<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended January 26, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
--------------- ---------------
Commission file number 1-1066
------
GENERAL HOST CORPORATION
------------------------------------------------------
(Exact name of registrant as specified in its charter)
New York State 13-0762080
--------------------------------- -------------------
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
One Station Place, P.O. Box 10045, Stamford, CT 06904
------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number including area code: (203) 357-9900
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ------------------- ------------------------
Common Stock, $1.00 Par Value New York Stock Exchange
and Pacific Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
and Pacific Stock Exchange
8% Convertible Subordinated New York Stock Exchange
Notes due February 15, 2002
11 1/2% Senior Notes due New York Stock Exchange
February 15, 2002
[Cover page 1 of 2 pages]
<PAGE> 2
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether General Host Corporation, the Registrant, (1)
has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes_____X_____ No___________
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
Aggregate market value of General Host Corporation's Common Stock, $1.00 par
value, held by non-affiliates of General Host as of April 1, 1997: $69,092,237*
Number of voting shares of General Host Corporation's Common Stock
outstanding as of April 1, 1997: 23,249,345.
DOCUMENTS INCORPORATED BY REFERENCE
General Host Corporation Proxy Part III, Items 10, 11, 12 and 13
Statement for Annual Meeting of
Shareholders to be held on
May 15, 1997 (hereinafter "the
Company's 1997 Proxy Statement")
* Does not include the market value of the outstanding Common Stock held by the
directors and officers of General Host which aggregates $9,374,302, since such
directors and officers may be considered affiliates of General Host.
[Cover page 2 of 2 pages]
<PAGE> 3
PART I
ITEM 1. BUSINESS
General Host Corporation ("General Host", the "Company" or the "Registrant")
operates a chain of specialty retail stores devoted to the sale of lawn and
garden products, crafts, Christmas merchandise and pet food and supplies.
Measured by sales and number of stores, the Company believes it is the largest
chain in the United States concentrating on the sale of such products. As of
January 26, 1997, the Company operated 259 stores in 16 states under the name
Frank's Nursery & Crafts(R) and three stores under the name Frank's
SuperCrafts(R). Unless otherwise stated, all statistics in this Item were
compiled as of January 26, 1997.
The Company's executive offices are located at One Station Place, Stamford,
Connecticut. The Company's mailing address is Post Office Box 10045, Stamford,
Connecticut 06904, and its telephone number is (203) 357-9900.
General Host was incorporated under the laws of the State of New York in 1911
as General Baking Company. The Company has engaged in a number of businesses
since its organization.
With the acquisition of Frank's Nursery & Crafts, Inc. ("Frank's") in 1983,
the Company's objective was to develop the first national chain of garden and
crafts stores. At the time of its acquisition, Frank's had 95 stores
principally located in the Midwest. In 1984, through the acquisition of Flower
Time, Inc., the Company obtained 17 stores in the New York metropolitan area.
In 1986, the Company further expanded into the eastern United States when it
acquired Scott's Seaboard Corporation, adding 14 stores in the Washington, D.C.
and Baltimore markets. In early 1989, the Company increased its presence in
the Philadelphia metropolitan area through the acquisition of 12 store leases.
Since 1983, the Company has built, leased or acquired a net of 167 stores in
existing and new markets.
The national lawn and garden market is highly fragmented, consisting of
thousands of local garden centers plus mass merchandisers who sell lawn and
garden products as part of their overall product lines. In fiscal 1996, the
Company's lawn and garden and nursery sales averaged approximately $1 million
per store. In addition to approximately $269 million in lawn and garden and
nursery sales, the Company generated approximately $237 million in revenues in
the last fiscal year from the sale of crafts and Christmas products and $25
million from the sale of pet food and supplies.
Although no single company directly competes with the Company's overall
product lines, many retailers and mass merchandisers provide competition with
respect to certain of the Company's lines of business. The Company competes
with mass merchandisers, home center chains and many local and regional garden
centers in the lawn and garden and nursery business. The Company competes in
the crafts business with mass merchandisers, crafts store chains and local
craft stores. The Company competes with major department stores, mass
merchandisers, local garden
<PAGE> 4
centers and other retailers in the Christmas business. The Company competes
with mass merchandisers, supermarkets, pet supply chains and local pet supply
stores in the pet food and supply business.
The Company's business is highly seasonal and subject to the impact of
weather conditions, which may affect consumer purchasing patterns. In fiscal
1996, 39% of the Company's sales occurred during the spring season (late March
to mid-June) and 25% occurred at Christmas time (November to late December).
Normally, spring is the most profitable season, and Christmas is the next most
profitable season. Losses usually are experienced during the other periods of
the year. The Company's slowest selling seasons are typically the period from
the beginning of the calendar year until the start of the spring selling
season, and from mid-July to October.
Live nursery goods, which constitute a significant portion of the Company's
products, have limited shelf lives in some cases. If customer purchases of
live nursery goods are delayed because of adverse weather conditions, such
goods may remain unsold past their shelf life and require markdowns or
disposal.
Lawn and garden and nursery sales are highest in the spring with the largest
impact being in the first fiscal quarter and the early part of the second
fiscal quarter. There is an early fall season in these products that is of
less importance than the spring season, and sales during middle and late summer
are slow. In the winter months, sales of such products are minimal.
Crafts and pet food and supplies sell at a fairly even pace throughout the
year. Craft sales are stimulated by fall and late winter promotions. During
the winter months (other than the Christmas season) crafts constitute the
majority of the Company's sales.
Christmas merchandise is sold almost entirely in November and December.
The Company's most significant capital requirements are for seasonal buildup
of merchandise inventories.
Capital expenditures of the Company totalled $4.4 million in fiscal 1996.
Expenditures for fiscal 1996 included expenditures for facility improvements at
existing stores and at the new distribution center in Howe, Indiana. The
Company anticipates spending approximately $6 million for capital expenditures
in fiscal 1997.
The Company closed three stores in fiscal 1996. In 1997 the Company plans to
open one new store and remodel three to four existing stores.
2
<PAGE> 5
The aggregate cost of any future expansion is dependent upon the method of
financing new stores. Such methods include build-to-suit leases, conversion of
existing buildings, and land purchases with Company-funded construction. The
cost of these methods ranges from approximately $500,000 per store for
build-to-suit leases to $2.5 million per store for land purchases with
Company-funded construction.
In 1990, looking to capitalize on its expertise in the Christmas decoration
business, the Company entered the temporary retail marketplace with the
introduction of "Christmas by Frank's". The "Christmas by Frank's" boutiques
are temporary sites, typically located in high traffic regional malls and open
only during the Christmas shopping season. These boutiques carry a broad
selection of seasonal merchandise and capitalize on the increased mall traffic
during the holidays. During 1996 the Company operated 76 temporary Christmas
boutiques.
The success of the Company's temporary business will depend upon the Company's
ability from year to year to obtain favorable short-term locations in various
malls that are in close proximity to existing stores.
The principal products sold at the Company's retail garden and crafts stores
are as follows:
<TABLE>
<CAPTION>
Percentage of
Sales In
Product Line Fiscal Year 1996 Description
- ------------ ---------------- -----------
<S> <C> <C>
Lawn and garden 24% Fertilizers, herbicides and pesticides, seeds
and bulbs, mulches, plant accessories, hoses
and garden tools and equipment
Live nursery 26 Trees, shrubs, roses, potted plants, annual
and perennial flowering plants and indoor
plants
Crafts 29 Yarns, macrame, art supplies, needlework and
children's crafts, wood crafts, ribbon, and
artificial and silk flowers and arrangements
Christmas 16 Artificial and live Christmas trees,
decorations and trimmings and Christmas
plants
</TABLE>
3
<PAGE> 6
<TABLE>
<S> <C> <C>
Pet 5 Pet food and supplies, bird seed and
--- accessories
100%
===
</TABLE>
Substantially all of the plants and products the Company sells are purchased
from approximately 1,200 outside vendors. Alternative sources of supply are
generally available for all products sold by the Company.
As of January 26, 1997, 123 of the Company's stores were leased and 139 were
owned (40 of which are subject to ground leases). All store leases are
long-term. If no options are exercised, 107 leases will terminate prior to
December 31, 2006.
Stores are generally located on three-acre sites. A prototype store in which
the overhang area leading to the yard has been enclosed includes 18,500 square
feet of indoor space (16,000 square feet of sales area and 2,500 square feet of
storage area), 17,000 square feet of outdoor selling area and ample offstreet
parking. The stores are designed in a "supermarket" format familiar to
customers, and shopping is done with carts in wide aisles with attractive
displays. Traffic design is intended to enhance the opportunity for impulse
purchases. Most stores are free-standing and located adjacent to or near
shopping centers; some stores are part of strip centers.
Typically, stores are open 80 hours per week. The average store has
approximately 20-25 employees, including a store manager, assistant manager and
up to seven department managers responsible for the various product lines of
the business. The in-store staff is supplemented at seasonal peak selling
periods by temporary employees. Overall, the Company had 7,090 employees at
January 26, 1997, including seasonal employees.
The Company operated distribution centers in Detroit, Michigan; Chicago,
Illinois; and Harrisburg, Pennsylvania during the majority of the fiscal year.
In August 1996, the Company opened a new distribution center in Howe, Indiana,
which replaced and consolidated the Chicago and Detroit facilities, both of
which are now closed. The Company owns the Frank's headquarters and leases the
Harrisburg and Howe centers. These centers delivered approximately 49% of all
merchandise to the stores in 1996, primarily using contract carriers. The
balance of the products are delivered directly to stores by vendors.
4
<PAGE> 7
ITEM 2. PROPERTIES
Principal operating facilities owned or leased by the Company are described
in Item 1 of this Annual Report on Form 10-K. General Host leases its
executive offices. No material adverse effect is foreseen as a result of the
expiration of leases of the Company's facilities.
ITEM 3. LEGAL PROCEEDINGS
In the normal course of business the Company is subject to various claims.
In the opinion of management, any ultimate liability arising from or related to
these claims should not have a material adverse effect on future results of
operations or the consolidated financial position of the Company.
In 1995 the Company charged to discontinued operations a loss of $3 million,
or $.12 per share, as a result of a judgment against the Company in a 1991
saltwater pollution lawsuit. The Company has appealed. The lawsuit involves
claims by farmers in Rice County, Kansas, who alleged that saltwater pollution
of the ground water by the American Salt Company, a former subsidiary of the
Company, rendered it unfit for irrigation. In August 1995, a jury verdict
awarded the plaintiffs $.5 million in compensatory damages for the period 1989
to 1995 and in October 1995 the plaintiffs were awarded $.5 million in punitive
damages and the judgment was entered. The judgment, together with
approximately $1.1 million in legal defense costs, $.5 million in related
costs, principally for technical consulting and expert witnesses, and $.4
million for future legal and related costs, totalled $3 million.
