounts of fixed rent, additional rent, percentage rent, or other
sums, if any, which are payable in respect of the Lease and the commencement
date and expiration date of the Lease, (c) the dates to which the fixed rent
additional rent, percentage rent, if any, and other sums which are payable in
respect to the Lease have been paid, (d) whether or not Tenant is entitled to
credits or offsets against such rent, and, if so, the reasons therefor and
the amount thereof, (e) that Tenant is not in default in the performance of
any of its obligations under the Lease and no event has occurred which, with
the giving of notice or the passage of time, or both, would constitute such a
default, (f) whether or not, to the best knowledge of the person certifying
on behalf of Tenant, Landlord is in default in the performance of any of its
obligations under the Lease, and, if so, specifying the same, (g) whether or
not, to the best knowledge of such person, any event has occurred which with
the giving of such notice or passage of time, or both would constitute such a
default, and, if so, specifying each such event, and (h) whether or not, to
the best knowledge of such person, Tenant has any claims, defenses or
counterclaims against Landlord under the Lease, and, if so, specifying the
same. Tenant also shall include in any such statement such other information
concerning the Lease as Lender may reasonably request.
11. This Non-Disturbance Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute and be construed as one and the same instrument.
Signature and acknowledgment pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature and
acknowledgment pages are physically attached to the same instrument.
12. All remedies which Lender may have against Landlord provided
herein, if any, are cumulative and shall be in addition to any and all other
rights and remedies provided by law and by other agreements between Lender and
Landlord or others. If any party consists of multiple individuals or entities,
each of same shall be jointly and severally liable for the obligations of such
party hereunder.
13. The reasonable cost of attorneys' fees and disbursements for any
legal action or arbitration between or among the parties arising out of any
dispute or litigation relating to enforcement of this Non-Disturbance Agreement
shall be borne by the party or parties against whom a final decision is
rendered, where so directed by Federal law.
14. Any notice, demand, statement, request or consent made hereunder
shall be effective and valid only if in writing, referring to this
Non-Disturbance Agreement, signed by the party giving such notice, and delivered
either personally to such other party, or sent by nationally recognized
overnight courier delivery service or by certified mail
3
<PAGE>
of the United States Postal Service, postage prepaid, return receipt requested,
addressed to the other party as follow (or to such other address or person as
either party or person entitled to notice may by notice to the other party
specify):
To Lender Metropolitan Life Insurance Company
Real Estate Investments
200 Park Avenue, 12th Floor
New York, New York 10166
Attention: Senior Vice President
with a copy to: Metropolitan Life Insurance Company
Real Estate Investments
200 Park Avenue, 12th Floor
New York, New York 10166
Attention: Law Department
To Tenant: U.S. FISH AND WILDLIFE SERVICE
ARLINGTON SQUARE
4401 NORTH FAIRFAX DRIVE
ARLINGTON, VIRGINIA 22203
Attention: CONTRACT OFFICER
To Landlord: ARLINGTON SQUARE LIMITED PARTNERSHIP
4650 EAST-WEST HIGHWAY, SUITE 251
BETHESDA, MARYLAND 20815
Attention: WILLIAM N. DEMAS
Unless otherwise specified, notices shall be deemed given as follows: (i) if
delivered personally, when delivered, (ii) if delivered by nationally recognized
overnight courier delivery service, on the day following the day such material
is sent, or (iii) if sent by certified mail, three (3) days after such notice
has been sent by Lender, Landlord or Tenant.
15. This Non-Disturbance Agreement shall be interpreted and construed
in accordance with and governed by Federal law and by the laws of the State of
New York, without regard to conflict of laws principles, where no Federal law
addresses the dispute.
16. This Non-Disturbance Agreement shall apply to, bind and inure to
the benefit of the parties hereto and their respective successors and permitted
assigns. As used herein "Lender" shall include any subsequent holder of the
Mortgage.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Non-Disturbance Agreement as of the day and year first above written.
METROPOLITAN LIFE INSURANCE COMPANY
By: /s/ Michael Curran
--------------------------------
Name: Michael Curran
Title: AVP
ARLINGTON SQUARE LIMITED PARTNERSHIP,
a VIRGINIA LIMITED PARTNERSHIP
BY: ARLINGTON SQUARE. INC.. GENERAL PARTNER
By: /s/ William N. Demas
----------------------------------------
Name: William N. Demas
Title: President
U.S. FISH AND WILDLIFE SERVICE.
A BUREAU OF THE UNITED STATES
DEPARTMENT OF INTERIOR
By: /s/ Juanita B. Williams
----------------------------------------
Name: Juanita B. Williams
Title: Chief, Division of CGS
5
<PAGE>
STATE OF DISTRICT )
) SS.:
COUNTY OF COLUMBIA )
ON THE 24TH DAY OF NOVEMBER IN THE YEAR 1998 BEFORE ME, THE
UNDERSIGNED, A NOTARY PUBLIC IN AND FOR SAID STATE, PERSONALLY APPEARED
MICHAEL CURRAN, PERSONALLY KNOWN TO ME OR PROVED TO ME ON THE BASIS OF
SATISFACTORY EVIDENCE TO BE THE INDIVIDUAL(S) WHOSE NAME(S) IS (ARE)
SUBSCRIBED TO THE WITHIN INSTRUMENT AND ACKNOWLEDGED TO ME THAT HE/SHE/THEY
EXECUTED THE SAME IN HIS/HER/THEIR CAPACITY(IES), AND THAT BY HIS/HER/THEIR
SIGNATURE(S) ON THE INSTRUMENT, THE INDIVIDUAL(S), OR THE PERSON UPON BEHALF
OF WHICH THE INDIVIDUAL(S) ACTED, EXECUTED THE INSTRUMENT.