The Company has certain lease obligations which extend to the year 2001 for
businesses sold. In the opinion of management, any ultimate liability arising
from or related to these obligations, to the extent not otherwise provided for,
should not have a material adverse effect on future operations or the
consolidated financial position of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
5
<PAGE> 8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The New York Stock Exchange is the principal market on which the Company's
Common Stock is traded. The high and low sales prices per share of Common
Stock as traded on the New York Stock Exchange and cash dividends paid per
share of Common Stock during each quarter of the last two fiscal years are as
follows:
<TABLE>
<CAPTION>
Cash Dividends
High Low Per Share
---- --- --------------
<S> <C> <C> <C>
Fiscal 1996 *
First Quarter $ 4-1/4 $ 3-3/8 $ .00
Second Quarter $ 3-3/4 $ 2-3/8 $ .00
Third Quarter $ 3 $ 2-3/8 $ .00
Fourth Quarter $ 3-7/8 $ 2-1/2 $ .00
Fiscal 1995
First Quarter $ 7 $ 4-7/8 $ .00
Second Quarter $ 7-5/8 $ 5-5/8 $ .00
Third Quarter $ 6-1/2 $ 4-3/4 $ .00
Fourth Quarter $ 5 $ 3-5/8 $ .00
</TABLE>
*Five percent stock dividends were paid on April 5, 1996 and April 4, 1997
and all stock-related data in the financial statements in this Report reflect
the aforementioned stock dividends for all periods presented.
Under the most restrictive provisions of any of the debt and bank agreements,
total shareholders' equity available to pay cash dividends or purchase treasury
stock was below the required minimum level by $20.4 million at January 26,
1997.
At April 1, 1997, there were approximately 3,841 holders of record of the
Company's Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
Five Year Financial Data concerning the Company is listed on F-21 of this
Annual Report on Form 10-K.
6
<PAGE> 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Sales were $531 million for the 1996 fiscal year compared to $593 million for
the 1995 fiscal year. Same-store sales (stores open for a full year in both
years) for 1996 decreased 9.4% due primarily to a 14.3% drop in the first
quarter, when the Company experienced unseasonably cold and wet weather
throughout its 16-state operating area. In addition, same-store sales declines
of 13% and 7.9%, respectively, were recorded in the third and fourth quarters
as the Company's merchandising and marketing efforts failed to produce
satisfactory results. Sales were $593 million for the 1995 fiscal year
compared to $568 million for the 1994 fiscal year. Same-store sales for 1995
increased 4.5% led by a 25% sales gain in the pet food and supplies business as
well as a strong first half performance in the lawn and garden business. Also
contributing to the sales increase was improved in-store merchandising, and the
sales from the temporary Christmas boutiques of $14.4 million in 1995 compared
to $12.9 million in 1994.
Other income decreased $2.5 million to $.8 million in 1996. The decrease was
due primarily to lower levels of cash equivalents, which resulted from a net
reduction of long-term debt at the end of 1995. Other income increased $1.3
million to $3.3 million in 1995. The increase was due to increased interest
income resulting from higher rates of return in 1995.
Cost of sales, including buying and occupancy, decreased $46.1 million to
$383.1 million or 72.2% of sales in 1996. This compares with $429.2 million or
72.3% of sales in 1995. Merchandise margins, as a percentage of sales,
improved by 1.4 percentage points due to a less promotional strategy and
tighter inventory management during 1996. Buying and occupancy costs for 1996
decreased $1.8 million, but as a percentage of sales, increased by 1.2
percentage points compared to 1995. Cost of sales, including buying and
occupancy, increased $26.4 million to $429.2 million or 72.3% of sales in 1995.
This compares with $402.8 million or 70.9% of sales in 1994. The increase of
1.4 percentage points was due to lower merchandise margins resulting from
increased promotional activity and extremely hot, dry weather in the second
quarter of 1995, the mix of goods sold during 1995 and increased occupancy
costs related to the temporary Christmas business.
Selling, general and administrative expense decreased $10.1 million to $138.4
million in 1996 compared to $148.5 million in 1995, which resulted from expense
reductions initiated during 1996. As a percentage of sales, selling, general
and administrative expense was 26.1% of sales in 1996 and 25% of sales in 1995.
Selling, general and administrative expense increased $8.3 million
7
<PAGE> 10
to $148.5 million in 1995 compared to $140.2 million in 1994. The increase was
attributable to the increases in store payroll, advertising and administrative
costs that occurred in the first half of 1995 and increased costs associated
with the temporary Christmas business. As a percentage of sales, selling,
general and administrative expense was 25% of sales in 1995 and 24.7% of sales
in 1994.
Interest and debt expense was $20.9 million in 1996 compared to $23.8
million in 1995. The decrease was primarily due to the Company's repayment of
$76 million of Adjustable Rate First Mortgage Notes (the "mortgage notes") at
the end of 1995. The Company replaced this financing, in part, with new
mortgage financings that totalled $39 million as of January 26, 1997. Interest
and debt expense was $23.8 million in 1995 compared to $22.9 million in 1994.
The increase was primarily due to increased interest rates for the mortgage
notes due March 29, 1996 that were repaid as of January 28, 1996.
The income tax benefit for 1995 included the elimination of income tax
reserves no longer required of $.6 million. In 1995, the tax provision was
unfavorably impacted by an increase in the valuation allowance as a result of
the loss not being benefitted. A valuation allowance was provided in 1993
against the net deferred tax asset resulting from the Company's net operating
loss and the loss from an investment in an unconsolidated affiliate. Due to
the Company's historical operating results, a valuation allowance for the net
deferred tax asset balance is recorded at January 26, 1997. As a result of the
valuation allowance, approximately $31 million of these loss carryforwards have
not been benefitted and utilization will be recognized against future income.
Income taxes included the elimination of income tax reserves no longer required
of $1 million in 1994.
In 1994 the Company sold its 49.5% interest in Sunbelt Nursery Group, Inc.
and recognized a net gain of $3.6 million.
The loss from operations in 1996 was $10.7 million, an increase of $6.4
million compared with 1995. The 1995 loss from continuing operations was $4.3
million, a decline of $12.9 million compared with 1994. Income for 1994
included $3.6 million from the sale of the Company's investment in Sunbelt.
The loss from discontinued operations for 1995 of $3 million resulted from an
October 1995 judgment of $1 million against the Company in a 1991 saltwater
pollution lawsuit. The judgment, together with approximately $1.1 million in
legal defense costs, $.5 million in related costs, principally for technical
consulting and expert witnesses, and $.4 million for future legal and related
costs, totalled $3 million. The Company has appealed the case. This item
combined with the respective income or loss from
8
<PAGE> 11
continuing operations resulted in net losses of $10.7 million in 1996, $7.3
million in 1995 and net income of $8.6 million in 1994.
Liquidity and Capital Resources
- -------------------------------
Continuing operations provided net cash of $14.5 million compared to net cash
used of $2.6 million in 1995. The 1996 decrease in inventory of $6.6 million
compared to the 1995 increase of $.9 million was due to tighter inventory
control in 1996, which resulted in a reduction of purchases during 1996. In
1995 the early receipt of Christmas season merchandise in the 1995 fourth
quarter and reduced purchases for the 1996 spring season in the fourth quarter
of 1995 resulted in a higher decrease in accounts payable for 1995 of $9
million compared to the 1996 decrease of $3.9 million. The change in accrued
expenses for 1996 compared to 1995 is due to the timing of payments. Included
in accrued expenses is a reserve for closed stores. As of January 26, 1997 the
Company had terminated and entered into sublease arrangements for all but six
leased stores and one owned location. The annual sublease income generated
approximates the Company's annual costs. The Company retains its primary
obligation under the prime lease should a sublease tenant default on its
sublease obligation. At January 26, 1997 the remaining reserve of $2.1 million
primarily represents lease termination costs for the remaining six store
locations and estimated losses associated with the sale and or sublease of real
estate.
Discontinued operations used net cash of $.3 million related to payments for
operations disposed of in prior years. Net cash of $1.9 million in 1995 was
primarily for legal expenditures incurred to defend the Company in a 1991
saltwater pollution lawsuit.
In 1994 the Company issued restricted stock grants under the 1986 stock
incentive plan, as amended in 1992, to employees of the Company. The noncash
transaction was completed by issuing shares of treasury stock. The market
value of the shares granted amounted to $.3 million and was charged to selling
expense in 1994. On January 28, 1996 restrictions on the grants expired and in
February 1996, 59,301 shares were issued.
Net cash used for investing activities in 1996 was $3.4 million compared to
$5.2 million in 1995.
Net cash provided by financing activities was $2.7 million, which included
additional mortgage financings of $5.1 million. Net cash used of $43.8 million
in 1995 included the payment of long-term debt and capital lease obligations of
$77.1 million (principally the mortgage notes of $76 million). Offsetting, in
part, the mortgage note repayment was $35 million of new mortgage
9
<PAGE> 12
financings, which the Company entered into during the third and fourth quarters
of 1995.
The weighted average interest rate on debt outstanding at January 26, 1997
was 10%. The Company has a $25 million secured credit agreement with a bank
that expires June 30, 1997. The credit agreement is secured by mortgages on
retail properties owned by Frank's Nursery & Crafts, Inc. The credit agreement
requires the Company, among other things, to maintain minimum levels of
earnings, tangible net worth and certain minimum financial ratios. The Company
was in compliance with all of its covenants under the credit agreement at
January 26, 1997.
As of February 26, 1997 the Company had $21 million outstanding under the
secured credit agreement. The Company plans either to extend the maturity of
the existing credit facility or negotiate a new credit facility prior to June
30, 1997. If the Company is unable to secure a replacement credit facility,
the Company believes that its cash flow from operations, together with
additional capital raised through a) additional mortgage financings, b)
expense reductions or c) new debt offerings, will be sufficient to meet its
seasonal working capital requirements.
Under the most restrictive provisions of any of the Company's debt
agreements, total shareholders' equity available to pay cash dividends or
purchase treasury stock was below the required minimum level by $20.4 million
at January 26, 1997, thus prohibiting the Company from paying cash dividends or
purchasing treasury stock. None of the Company's debt agreements affect its
ability to declare and pay a stock dividend. On February 26, 1997 a 5% stock
dividend for shareholders of record on March 14, 1997 was declared. The stock
dividend is payable on April 4, 1997. The Company was in compliance with all
other covenants.
Total shareholders' equity in 1996 decreased $10.7 million to $99.5 million
from $110.2 million in 1995, due primarily to the 1996 net loss. Long-term
debt as a percentage of total capitalization increased from 64% in 1995 to 66%
in 1996.
In December 1988 the Board of Directors authorized the repurchase, in open
market transactions, of up to 2,000,000 additional shares of the Company's
common stock. As of January 26, 1997 the total remaining authorization was for
628,750 shares. The Company did not repurchase any shares in fiscal 1996 or
1995.
Working Capital
- ---------------
Working capital amounted to $53 million at January 26, 1997 compared to $45
million at January 28, 1996. The ratio of current assets to current
liabilities was 1.6 in 1996 compared to 1.5 in 1995. Working capital included
$43 million of cash and cash
10
<PAGE> 13
equivalents at January 26, 1997 compared to $30 million of cash and cash
equivalents at January 28, 1996.
The Company believes its cash flow from operations, utilization of available
borrowings under the credit agreement (either the existing, renewed or new
credit agreement) and/or additional capital raised through a) additional
mortgage financings, b) expense reductions or c) new debt offerings, will be
sufficient to meet its seasonal working capital needs, pay approximately $21
million in fixed interest charges and to fund capital expenditures of
approximately $6 million for 1997. In 1997 the Company currently plans to open
one new store and to remodel three to four existing stores.
Inflation
- ---------
Inflation has been modest in recent years and has not had a significant effect
on the Company. If merchandise costs were to increase because of inflation,
management believes such increases could be recovered through higher selling
prices, since virtually all retailers would be similarly affected.
- --------------------------------------------------------
SAFE HARBOR STATEMENT under the Private Securities Litigation Reform Act of
1995: Except for the historical information contained herein, the matters
discussed in this annual report are forward-looking statements that involve
risks and uncertainties, including but not limited to economic, competitive,
governmental and technological factors affecting the Company's operations,
markets, products, services and prices, and other factors discussed in the
Company's filings with the Securities and Exchange Commission.
11
<PAGE> 14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial Statements
--------------------
The Company's consolidated financial statements and supplementary data are
listed in Item 14 of this Report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
12
<PAGE> 15
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Directors
---------
Information on Nominee and Incumbent Directors, which appears
on pages 5 and 6 of the Company's 1997 Proxy Statement, is
incorporated by reference in this Annual Report on Form 10-K.
(b) Executive Officers
------------------
<TABLE>
<CAPTION>
POSITION AND OFFICE WITH
NAME AGE THE COMPANY
- ---- --- ------------------------
<S> <C> <C>
Harris J. Ashton 64 Chairman of the Board of Directors, President
and Chief Executive Officer
Ernest W. Townsend 51 Executive Vice President, President and Chief
Operating Officer - Frank's
William C. Boyd 67 Executive Vice President - Frank's
Robert M. Lovejoy, Jr. 53 Vice President and Treasurer
James R. Simpson 45 Vice President and Controller
J. Theodore Everingham 57 Vice President, General Counsel and Secretary
</TABLE>
Mr. Ashton has been Chairman of the Board of Directors and Chief Executive
Officer of the Company since 1970, and President of the Company since 1974.
Prior thereto he was President and Chief Executive Officer from October 1969 to
June 1970, President and Chief Administrative Officer from December 1967 to
October 1969, Secretary from May 1965 to December 1967 and a Director of the
Company since May 1965.
Mr. Townsend has been President and Chief Operating Officer of Frank's and
Executive Vice President of General Host since January 13, 1997. He was most
recently President of Dole Food Company North America, having joined Dole in
1992. Prior thereto he was President of Kraft's Frozen Food Group, having
joined Kraft in 1987 as President and Chief Operating Officer of The All
American Gourmet Company, a subsidiary of General Host, which was purchased by
Kraft. Prior thereto he was employed by General Host in various capacities
since 1972.
13
<PAGE> 16
Mr. Boyd has been Executive Vice President of Frank's since June 1987 and
prior thereto was employed by Frank's in various capacities since 1949.
Mr. Lovejoy was named Vice President on February 22, 1991. He has been
Treasurer of the Company since September 1988.
Mr. Simpson was named Vice President on February 22, 1991. He has been
Controller of the Company since July 1989.
Mr. Everingham was named Vice President, General Counsel and Secretary on
July 12, 1995. He was self-employed in the private practice of law from
January 1995 to July 1995 and was a partner of the law firm of Dykema Gossett
PLLC for more than five years prior thereto.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation and Other Information which appears on pages 8 through
15 of the Company's 1997 Proxy Statement is incorporated by reference in this
Annual Report on Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information on the ownership of Company securities by certain beneficial
owners and management which appears on pages 2 through 4 of the Company's 1997
Proxy Statement is incorporated by reference in this Annual Report on Form
10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information on transactions with management and others which appears on pages
6 and 7 and pages 14 through 18 of the Company's 1997 Proxy Statement, is
incorporated by reference in this Annual Report on Form 10-K.
14
<PAGE> 17
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
A. List of documents filed as part of this report:
1. FINANCIAL STATEMENTS
Page No.
--------
- Report of Independent Accountants F-1
- Consolidated Balance Sheets - for the years F-2
ended January 26, 1997 and January 28, 1996.
- Consolidated Statements of Income - for the F-3
years ended January 26, 1997, January 28, 1996
and January 29, 1995.
- Consolidated Statements of Changes in F-4
Shareholders' Equity - for the years ended
January 26, 1997, January 28, 1996 and
January 29, 1995.
- Consolidated Statements of Cash Flow - for F-5
the years ended January 26, 1997,
January 28, 1996 and January 29, 1995.
- Notes to Consolidated Financial Statements F-6 to F-19
2. FINANCIAL STATEMENT SCHEDULES
-----------------------------
Schedules not included have been
omitted because they are not
applicable or the required information
is shown in the consolidated financial
statements or notes thereto.
VIII - Valuation and qualifying accounts- F-22 to F-24
years ended January 26, 1997, January
28, 1996 and January 29, 1995.
15
<PAGE> 18
3. EXHIBITS
--------
Exhibit No. Description of Exhibit
----------- ----------------------
3. ARTICLES OF INCORPORATION AND BY-LAWS
3.01 (a) Restated Certificate of Incorporation of the Company ("Restated
Certificate"), filed November 13, 1968. (Incorporated by reference
to the Company's Annual Report on Form 10-K for its fiscal year
ended January 31, 1993, File No. 1-1066 ("1992 Form 10-K"), Exhibit
3(a))
(b) Certificate of Amendment of the Restated Certificate, filed January
24, 1969. (Incorporated by reference to the 1992 Form 10-K,
Exhibit 3(b))
(c) Certificate of Amendment of the Restated Certificate, filed
October 30, 1969. (Incorporated by reference to the 1992 Form
10-K, Exhibit 3(c))
(d) Certificate of Amendment of the Restated Certificate, filed June 15,
1977. (Incorporated by reference to the 1992 Form 10-K, Exhibit
3(d))
(e) Certificate of Amendment of the Restated Certificate, filed
June 27, 1985. (Incorporated by reference to the Company's Annual
Report on Form 10-K for its fiscal year ended January 26, 1992,
File No. 1-1066 ("1991 Form 10-K"), Exhibit 3(f))
(f) Certificate of Amendment of the Restated Certificate, filed April
14, 1988. (Incorporated by reference to the Company's Annual
Report on Form 10-K for its fiscal year ended January 28, 1996,
File No. 1-1066 ("1995 Form 10-K"), Exhibit 3.01(f))
3.02 By-Laws of the Company, amended as of November 6, 1986.
(Incorporated by reference to the 1992 Form 10-K, Exhibit 3(g))
16
<PAGE> 19
Exhibit No. Description of Exhibit
----------- ----------------------
4. INSTRUMENTS DEFINING THE RIGHTS OF SECURITY HOLDERS, INCLUDING
INDENTURES
4.01 (a) Rights Agreement, dated as of March 7, 1990, by and between the
Company and Manufactures Hanover Trust Company. (Incorporated by
reference to the Company's Form 8-A Registration Statement, filed
March 23, 1995 ("1995 Form 8-A"), Exhibit 1, 2)
(b) Amendment No. 1 to the Rights Agreement dated as of March 1, 1995
by and between the Company and Chemical Bank, as successor to
Manufactures Hanover Trust Company. (Incorporated by reference to
the Company's 1995 Form 8-A, Exhibit 1a)
4.02* (a) Promissory Note in the original principal amount of $825,000 dated
August 31, 1995 from Frank's Nursery & Crafts, Inc. ("Frank's") to
MetLife Capital Financial Corporation ("MetLife"). (Incorporated
by reference to the 1995 Form 10-K, Exhibit 4.02(a))
(b) Commercial Mortgage, Security Agreement, Assignment of Leases and
Rents and Fixture Filing dated as of August 31, 1995 by and
between Frank's and MetLife. (Incorporated by reference to the
1995 Form 10-K, Exhibit 4.02(b))
(c) Security Agreement dated as of August 31, 1995 by and between
Frank's and MetLife. (Incorporated by reference to the 1995 Form
10-K, Exhibit 4.02(c))
(d) Assignment of Rents and Leases dated as of August 31, 1995 by and
between Frank's and MetLife. (Incorporated by reference to the
1995 Form 10-K, Exhibit 4.02(d))
(e) Guaranty dated as of August 31, 1995 by the Company in favor of
MetLife. (Incorporated by reference to the 1995 Form 10-K,
Exhibit 4.02(e))
17
<PAGE> 20
Exhibit Description of Exhibit
------- ----------------------
4.03*(a) Mortgage Note in the original principal amount of $4,950,000 dated
January 25, 1996 from Frank's to People's Bank ("People's").
(Incorporated by reference to the 1995 Form 10-K, Exhibit 4.03(a))
(b) Mortgage Deed and Security Agreement dated as of January 25, 1996
by and between Frank's and People's. (Incorporated by reference
to the 1995 Form 10-K, Exhibit 4.03(b))
(c) Assignment of Rents and Leases dated as of January 25, 1996 by and
between Frank's and People's. (Incorporated by reference to the
1995 Form 10-K, Exhibit 4.03(c))
(d) Guaranty and Indemnity Agreement dated as of January 25, 1996 by
the Company in favor of People's. (Incorporated by reference to
the 1995 Form 10-K, Exhibit 4.03(d))
(e) Escrow Agreement dated as of January 25, 1996 by and among
Frank's, People's and Commonwealth Land Title Insurance Company.
(Incorporated by reference to the 1995 Form 10-K, Exhibit 4.03(e))
- ---------------------
* See Schedule of Substantially Identical Documents filed herewith.
18
<PAGE> 21
Exhibit No. Description of Exhibit
----------- ----------------------
4.04*(a) Promissory Note in the original principal amount of $682,878 dated
March 14, 1996 from Frank's Nursery & Crafts, Inc. ("Frank's") to
Midland Loan Services, L.P. ("Midland"). (Incorporated by
reference to the 1995 Form 10-K, Exhibit 4.04(a))
(b) Mortgage, Security Agreement and Assignment of Leases and Rents
dated as of March 14, 1996 by and between Frank's and Midland.
(Incorporated by reference to the 1995 Form 10-K, Exhibit 4.04(b))
(c) Assignment of Rents and Leases dated as of March 14, 1996 by and
between Frank's and Midland. (Incorporated by reference to the
1995 Form 10-K, Exhibit 4.04(c))
(d) Guaranty dated as of March 14, 1996 by the Company in favor of
Midland. (Incorporated by reference to the 1995 Form 10-K, Exhibit
4.04(d))
(e) Escrow Agreement dated as of March 14, 1996 by and between Frank's
and Midland in its capacities as lender and escrow agent.
(Incorporated by reference to the 1995 Form 10-K, Exhibit 4.04(e))
4.05*(a) Promissory Note in the original principal amount of $741,000 dated
as of April 22, 1996 from Frank's Nursery & Crafts, Inc.
("Frank's") to First Union National Bank of North Carolina ("First
Union"). (Filed herewith)
(b) Mortgage, Security Agreement and Assignment of Leases and Rents
dated as of April 22, 1996 by and between Frank's and First Union.
(Filed herewith)
(c) First Amendment to Mortgage and Security Agreement dated as of May
1, 1996 by and between Frank's and First Union. (Filed herewith)
(d) Guaranty dated as of April 22, 1996 by the Company in favor of
First Union. (Filed herewith)
- ------------------
* See Schedule of Substantially Identical Documents filed herewith.