/s/ Veronica Jenkins
----------------------------------------------------------
(SIGNATURE AND OFFICE OF INDIVIDUAL TAKING ACKNOWLEDGEMENT)
VERONICA JENKINS
NOTARY PUBLIC, DISTRICT OF COLUMBIA
MY COMMISSION EXPIRES APRIL 30, 2003
STATE OF VIRGINIA )
) SS.:
COUNTY OF ARLINGTON )
ON THE 18TH DAY OF NOVEMBER IN THE YEAR 1998 BEFORE ME, THE
UNDERSIGNED, A NOTARY PUBLIC IN AND FOR SAID STATE, PERSONALLY APPEARED WILLIAM
N. DEMAS, PERSONALLY KNOWN TO ME OR PROVED TO ME ON THE BASIS OF SATISFACTORY
EVIDENCE TO BE THE INDIVIDUAL(S) WHOSE NAME(S) IS (ARE) SUBSCRIBED TO THE WITHIN
INSTRUMENT AND ACKNOWLEDGED TO ME THAT HE/SHE/THEY EXECUTED THE SAME IN
HIS/HER/THEIR CAPACITY(IES), AND THAT BY HIS/HER/THEIR SIGNATURE(S) ON THE
INSTRUMENT, THE INDIVIDUAL(S), OR THE PERSON UPON BEHALF OF WHICH THE
INDIVIDUAL(S) ACTED, EXECUTED THE INSTRUMENT.
MY COMMISSION EXPIRES: 12/31/01 /s/ Lisa A. Antonelli
----------------------------------------------------------
(SIGNATURE AND OFFICE OF INDIVIDUAL TAKING ACKNOWLEDGEMENT)
STATE OF VIRGINIA )
) SS.:
COUNTY OF ARLINGTON )
ON THE 18TH DAY OF NOVEMBER IN THE YEAR 1998 BEFORE ME, THE
UNDERSIGNED, A NOTARY PUBLIC IN AND FOR SAID STATE, PERSONALLY APPEARED
JUANITA B. WILLIAMS, PERSONALLY KNOWN TO ME OR PROVED TO ME ON THE BASIS OF
SATISFACTORY EVIDENCE TO BE THE INDIVIDUAL(S) WHOSE NAME(S) IS (ARE) SUBSCRIBED
TO THE WITHIN INSTRUMENT AND ACKNOWLEDGED TO ME THAT HE/SHE/THEY EXECUTED THE
SAME IN HIS/HER/THEIR CAPACITY(IES), AND THAT BY HIS/HER/THEIR SIGNATURE(S) ON
THE INSTRUMENT, THE INDIVIDUAL(S), OR THE PERSON UPON BEHALF OF WHICH THE
INDIVIDUAL(S) ACTED, EXECUTED THE INSTRUMENT.
MY COMMISSION EXPIRES: 12/31/01 /s/ Lisa A. Antonelli
----------------------------------------------------------
(SIGNATURE AND OFFICE OF INDIVIDUAL TAKING ACKNOWLEDGEMENT)
<PAGE>
SCHEDULE A
LEGAL DESCRIPTION
Parcel A, Arlington Square, as duly dedicated, platted and recorded in Deed Book
2210, at page 994, among the Land Records of Arlington County, Virginia.
<PAGE>
<TABLE>
<CAPTION>
Exhibit 21
THE WASHINGTON CORPORATION--SUBSIDIARIES
As of December 31, 1998
State of
Formation or Date of
Subsidiary Incorporation Formation
---------- ------------- ---------
<S> <C> <C>
Arlington Square Limited Partnership Maryland 09/17/85
Four Year Trail Limited Partnership Virginia 09/16/87
Nanjemoy Associates Limited Partnership Maryland 01/11/88
TWC Development Corporation Maryland 04/08/85
TWC Real Estate, Inc. Virginia 04/15/85
Arlington Square, Inc. Virginia 02/28/91
Four Year Trail, Inc. Virginia 02/28/91
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
WASHINGTON CORPORATION AND SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000314625
<NAME> THE WASHINGTON CORPORATION AND SUBSIDIARIES
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 828,893
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,188,432
<PP&E> 27,864,237
<DEPRECIATION> 7,935,064
<TOTAL-ASSETS> 21,117,605
<CURRENT-LIABILITIES> 1,375,981
<BONDS> 23,350,000
0
0
<COMMON> 17,069
<OTHER-SE> (3,625,445)
<TOTAL-LIABILITY-AND-EQUITY> 21,117,605
<SALES> 0
<TOTAL-REVENUES> 3,327,888
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,861,864
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,255,559
<INCOME-PRETAX> (2,204,959)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> (1,750,000)
<CHANGES> 0
<NET-INCOME> (3,954,459)
<EPS-BASIC> (2.41)
<EPS-DILUTED> (2.41)
</TABLE>