19
<PAGE> 22
Exhibit No. Description of Exhibit
----------- ----------------------
4.06*(a) Mortgage-backed Credit Agreement in the aggregate face amount of
$40,000,000 dated as of November 29, 1996 by and between the
Company, Frank's Nursery & Crafts, Inc. ("Frank's") and Comerica
Bank ("Comerica"). (Filed herewith)
(b) Mortgage-Backed Note in the original principal amount of
$25,000,000 dated as of November 29, 1996 by and between the
Company, Frank's and Comerica. (Filed herewith)
(c) Mortgage, Security Agreement, Assignment of Rents and Leases,
Fixture Filing and Financing Statement dated as of November 29,
1996 by and between Frank's and Comerica. (Filed herewith)
(d) Guaranty dated as of November 29, 1996 by the Company in favor of
Comerica. (Filed herewith)
4.07 (a) Indenture among the Company, certain guarantors named therein and
Bankers Trust Company, as Trustee, dated as of February 28, 1992.
(Incorporated by reference to the Company's Amendment No. 2 to the
Form S-3 Registration Statement, filed January 31, 1992, Exhibit
4(c), File No. 33-43504)
(b) Specimen of 11 1/2% Senior Notes due 2002. (Incorporated by
reference to the Company's Form 8-A Registration Statement, dated
February 21, 1992, Exhibit 2(a))
4.08 (a) Indenture among the Company and United States Trust Company of New
York, as Trustee, dated as of February 28, 1992. (Incorporated by
reference to the Company's Amendment No. 2 to the Form S-3
Registration Statement, filed January 31, 1992, Exhibit 4(b), File
No. 33-43504)
(b) Specimen of 8% Convertible Subordinated Notes due 2002.
(Incorporated by reference to the Company's Form 8-A Registration
Statement, dated February 21, 1992, Exhibit 2(a))
- -------------------
* See Schedule of Substantially Identical Documents filed herewith.
20
<PAGE> 23
Exhibit No. Description of Exhibit
------------ -----------------------
10. MATERIAL CONTRACTS
10.01 Employment Agreement dated as of January 1, 1992 by and
between the Company and Harris J. Ashton. (Incorporated by
reference to the 1992 Form 10-K, Exhibit 10(a), File No.
1-1066)
10.02 Agreement between the Company and a Trust established for the
benefit of Mr. and Mrs. Ashton's beneficiaries dated November
1, 1989. (Incorporated by reference to the Company's Annual
Report on Form 10-K for its fiscal year ended January 27, 1991
("1990 10-K"), Exhibit 10(b), File No. 1-1066)
10.03 (a) Frank's 1997 Executive Compensation Program. (Filed herewith)
(b) The Company's 1997 Executive Compensation Program. (Filed
herewith)
10.04 1996 Stock Incentive Plan adopted May 16, 1996. (Incorporated
by reference to the Company's Proxy Statement for its fiscal
year ended January 28, 1996, Exhibit A)
10.05 (a) 1994 Non-Employee Directors Stock Option Plan adopted October
12, 1994. (Incorporated by reference to the 1995 Form 10-K,
Exhibit 10.05(a), File No. 1-1066)
(b) Directors' Stock Option Plan dated March 20, 1986.
(Incorporated by reference to the 1991 Form 10-K, Exhibit 10
(e), File No. 1-1066)
11.01 Statement re: computation of per share earnings. (Filed
herewith)
12.01 Statement re: computation of ratios. (Filed herewith)
21.01 Subsidiaries of the Registrant. (Filed herewith)
23.01 Consent of Price Waterhouse LLP. (Filed herewith)
21
<PAGE> 24
Exhibit No. Description of Exhibit
----------- ----------------------
24.01 Powers of Attorney. (Filed herewith)
(a) Christopher A. Forster Director
(b) S. Joseph Fortunato Director
(c) Philip B. Harley Director
(d) Richard W. Haskel Director
(e) Edward H. Hoornstra Director
(f) Charles B. Johnson Director
(g) Kelly Ashton Sant Albano Director
27.01 Financial Data Schedule. (Filed herewith)
22
<PAGE> 25
SCHEDULE OF SUBSTANTIALLY IDENTICAL DOCUMENTS
---------------------------------------------
Exhibit No.
- -----------
4.02 (1) (a) Promissory notes in the original principal amounts of
$975,000, $937,000 and $825,000; (b) related Commercial
Mortgages on properties located in Merrilville, Indiana,
Columbus, Indiana and South Bend, Indiana, respectively; (c)
related Security Agreements; (d) related Assignments of Rents
and Leases; and (e) related Guaranties, all dated August 31,
1995 and governed by Indiana law.
(2) (a) Promissory notes in the original principal amounts of
$660,000, $675,000, $690,000 and $825,000; (b) related
Commercial Mortgages on properties located in Waukegan,
Illinois, Evergreen Park, Illinois, St. Charles, Illinois and
Naperville, Illinois, respectively; (c) related Security
Agreements; (d) related Assignments of Rents and Leases; and (e)
related Guaranties, all dated August 31, 1995 and governed by
Illinois law.
(3) (a) A promissory note in the original principal amount of
$855,000; (b) related Commercial Mortgage on property located in
Coon Rapids, Minnesota; (c) related Security Agreement; (d)
related Assignment of Rents and Leases; and (e) related
Guaranty, all dated August 31, 1995 and governed by Minnesota
law.
(4) (a) A promissory note in the original principal amount of
$1,200,000; (b) related Commercial Mortgage on property located
in Franklin, Ohio; (c) related Security Agreement; (d) related
Assignment of Rents and Leases; and (e) related Guaranty, all
dated August 31, 1995 and governed by Ohio law.
(5) (a) Promissory notes in the original principal amounts of
$1,125,000 and $1,125,000; (b) related Commercial Mortgages on
properties located in Clinton Township, Michigan and Canton
Township, Michigan, respectively; (c) related Security
Agreements; (d) related Assignments of Rents and Leases; and (e)
related Guaranties, all dated August 31, 1995 and governed by
Michigan law.
4.03 (1) (a) Mortgage and Security Agreement on property located in
Kingston, New York; and (b) Assignment of Rents and Leases, each
dated as of January 25, 1996 and governed by New York law.
23
<PAGE> 26
Exhibit No.
- -----------
4.04 (1) (a) Promissory notes in the original principal amounts of
$867,548, $862,893, $857,318 and $883,802; (b) related Mortgages
on properties located in Libertyville, Illinois, Lake Zurich,
Illinois, Crystal Lake, Illinois and Schaumburg, Illinois,
respectively; (c) related Assignments of Rents and Leases; (d)
related Guaranties; and (e) related Escrow Agreements, all dated
January 26, 1996 and governed by Illinois law.
(2) (a) Promissory notes in the original principal amounts of
$726,793 and $1,330,423; (b) related Mortgages on properties
located in Battle Creek, Michigan and Bloomfield Township,
Michigan respectively; (c) related Assignments of Rents and
Leases; (d) related Guaranties; and (e) related Escrow
Agreements, all dated January 26, 1996 and governed by Michigan
law.
(3) (a) Promissory notes in the original principal amounts of
$956,708, $909,974 and $849,344; (b) related Mortgages on
properties located in Roseville, Minnesota, Eden Prairie,
Minnesota and Eagan, Minnesota, respectively; (c) related
Assignments of Rents and Leases; (d) related Guaranties; and (e)
related Escrow Agreements, all dated January 26, 1996 and
governed by Minnesota law.
(4) (a) Promissory notes in the original principal amounts of
$730,026, $734,319 and $753,432; (b) related Mortgages on
properties located in Bridgeton, Missouri, St. Charles,
Missouri and St. Charles, Missouri, respectively; (c) related
Assignments of Rents and Leases; (d) related Guaranties; and (e)
related Escrow Agreements, all dated January 26, 1996 and
governed by Missouri law.
(5) (a) Promissory notes in the original principal amounts of
$1,280,990, $1,379,474 and $1,316,019; (b) related Mortgages on
properties located in Deptford, New Jersey, Bridgewater, New
Jersey and Bricktown, New Jersey, respectively; (c) related
Assignments of Rents and Leases; (d) related Guaranties; and (e)
related Escrow Agreements, all dated January 26, 1996 and
governed by New Jersey law.
24
<PAGE> 27
Exhibit No.
- -----------
4.04 (cont.)
(6) (a) A promissory note in the original principal amount of
$1,373,432; (b) related Mortgage on property located in Staten
Island, New York; (c) related Assignment of Rents and Leases;
(d) related Guaranty; and (e) related Escrow Agreement, all
dated January 26, 1996 and governed by New York law.
(7) (a) A promissory note in the original principal amount of
$892,829; (b) related Mortgage on property located in
Brookhaven, Pennsylvania; (c) related Assignment of Rents and
Leases; (d) related Guaranty; and (e) related Escrow Agreement,
all dated January 26, 1996 and governed by Pennsylvania law.
(8) (a) Amended and Restated Promissory Note in the original
principal amount of $2,583,273.69 dated as of December 1, 1995
from Frank's to Midland Commercial Financing Corp; (b) related
Mortgages dated as of October 16, 1995, as amended as of
December 1, 1995 on properties located in Okemos, Michigan and
Joliet, Illinois; (c) related Assignments of Rents and Leases
dated as of October 16, 1995, as amended as of December 1, 1995;
(d) Amended and Restated Guaranty dated as of December 1, 1995
from the Company in favor of Midland Commercial Financing Corp.;
and (e) related Escrow Agreements dated as of October 13, 1995.
4.05 (1) (a) Promissory Notes in the original principal amount of $683,000
and $657,000; (b) related Mortgages, Security Agreements and
Assignments of Leases and Rents on properties located in
Louisville, Kentucky and Louisville, Kentucky; and (c) related
Guaranty, all dated as of April 22, 1996 and governed by Kentucky
law.
(2) (a) Promissory Notes in the original principal amount of
$849,000 and $659,000; (b) related Mortgages, Security
Agreements and Assignments of Leases and Rents on properties
located in Flint, Michigan and Grand Rapids, Michigan; and (c)
related Guaranty, all dated as of April 22, 1996 and governed by
Michigan law.
25
<PAGE> 28
Exhibit No.
- -----------
4.05 (cont.)
(3) (a) A Promissory Note in the original principal amount of
$865,000; (b) related Mortgage, Security Agreement and
Assignment of Leases and Rents on property located in
Cincinnati, Ohio; and (c) related Guaranty, all dated as of
April 22, 1996 and governed by Ohio law.
4.06 (1) Mortgage, Security Agreement, Assignment of Rents and Leases,
Fixture Filing and Financing Statement on property located in
Milford, Connecticut, dated November 29, 1996 and governed by
Connecticut law.
(2) Mortgage, Security Agreement, Assignment of Rents and Leases,
Fixture Filing and Financing Statement on property located in
St. Petersburg, Florida, New Port Richey, Florida, Largo,
Florida, Tampa, Florida, Tampa, Florida, Bradenton, Florida and
Clearwater, Florida, all dated November 29, 1996 and governed by
Florida law.
(3) Mortgage, Security Agreement, Assignment of Rents and Leases,
Fixture Filing and Financing Statement on property located in
Bedford Park, Illinois, dated November 29, 1996 and governed by
Illinois law.
26
<PAGE> 29
Exhibit No.
- -----------
4.06 (cont.)
(4) Mortgage, Security Agreement, Assignment of Rents and Leases, Fixture
Filing and Financing Statement on property located in Fort Wayne,
Indiana, Fort Wayne, Indiana and Mishawaka, Indiana, all dated
November 29, 1996 and governed by Indiana law.
(5) Mortgage, Security Agreement, Assignment of Rents and Leases, Fixture
Filing and Financing Statement on property located in Florence,
Kentucky, dated November 29, 1996 and governed by Kentucky law.
(6) Mortgage, Security Agreement, Assignment of Rents and Leases, Fixture
Filing and Financing Statement on property located in Owings Mills,
Maryland, dated November 29, 1996 and governed by Maryland law.
(7) Mortgage, Security Agreement, Assignment of Rents and Leases, Fixture
Filing and Financing Statement on property located in Tauton,
Massachusetts, Brockton, Massachusetts, Hadley, Massachusetts,
Springfield, Massachusetts and Westfield, Massachusetts, all dated
November 29, 1996 and governed by Massachusetts law.
(8) Mortgage, Security Agreement, Assignment of Rents and Leases, Fixture
Filing and Financing Statement on property located in Dearborn
Heights, Michigan, Saginaw, Michigan, Saginaw, Michigan, Utica,
Michigan, Grandville, Michigan, Flint, Michigan, Warren, Michigan, Bay
City, Michigan, Lincoln Park, Michigan, Portage, Michigan, Lansing,
Michigan and Norton Shores, Michigan, all dated November 29, 1996 and
governed by Michigan law.
(9) Mortgage, Security Agreement, Assignment of Rents and Leases, Fixture
Filing and Financing Statement on property located in Bloomington,
Minnesota, Blain, Minnesota and St. Paul, Minnesota all dated November
29, 1996 and governed by Minnesota law.
(10) Mortgage, Security Agreement, Assignment of Rents and Leases, Fixture
Filing and Financing Statement on property located in Ballwin,
Missouri, dated November 29, 1996 and governed by Missouri law.
27
<PAGE> 30
Exhibit No.
- -----------
4.06 (cont.)
(11) Mortgage, Security Agreement, Assignment of Rents and Leases, Fixture
Filing and Financing Statement on property located in Sea Girt, New
Jersey, West Long Branch, New Jersey, Kenvil, New Jersey, Hazlet, New
Jersey and Howell, New Jersey, all dated November 29, 1996 and
governed by New Jersey law.
(12) Mortgage, Security Agreement, Assignment of Rents and Leases, Fixture
Filing and Financing Statement on property located in Columbus, Ohio,
Columbus, Ohio, Columbus, Ohio, Toledo, Ohio, Toledo, Ohio, Northwood,
Ohio, Springfield, Ohio, Cincinnati, Ohio, Cincinnati, Ohio and Huber
Heights, Ohio, all dated November 29, 1996 and governed by Ohio law.
(13) Mortgage, Security Agreement, Assignment of Rents and Leases, Fixture
Filing and Financing Statement on property located in Philadelphia,
Pennsylvania and Exton, Pennsylvania, both dated November 29, 1996 and
governed by Pennsylvania law.
B. Reports on Form 8-K
--------------------
During the last quarter of the period covered by this report, the Company
did not file a report on Form 8-K.
28
<PAGE> 31
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized.
GENERAL HOST CORPORATION
Date: April 23, 1997 By /s/ Harris J. Ashton
--------------------------------
Harris J. Ashton
Chairman of the Board of
Directors, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: April 23, 1997 By /s/ Harris J. Ashton
-------------------------------
Harris J. Ashton
Chairman of the Board of
Directors, President and
Chief Executive Officer
(Principal Executive and
Financial Officer)
Date: April 23, 1997 By /s/ James R. Simpson
--------------------------------
James R. Simpson
Vice President and Controller
(Principal Accounting Officer)
Date: April 23, 1997 By
-------------------------------
C. Whitcomb Alden, Jr.
Director
Date: April 23, 1997 By CHRISTOPHER A. FORSTER*
-------------------------------
Christopher A. Forster
Director
Date: April 23, 1997 By S. JOSEPH FORTUNATO*
-------------------------------
S. Joseph Fortunato
Director
Date: April 23, 1997 By KELLY ASHTON SANT ALBANO*
-------------------------------
Kelly Ashton Sant Albano
Director
Date: April 23, 1997 By PHILIP B. HARLEY*
-------------------------------
Philip B. Harley
Director
Date: April 23, 1997 By RICHARD W. HASKEL*
-------------------------------
Richard W. Haskel
Director
Date: April 23, 1997 By EDWARD H. HOORNSTRA*
--------------------------------
Edward H. Hoornstra
Director
Date: April 23, 1997 By CHARLES B. JOHNSON*
--------------------------------
Charles B. Johnson
Director
Date: April 23, 1997 * By /s/ J. Theodore Everingham
------------------------------
(Attorney-in-Fact)
29
<PAGE> 32
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
General Host Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(A)(1) and (2) on page 15 present fairly, in all
material respects, the financial position of General Host Corporation and its
subsidiaries at January 26, 1997 and January 28, 1996, and the results of their
operations and their cash flows for the three years in the period ended January
26, 1997 in conformity with generally accepted accounting principles. These
financial 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 of these statements in accordance with
generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
Price Waterhouse LLP
Detroit, Michigan
February 26, 1997, except as to the
stock dividend described in Note 1
which is as of March 14, 1997
F-1
<PAGE> 33
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
JANUARY 26, 1997 AND JANUARY 28, 1996
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 43,320 $ 29,901
Accounts and notes receivable 4,420 3,823
Merchandise inventory 81,575 88,162
Prepaid expenses and other current assets 10,671 9,417
---------- ----------
Total current assets 139,986 131,303
---------- ----------
PROPERTY, PLANT AND EQUIPMENT, LESS ACCUMULATED
DEPRECIATION OF $173,228 AND $154,830 220,626 237,803
INTANGIBLES, LESS ACCUMULATED AMORTIZATION
OF $10,653 AND $9,783 15,266 16,136
OTHER ASSETS AND DEFERRED CHARGES 10,544 10,543
---------- ----------
$ 386,422 $ 395,785
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 43,868 $ 47,776
Accrued expenses 40,595 36,359
Current portion of long-term debt 2,254 1,974
---------- ----------
Total current liabilities 86,717 86,109
---------- ----------
LONG-TERM DEBT:
Senior debt 127,761 124,898
Subordinated debt 65,000 65,000
---------- ----------
Total long-term debt 192,761 189,898
---------- ----------
OTHER LIABILITIES AND DEFERRED CREDITS 7,449 9,550
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock $1.00 par value, 100,000,000
shares authorized, 31,752,450 shares issued 31,752 31,752
Capital in excess of par value 81,186 81,186
Retained earnings 58,127 79,924
---------- ----------
171,065 192,862
Cost of 7,338,605 and 8,505,096 shares of
common stock in treasury (69,561) (80,618)
Notes receivable from exercise of
stock options (2,009) (2,016)
---------- ----------
Total shareholders' equity 99,495 110,228
---------- ----------
$ 386,422 $ 395,785
========== ==========
</TABLE>
See accompanying notes.
F-2
<PAGE> 34
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
FISCAL YEARS ENDED JANUARY 26, 1997, JANUARY 28, 1996 AND JANUARY 29, 1995
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
REVENUES:
Sales $ 530,752 $ 593,270 $ 567,987
Other income 825 3,294 2,007
---------- --------- ---------
531,577 596,564 569,994
---------- --------- ---------
COSTS AND EXPENSES:
Cost of sales, including
buying and occupancy 383,099 429,181 402,839
Selling, general and
administrative 138,355 148,502 140,171
Interest and debt expense 20,863 23,845 22,911
---------- --------- ---------
542,317 601,528 565,921
---------- --------- ---------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES
AND NET INVESTMENT GAIN (10,740) (4,964) 4,073
INCOME TAX BENEFIT (625) (900)
NET GAIN ON SALE OF INVESTMENT
IN AN UNCONSOLIDATED AFFILIATE 3,612
---------- --------- ---------
INCOME (LOSS) FROM CONTINUING
OPERATIONS (10,740) (4,339) 8,585
LOSS FROM DISCONTINUED OPERATIONS (3,000)
---------- --------- ---------
NET INCOME (LOSS) $ (10,740) $ (7,339) $ 8,585
========== ========= =========
INCOME (LOSS) PER SHARE:
Income (loss) from continuing
operations $ (.44) $ (.18) $ .35
Loss from discontinued operations (.12)
---------- --------- ---------
Net income (loss) $ (.44) $ (.30) $ .35
========== ========= =========
AVERAGE SHARES OUTSTANDING 24,414 24,416 24,411
========== ========= =========
</TABLE>
See accompanying notes.
F-3
<PAGE> 35
GENERAL HOST CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
FISCAL YEARS ENDED JANUARY 26, 1997, JANUARY 28, 1996
AND JANUARY 29, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Notes
Receivable
Cost of from
Common Capital in Common Exercise Total
Shares of Common Stock Stock Excess of Retained Stock in of Stock Shareholders'
Issued In Treasury Issued Par Value Earnings Treasury Options Equity
---------- ----------- -------- ---------- --------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 30, 1994 31,752,450 (10,735,904) $ 31,752 $ 85,145 $ 95,543 $(101,765) $ (1,961) $ 108,714
Net income 8,585 8,585
Stock dividend 1,054,307 (3,668) (6,326) 9,994
Restricted stock grants issued 68,300 (306) 648 342
Issuance of common stock 1,800 (8) 17 9
---------- ----------- -------- ---------- --------- --------- --------- ---------
BALANCE AT JANUARY 29, 1995 31,752,450 (9,611,497) 31,752 81,163 97,802 (91,106) (1,961) 117,650
Net loss (7,339) (7,339)
Stock dividend 1,108,751 (6) (10,504) 10,510
Restricted stock grants cancelled (12,350) 54 (117) (63)
Stock option exercised 10,000 (40) 95 (55)
Income tax effect (net) related to
stock options and grants (25) 5 (20)
---------- ----------- -------- ---------- --------- --------- --------- ---------
BALANCE AT JANUARY 28, 1996 31,752,450 (8,505,096) 31,752 81,186 79,924 (80,618) (2,016) 110,228
Net loss (10,740) (10,740)
Stock dividend declared on
February 26, 1997 1,166,491 (11,057) 11,057
Note repayment 7 7
---------- ----------- -------- ---------- --------- --------- --------- ---------
BALANCE AT JANUARY 26, 1997 31,752,450 (7,338,605) $ 31,752 $ 81,186 $ 58,127 $ (69,561) $ (2,009) $ 99,495
========== =========== ======== ========== ========= ========= ========= =========
</TABLE>
See accompanying notes.
F-4
<PAGE> 36
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
FISCAL YEARS ENDED JANUARY 26, 1997, JANUARY 28, 1996 AND JANUARY 29, 1995
<TABLE>
<CAPTION>
1996 1995 1994
---------- --------- ---------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Income (loss) from continuing operations $ (10,740) $ (4,339) $ 8,585
Noncash adjustments:
Depreciation and amortization 22,377 22,888 23,836
Net gain on sale of investment in an
unconsolidated affiliate (3,612)
Other 775 (585) 1,674
---------- --------- ---------
12,412 17,964 30,483
Changes in current assets and current liabilities:
(Increase) decrease in accounts and notes receivable (21) 2,499 2,751
(Increase) decrease in inventory 6,587 (924) 569
(Increase) decrease in prepaid expenses (1,254) (828) 1,333
Increase (decrease) in accounts payable (3,908) (8,950) 7,175
Increase (decrease) in accrued expenses 665 (12,348) (3,951)
---------- --------- ---------
Net cash provided by (used for)
continuing operations 14,481 (2,587) 38,360
Net cash used for discontinued operations (325) (1,905) (333)
---------- --------- ---------
14,156 (4,492) 38,027
---------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property, plant and equipment (4,371) (5,497) (5,391)
Proceeds from sales of property, plant and equipment 930 342 3,016
Net proceeds from the sale of investment in an
unconsolidated affiliate 3,612
Proceeds from the sales of marketable securities 120
---------- --------- ---------
Net cash provided by (used for) investing activities (3,441) (5,155) 1,357
---------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of long-term debt 5,137 34,984
Debt issue costs (439) (1,681)
Payment of long-term debt and capital lease
obligations (1,994) (77,117) (18,877)
---------- --------- ---------
Net cash provided by (used for) financing activities 2,704 (43,814) (18,877)
---------- --------- ---------
Increase (decrease) in cash and cash equivalents 13,419 (53,461) 20,507
Cash and cash equivalents at beginning of year 29,901 83,362 62,855
---------- --------- ---------
Cash and cash equivalents at end of year $ 43,320 $ 29,901 $ 83,362
========== ========= =========
</TABLE>
See accompanying notes.
F-5
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: ACCOUNTING POLICIES
General Host is the nation's leading specialty retailer of lawn and garden
products, crafts and Christmas merchandise. Below are those accounting
policies considered to be significant.
THE FISCAL YEAR is comprised of 52 or 53 weeks, ending on the last Sunday in
January. The 1996, 1995 and 1994 fiscal years each reflect a 52- week period.
THE CONSOLIDATED FINANCIAL STATEMENTS include the accounts of General Host
Corporation and its subsidiaries (the "Company"). Intercompany balances and
transactions are eliminated. The consolidated financial statements have been
prepared in accordance with generally accepted accounting principles and, as
such, include amounts based on management's best estimates. Actual results
could differ from those estimates. Certain reclassifications have been made to
prior years' financial statements to conform to the 1996 presentation.
CASH EQUIVALENTS are highly liquid investments, such as U.S. government
securities and bank certificates of deposit having original maturities of three
months or less, and are carried at cost plus accrued interest.
MERCHANDISE INVENTORIES are stated at the lower of cost or market, with cost
being determined under the first-in, first-out method.
PRE-OPENING COSTS are costs incurred in the opening of new stores (primarily
payroll costs) that are capitalized prior to the opening of a new store and
amortized over a one year period commencing with the first period after the new
store opens.
ADVERTISING COSTS are expensed when the advertising first takes place.
Advertising expenditures were $22,262,000 for 1996, $24,373,000 for 1995 and
$21,721,000 for 1994.
STORE CLOSING COSTS include provisions for estimated future net lease
obligations, nonrecoverable investments in fixed assets, and other expenses
directly related to discontinuance of operations. Provisions for store
closings are charged to operations in the period when the decision is made to
close a retail unit.
F-6
<PAGE> 38
PROPERTY, PLANT AND EQUIPMENT, including significant improvements thereto, are
recorded at cost. Expenditures for repairs and maintenance are charged to
expense as incurred. The cost of plant and equipment is depreciated over the
estimated useful lives using the straight-line method. Estimated useful lives,
including capital leases, are: buildings, 10-40 years or, if shorter, the terms
of the lease; equipment, 3-20 years. Leasehold improvements are depreciated
over the lease terms of the respective leases or the estimated useful lives.
Upon sale or other disposition of assets, the cost and related accumulated
depreciation are removed from the accounts and the resulting gain or loss, if
any, is recognized in the statement of income.
INTANGIBLES, including costs in excess of net assets of acquired businesses,
are amortized over the estimated periods of related benefit, ranging from 10 to
40 years, using the straight-line method. On an annual basis the Company
reviews the recoverability of intangibles, specifically goodwill. The
measurement of possible impairment is based primarily on the ability to recover
the balance of the goodwill from expected future operating cash flows on an
undiscounted basis.
IMPAIRMENT OF LONG-LIVED ASSETS is reviewed annually by the Company in
accordance with Statement of Financial Accounting Standards No. 121,
"Impairment of Long-Lived Assets," (FAS 121) by comparing estimated future
undiscounted cash flows associated with the asset to the asset's carrying value
to determine if an impairment exists. The adoption of FAS 121 in fiscal 1996
did not require an adjustment to the results of operations or the financial
position of the Company.
OTHER POSTRETIREMENT BENEFITS are recognized in the financial statements during
the period in which service is provided.
LEASES that meet the accounting criteria for capital leases are recorded as
property, plant and equipment, and the related capital lease obligations (the
aggregate present value of minimum future lease payments, excluding executory
costs such as taxes, maintenance and insurance) are included in long-term debt.
Depreciation and interest are charged to expense, and rent payments are treated
as payments of long-term debt, accrued interest and executory costs. All other
leases are accounted for as operating leases, and rent payments are charged to
expense as incurred.
DEFERRED INCOME TAX ASSETS AND LIABILITIES are determined based on the
difference between the financial carrying amounts and tax bases of assets and
liabilities using enacted tax rates in effect in the years in which the
differences are expected to reverse.
F-7
<PAGE> 39
PRIMARY EARNINGS PER SHARE is based on the weighted average number of
common shares outstanding, which includes 1,166,491 shares representing the
5% stock dividend described below.
FULLY DILUTED EARNINGS PER SHARE is based on the assumed conversion of all
of the 8% Convertible Subordinated Notes into common stock. Interest
expense on the 8% Convertible Subordinated Notes is added back to net
earnings. Fully diluted earnings per share impacted the first quarter of
1995.
SUBSEQUENT TO FISCAL 1996 a 5% stock dividend was declared on February 26,
1997 by the Board of Directors for shareholders of record on March 14,
1997. The stock dividend is payable on April 4, 1997 and all stock-related
data in the consolidated financial statements reflect the stock dividend
for all periods presented.
NOTE 2: DISCONTINUED OPERATIONS
In prior years' the Company has sold businesses that have been treated as
discontinued operations for financial statement presentation.
The assets and liabilities for discontinued operations sold in prior years'
were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In thousands) 1996 1995
- ------------------------------------------------------------
<S> <C> <C>
Prepaid pension asset (Note 10) $ 1,123 $ 501
======== ========
Accrued expenses $ 1,619 $ 1,721
Other liabilities 1,178 1,401
-------- --------
$ 2,797 $ 3,122
======== ========
</TABLE>
In 1995 the Company charged to discontinued operations a loss of
$3,000,000, or $.12 per share, as a result of a judgment against the Company in
a 1991 saltwater pollution lawsuit (Note 13).
NOTE 3: OTHER INCOME
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In thousands) 1996 1995 1994
- ------------------------------------------------------------
<S> <C> <C> <C>
Interest on cash
equivalents and
marketable securities $ 788 $ 2,363 $ 1,365
Miscellaneous 37 931 642
-------- -------- --------
$ 825 $ 3,294 $ 2,007
======== ======== ========
</TABLE>
F-8
<PAGE> 40
NOTE 4: INCOME TAXES
The components of the income tax benefit are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
(In thousands) 1996 1995 1994
- -----------------------------------------------------------------------
<S> <C> <C>
CONTINUING OPERATIONS:
Current federal income taxes $ $ (25) $ (900)
Current state and other income taxes (600)
Deferred federal income taxes
Deferred state and other income taxes
-------- -------- --------
Total income tax benefit $ --- $ (625) $ (900)
======== ======== ========
</TABLE>
Differences between income taxes of continuing operations and income
taxes based on statutory federal income tax rates applied to income before
taxes are as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
(In thousands) 1996 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes based on
statutory rates $ (3,652) $ (2,708) $ 2,613
Increases (decreases) in rates
resulting from:
Limitation (utilization)
of tax loss carryforwards 3,493 2,145 (2,207)
Elimination of reserves no
longer required (600) (1,000)
Effect of graduated rates
Amortization of intangibles
and other acquisition costs 136 136 136
Other 23 402 (442)
-------- -------- --------
$ --- $ (625) $ (900)
======== ======== ========
</TABLE>
F-9
<PAGE> 41
The tax effects of the principal temporary deferred tax assets and
liabilities are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
(In thousands) 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C>
LIABILITIES:
Property, plant & equipment $ (14,708) $ (16,168)
--------- ---------
Gross deferred tax liabilities (14,708) (16,168)
--------- ---------
ASSETS:
Inventory 736 1,043
Accrued expenses 3,241 3,091
Other 422 244
Loss on equity investment in an
unconsolidated affiliate 721 721
Store closing reserve 796 1,545
NOL carryforward 20,917 18,029
--------- ---------
Gross deferred tax assets 26,833 24,673
--------- ---------
Net deferred tax asset 12,125 8,505
Valuation allowance (12,125) (8,505)
--------- ---------
$ -- $ --
========= =========
</TABLE>
In 1995, the tax provision was unfavorably impacted by an increase in
the valuation allowance as a result of the loss not being benefitted. A
valuation allowance was provided in 1993 against the net deferred tax asset
resulting from the Company's net operating loss and the loss from an
investment in an unconsolidated affiliate. Due to the Company's historical
operating results, a valuation allowance for the net deferred tax asset
balance is recorded at January 26, 1997.
At January 26, 1997 the federal tax NOL carryforwards approximated
$61,500,000. As a result of the valuation allowance, approximately
$31,000,000 of these carryforwards have not been benefitted and utilization
will be recognized against future income. The net operating loss will
expire as follows: in January 2008 -- $5,000,000, January 2009 --
$39,000,000, January 2010 -- $3,000,000, January 2011 -- $6,000,000 and
January 2012 -- $8,500,000.
F-10
<PAGE> 42
NOTE 5: PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
(In thousands) 1996 1995
- -----------------------------------------------------------------
<S> <C> <C>
Land $ 45,328 $ 45,928
Buildings:
Owned 169,141 168,964
Capital leases (Note 9) 17,445 17,445
Equipment 110,361 106,610
Leasehold improvements 48,328 48,107
Construction in progress 3,251 5,579
-------- --------
393,854 392,633
Less accumulated depreciation,
including capital lease amounts
of $10,889 and $10,046 173,228 154,830
-------- --------
$220,626 $237,803
======== ========
</TABLE>
NOTE 6: ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable include amounts payable to brokers for purchases of cash
equivalents of $15,998,000 in 1996 and $19,997,000 in 1995.
Accrued expenses are as follows:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
(In thousands) 1996 1995
- -----------------------------------------------------------------
<S> <C> <C>
Income taxes $ 400 $ 301
Taxes, other than income taxes 6,136 6,580
Payroll and other compensation 5,689 2,338
Advertising 2,150 2,406
Insurance 3,476 3,669
Interest 6,832 6,637
Litigation 1,132 1,336
Other 14,780 13,092
------- -------
$40,595 $36,359
======= =======
</TABLE>
F-11
<PAGE> 43
NOTE 7: LONG-TERM DEBT
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
(In thousands) 1996 1995
- -----------------------------------------------------------------
<S> <C> <C>
SENIOR DEBT:
11 1/2% Senior Notes due
February 15, 2002 $ 78,000 $ 78,000
Mortgage notes due on varying
dates from February 1, 2001
to May 1, 2006 38,979 34,804
Capital leases (Note 9) 12,518 13,384
Other 518 684
-------- --------
130,015 126,872
Less current portion 2,254 1,974
-------- --------
127,761 124,898
-------- --------
SUBORDINATED DEBT:
8% Convertible Subordinated Notes
due February 15, 2002 65,000 65,000
-------- --------
Total long-term debt $192,761 $189,898
======== ========
</TABLE>
The Senior Notes, issued at par, bear interest at 11 1/2%. The Convertible
Subordinated Notes, issued at par, bear interest at 8% and are convertible into
common stock of the Company at a conversion price of $8.54 per share, subject
to adjustments in certain events.
The mortgage notes have interest rates varying from 7.8% to 9.625%, and the
notes mature with balloon payments on varying dates from February 1, 2001 to May
1, 2006. The mortgage notes are secured by retail properties owned by Frank's
Nursery & Crafts, Inc.
The Company has a $25,000,000 secured credit agreement with a bank. The
credit agreement is committed through June 30, 1997. There is a commitment fee
of 5/8 of 1% on the $25,000,000. The credit agreement is secured by mortgages
on retail properties owned by Frank's Nursery & Crafts, Inc. At the Company's
option, interest under the agreement may be based on the London Interbank
Offering Rate (LIBOR) or on the bank's prime rate. As of February 26, 1997,
$21,000,000 was outstanding under the credit agreement.
The credit agreement requires the Company, among other things, to maintain
minimum levels of earnings, tangible net worth and certain minimum financial
ratios. In addition, the Company is required to maintain a minimum credit
facility of $15,000,000 at all times prior to May 31, 1997 under $4,950,000 of
the mortgage financings. The Company was in compliance with all of the bank
agreement covenants and other restrictions under all other debt agreements at
January 26, 1997.
F-12
<PAGE> 44
Under the most restrictive provisions of any of the Company's debt
agreements, total shareholders' equity available to pay cash dividends or
purchase treasury stock was below the required minimum level by $20,364,000 at
January 26, 1997.
Aggregate maturities of long-term debt for the five years subsequent to
1996, excluding capital lease obligations (Note 9), are $1,296,000 in 1997,
$1,412,000 in 1998, $1,445,000 in 1999, $1,433,000 in 2000 and $5,204,000 in
2001.
NOTE 8: SHAREHOLDERS' EQUITY
The Company's 1996 stock incentive plan provides for the granting of options to
key employees. Outstanding options under the 1996 stock incentive plan and the
1986 stock incentive plan, as amended in 1992, become exercisable at varying
vesting rates and expire no later than ten years after grant date.
The directors' stock option plan provides for the issuance of options to
members of the Board of Directors who are not employees of the Company; options
expire no later than five years after grant date.
All of the aforementioned plans provide for adjustment of the exercise
prices or number of shares to reflect changes in the corporate structure or
shares of the Company. Under all plans, options are granted at prices not less
than fair market value on the date of grant.
In April 1994 the Company issued restricted stock grants under the plan to
employees of the Company. The market value of the shares granted amounted to
$341,500 for fiscal 1994 and was charged to selling expense. Restrictions on
the grants expired on January 28, 1996 and in February 1996, 59,301 shares were
issued.
The Company applies Accounting Principles Board Opinion No. 25 "Accounting
for Stock Issued to Employees" in accounting for stock options under its stock
incentive plans. If compensation cost had been determined based upon the fair
value method in accordance with Statement of Financial Accounting Standards No.
123 "Accounting for Stock-Based Compensation", the pro forma net loss in fiscal
1996 and fiscal 1995 would have been $11,634,000, or $.48 per share, and
$7,904,000, or $.32 per share, respectively. For pro forma purposes the fair
value of each stock option grant was estimated using the Black-Scholes option
pricing model with the following weighted-average assumptions for grants in
fiscal 1996 and 1995, respectively; risk-free interest rates of 6.41% and 5.35%
and expected volatility of 37.62% and 35.77%, and an expected option life of 5
years and 3.07 years. For each year it was further assumed that no cash
dividends would be issued.
F-13
<PAGE> 45
Changes in stock options during the three years ended January 26, 1997 are
as follows:
<TABLE>
<CAPTION>
Shares Option Prices
--------- -------------
<S> <C> <C>
OUTSTANDING AT JANUARY 30, 1994 943,400 $ 5.50-14.38
Options granted 356,000 4.44- 5.75
Options cancelled/expired (64,000) 5.50-14.38
--------- ------------
OUTSTANDING AT JANUARY 29, 1995 1,235,400 4.44-14.38
Options granted 633,038 3.75- 7.25
Options exercised (15,000) 4.96- 5.46
Options cancelled/expired (678,750) 4.44-12.97
--------- ------------
OUTSTANDING AT JANUARY 28, 1996 1,174,688 3.75-12.97
Options granted 603,000 3.19
Options cancelled/expired (340,550) 3.56- 8.63
--------- ------------
OUTSTANDING AT JANUARY 26, 1997 1,437,138 $ 3.19-12.32
========= ============
</TABLE>
At January 26, 1997 outstanding options for 1,153,738 shares are
exercisable and 1,987,000 shares are available for granting additional options.
The Company's certificate of incorporation authorizes the issuance of
1,000,000 shares of $1.00 par value preferred stock, none of which have been
issued.
Each share of the Company's common stock carries with it one right to
purchase one additional share of common stock from the Company for $60 upon the
occurrence of certain events, at which time the rights become exercisable.
Separate rights certificates will then be issued and the rights can be traded
separately. In the event the rights become exercisable and thereafter the
Company is acquired in a merger or other business combination, each right will
entitle the holder, upon payment of the exercise price, to receive a number of
shares of the surviving corporation's common stock equal to the exercise price
divided by 50% of the market price. At the Company's option, the rights are
redeemable in their entirety at $.01 per right. The rights are subject to
adjustment to prevent dilution and expire March 7, 2000.
F-14
<PAGE> 46
NOTE 9: LEASES
The Company's capital leases are principally for retail stores, for periods
ranging up to 25 years. The Company's operating leases are principally for
retail store locations.
At January 26, 1997 lease obligations under capital leases, included in
long-term debt (Note 7), and operating leases with lease terms longer than one
year, are as follows:
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
Capital Operating
(In thousands) Leases Leases
- ----------------------------------------------------------------
<S> <C> <C>
Payable in 1997 $ 2,368 $ 13,207
1998 2,422 12,992
1999 2,363 12,185
2000 2,322 11,685
2001 2,202 11,098
Payable after 2001 10,430 76,038
-------- --------
Total minimum lease obligations 22,107 $137,205
========
Executory costs (28)
Amount representing future interest (9,561)
--------
Present value of net minimum lease
obligations $ 12,518
========
Future sublease rental income $ 4,342
========
</TABLE>
Rent expense was $21,915,000 in 1996, $22,473,000 in 1995 and $21,045,000
in 1994. Rent expense includes additional rentals based on retail store sales
(in excess of the minimums specified in leases) of $691,000 in 1996, $815,000 in
1995 and $760,000 in 1994 and is reduced by sublease rental income of $859,000
in 1996, $832,000 in 1995 and $873,000 in 1994.
F-15
<PAGE> 47
NOTE 10: PENSION PLAN
Retirement benefits for both salaried and hourly employees are provided through
a noncontributory, defined contribution plan. Contributions are determined by
the Board of Directors based upon assessment of the Company's fiscal year's
profitability as related to pre-established financial objectives. There were
no contributions made to the plan for 1996 and 1995. The 1994 contribution
approved by the Board of Directors was $500,000. The plan also includes a
401(k)component, permitting employees to invest from 1% to 10% of their salary
in the employee's choice of an equity fund, a balanced fund or a fixed income
fund. The Company does not match employee contributions.
The Company also sponsors a noncontributory, defined benefit pension plan,
which covers former hourly employees of several discontinued operations and
provides pension benefits of stated amounts multiplied by years of service. The
Company contributes to this plan based on funding requirements determined by
consulting actuaries using the accrued benefit (unit credit) method.
Net periodic pension income consisted of the following:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------
(In thousands) 1996 1995 1994
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Interest cost on projected benefit
obligations $ 1,869 $ 2,139 $ 2,065
Actual return on plan assets (2,491) (2,269) (2,684)
-------- -------- --------
Net periodic pension income $ (622) $ (130) $ (619)
======== ======== ========
</TABLE>
The following table summarizes the plan's funding status and the asset
recognized in the consolidated balance sheets as of January 26, 1997 and January
28, 1996:
<TABLE>
<CAPTION>
- ------------------------------------------------------------
(In thousands) 1996 1995
- ------------------------------------------------------------
<S> <C> <C>
Actuarial present value of
pension benefit obligations,
all of which are vested $(25,684) $(27,439)
Plan assets at fair value 32,787 29,332
Unrecognized gain (5,980) (1,392)
-------- --------
Pension asset in the
consolidated balance sheets $ 1,123 $ 501
======== ========
</TABLE>
F-16
<PAGE> 48
The above amounts were determined as of December 31 each year. The assumed
discount rate for projected benefit obligations was 7.5% for 1996 and 7.25% for
1995. The expected long-term return on plan assets was 9% for 1996 and 1995.
The assets of the plan consist primarily of U.S. government securities and
listed stocks and bonds, including common stock of the Company with a quoted
market value of $1,068,000 at December 31, 1996 and $1,550,000 at December 31,
1995.
NOTE 11: OTHER POSTRETIREMENT BENEFITS
The Company has provided for certain health care and life insurance benefits
which cover former hourly employees of several discontinued operations.
The Company adopted SFAS No. 106 as of February 1, 1994. The Statement
requires that the cost of such benefits be recognized in the financial
statements during the period employees provide service to the Company. The
Company elected to immediately recognize the accumulated liability. At the date
of adoption, the unrecognized accumulated liability was not material to the
consolidated financial statements of the Company.
The accrued postretirement liability recognized in the consolidated balance
sheets was $1,358,000 at January 26, 1997 and $1,577,000 at January 28, 1996.
The net periodic postretirement benefit cost was $82,000 for 1996 and $105,000
for 1995. The amounts were determined as of December 31 each year. The discount
rate used in determining the accumulated postretirement benefit obligation was
7.5% for 1996 and 7.25% for 1995. The assumed health care cost trend rate used
in measuring the accumulated postretirement benefit obligation was 9.4% in 1996
grading down uniformly to 5.5% in 2005. If the health care cost trend rate
assumptions were increased by 1%, the accumulated postretirement benefit
obligation would be increased by 6.3% for 1996. The effect of this change on
the interest cost component of net periodic postretirement benefit cost for 1996
would be an increase of 5.8%.
NOTE 12: DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate
that value:
CASH AND CASH EQUIVALENTS
The carrying value amount approximates fair value because of the short maturity
of those investments.
F-17
<PAGE> 49
OTHER INVESTMENTS
The Company's other investments represent investments in untraded companies.
Based upon the Company's review of the financial statements of these companies
the carrying amount approximates fair value.
LONG-TERM DEBT
The fair value of the Company's long-term debt is estimated based upon the
quoted market prices for the same or similar issues or on the current rates
offered to the Company for debt of the same remaining maturities.
The estimated fair values of the Company's financial instruments at January
26, 1997 and January 28, 1996 are as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
(In thousands) 1996 1995
- ------------------------------------------------------------------------------------
CARRYING FAIR Carrying Fair
AMOUNT VALUE Amount Value
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 43,320 $ 43,320 $ 29,901 $ 29,901
Other investments $ 1,067 $ 1,067 $ 1,088 $ 1,088
Long-term debt $ 195,015 $ 178,180 $ 191,872 $ 179,083
</TABLE>
NOTE 13: LITIGATION AND OTHER CONTINGENCIES
In the normal course of business the Company is subject to various claims. In
the opinion of management, any ultimate liability arising from or related to
these claims should not have a material adverse effect on future results of
operations or the consolidated financial position of the Company.
In 1995 the Company charged to discontinued operations a loss of $3,000,000,
or $.12 per share, as a result of a judgment against the Company in a 1991
saltwater pollution lawsuit. The Company has appealed. The lawsuit involves
claims by farmers in Rice County, Kansas, who alleged that saltwater pollution
of the groundwater by the American Salt Company, a former subsidiary of the
Company, rendered it unfit for irrigation. In August 1995, a jury verdict
awarded the plaintiffs $480,000 in compensatory damages for the period 1989 to
1995, and in October 1995 the plaintiffs were awarded $550,000 in punitive
damages and the judgment was entered. The judgment, together with
approximately $1,130,000 in legal defense costs, $470,000 in related costs,
principally for technical consulting and expert witnesses, and $370,000 for
future legal and related costs, totalled $3,000,000.
F-18
<PAGE> 50
The Company has certain lease obligations which extend to the year 2001 for
businesses sold. In the opinion of management, any ultimate liability arising
from or related to these obligations, to the extent not otherwise provided for,
should not have a material adverse effect on future operations or the
consolidated financial position of the Company.
NOTE 14: SUPPLEMENTAL CASH FLOW INFORMATION
Income tax payments were $55,000 in 1996, $449,000 in 1995 and $414,000 in
1994. Interest payments were $19,685,000 in 1996, $23,286,000 in 1995, and
$21,431,000 in 1994. Noncash investing and financing activities for 1994
included the purchase of land for $891,000 in exchange for a mortgage payable
and the issuance of 68,300 shares of common stock representing restricted stock
grants.
Net cash used for discontinued operations for fiscal 1996, 1995 and 1994 is
primarily for payments related to businesses sold in prior years, which were
treated as discontinued operations.
F-19
<PAGE> 51
QUARTERLY INFORMATION
<TABLE>
- --------------------------------------------------------------------------------------------------------
Fourth Third Second First
Quarter Quarter Quarter Quarter
(12 wks) (12 wks) (12 wks) (16 wks)
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(In thousands, except per share amounts)
1996 (1)
Sales $149,230 $ 83,305 $125,509 $172,708
======== ======== ======== ========
Cost of sales, including buying and occupancy $105,977 $ 66,050 $ 91,303 $119,769
======== ======== ======== ========
Income (loss) from continuing operations
before income taxes $ 682 $(15,133) $ 707 $ 3,004
======== ======== ======== ========
Net income (loss) $ 682 $(14,873) $ 657 $ 2,794
======== ======== ======== ========
Primary earnings (loss) per share(3) $ .03 $ (.61) $ .03 $ .11
======== ======== ======== ========
Fully diluted earnings (loss) per share(3) $ .03 $ (.61) $ .03 $ .11
======== ======== ======== ========
Price range per share as traded on the
New York Stock Exchange $3 7/8-2 1/2 $3-2 3/8 $3 3/4-2 3/8 $4 1/4-3 3/8
1995 (1,2)
Sales $168,555 $ 95,976 $126,741 $201,998
======== ======== ======== ========
Cost of sales, including buying and occupancy $121,219 $ 75,311 $ 94,981 $137,670
======== ======== ======== ========
Income (loss) from continuing operations
before income taxes $ (478) $(12,782) $ (3,555) $ 11,851
======== ======== ======== ========
Loss from discontinued operations $ (207) $ (2,793)
======== ========
Net income (loss) $ (766) $(14,692) $ (2,915)(4) $ 11,034
======== ======== ======== ========
Primary earnings (loss) per share(3):
Income (loss) from continuing operations $ (.02) $ (.49) $ (.12) $ .45
Loss from discontinued operations (.01) (.11)
-------- -------- -------- --------
Net income (loss) $ (.03) $ (.60) $ (.12) $ .45
======== ======== ======== ========
Fully diluted earnings (loss) per share(3):
Income (loss) from continuing operations $ (.02) $ (.49) $ (.12) $ .39
Loss from discontinued operations (.01) (.11)
-------- -------- -------- --------
Net income (loss) $ (.03) $ (.60) $ (.12) $ .39
======== ======== ======== ========
Price range per share as traded on the
New York Stock Exchange $5-3 5/8 $6 1/2-4 3/4 $7 5/8-5 5/8 $7-4 7/8
</TABLE>
(1) Share and per share data have been restated to reflect the 5% stock
dividend declared on February 26, 1997.
(2) Had the actual annual effective tax rate been applied to the quarterly
information, the first quarter net income would have increased by $817, or
$.03 per share, the second quarter net loss would have increased by $40,
with no per share effect, the third quarter net loss would have increased
by $1,090, or $.04 per share, and the fourth quarter net loss would have
decreased by $313, or $.01 per share.
(3) Due to changes in the number of shares outstanding during the year,
quarterly earnings per share do not necessarily add to the totals for the
year.
(4) Includes $600 of income tax reserves no longer required.
F-20
<PAGE> 52
FIVE YEAR FINANCIAL DATA
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands, except per share amounts) 1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Sales of continuing operations $530,752 $593,270 $567,987 $568,602 $557,818
Income (loss) from continuing operations before
income taxes $(10,740) $ (4,964) $ 4,073 $(53,906) $ 1,005
Income (loss) from continuing operations $(10,740) $ (4,339)(1) $ 8,585(2,3) $(55,220)(4) $ 2,853(6)
Net income (loss) $(10,740) $ (7,339) $ 8,585 $(56,060) $ 5,322(7)
Income (loss) per share from continuing operations(8) $ (.44) $ (.18)(1) $ .35(2,3) $ (2.30)(4) $ .13(6)
Net income (loss) per share(8) $ (.44) $ (.30) $ .35 $ (2.33) $ .24(7)
Cash dividends per share $ .00(10) $ .00(10) $ .00(10) $ .38 $ .36
Average shares outstanding(8) 24,414 24,416 24,411 24,027 22,319
Working capital $ 53,269 $ 45,194 $ 73,499 $ 50,525 $130,542
Ratio of current assets to current liabilities 1.6-1 1.5-1 1.7-1 1.4-1 2.4-1
Total year-end assets $386,422 $395,785 $464,858 $478,205 $531,019
Long-term debt, including current portion $195,015 $191,872 $234,005 $256,875 $262,014
Shareholders' equity $ 99,495 $110,228 $117,650 $108,714 $154,358
Long-term debt as a percentage of total capitalization 66% 64% 67% 70% 63%
Ratio of earnings to fixed charges .62 .85 1.27 (.71)(5) 1.00
Number of common shares outstanding(8) 24,414 24,414 24,417 24,347 22,407
Book value per share(8,9) $ 4.16 $ 4.60 $ 4.90 $ 4.55 $ 6.98
Price range per share as traded on the
New York Stock Exchange $4 1/4-2 3/8 $7 5/8-3 5/8 $6 7/8-3 3/4 $10 5/8-5 7/8 $10 1/2-7 3/4
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Includes $600 of income tax reserves no longer required.
(2) Includes a net gain of $3,612 from the sale of the Company's investment in
Sunbelt Nursery Group, Inc.
(3) Includes $1,000 of income tax reserves no longer required.
(4) Includes $22,876 ($15,098 net of taxes) representing a reserve for store
closings and other costs and $17,703 representing the net equity loss and
write-down of the Sunbelt investment.
(5) Pre-tax earnings from continuing operations were inadequate to cover fixed
charges to the extent of $54,266.
(6) Includes $1,914 of income tax reserves no longer required.
(7) Includes $2,850 representing the cumulative effect of the Company's
adoption of SFAS No. 109, "Accounting for Income Taxes".
(8) Share and per share data have been restated to reflect the 5% stock
dividend described in Note 1 of the Notes to Consolidated Financial
Statements.
(9) Includes notes receivable from exercise of stock options.
(10) In lieu of a cash dividend, a 5% stock dividend was distributed.
F-21
<PAGE> 53
Schedule VIII
GENERAL HOST CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEAR ENDED JANUARY 26, 1997
(In thousands)
<TABLE>
<CAPTION>
Additions
-----------------------
Balance, Charged Charged Balance,
Beginning to Costs to Other End
of Year and Expenses Accounts Deductions of Year
--------- ------------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Non-current assets:
Accumulated amortization of
intangible assets $ 9,783 $ 870 $10,653
Accumulated amortization of
deferred mortgage costs 5,076 205 $ 5,063 218
Other liabilities and deferred credits:
Estimated liabilities in connection
with discontinued operations 1,401 87 309 (1) 1,179
Other liabilities 7,148 1,310 3,188 (2) 5,270
</TABLE>
(1) Represents payments of liabilities.
(2) Reclassification to accrued expenses.
F-22
<PAGE> 54
Schedule VIII
GENERAL HOST CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEAR ENDED JANUARY 28, 1996
(In thousands)
<TABLE>
<CAPTION>
Additions
-----------------------
Balance, Charged Charged Balance,
Beginning to Costs to Other End
of Year and Expenses Accounts Deductions of Year
--------- ------------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Deducted from accounts receivable:
Allowance for doubtful accounts $ 200 $ 200
Non-current assets:
Accumulated amortization of
intangible assets 8,818 $ 965 $ 9,783
Accumulated amortization of
deferred mortgage costs 3,938 1,138 5,076
Other liabilities and deferred credits:
Estimated liabilities in connection
with discontinued operations 1,427 132 158 (1) 1,401
Other liabilities 6,048 1,100 7,148
</TABLE>
(1) Represents payments of liabilities.
F-23
<PAGE> 55
Schedule VIII
GENERAL HOST CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
FISCAL YEAR ENDED JANUARY 29, 1995
(In thousands)
<TABLE>
<CAPTION>
Additions
-----------------------
Balance, Charged Charged Balance,
Beginning to Costs to Other End
of Year and Expenses Accounts Deductions of Year
--------- ------------ -------- ---------- ---------
<S> <C> <C> <C> <C> <C>
Deducted from accounts receivable:
Allowance for doubtful accounts $ 200 $ 200
Non-current assets:
Accumulated amortization of
intangible assets 7,881 $ 937 8,818
Accumulated amortization of
deferred mortgage costs 3,258 680 3,938
Other liabilities and deferred credits:
Estimated liabilities in connection
with discontinued operations 1,547 278 398 (1) 1,427
Other liabilities 4,932 1,135 19 (1) 6,048
</TABLE>
(1) Primarily represents reclassification to current assets.
F-24
<PAGE> 56
INDEX OF EXHIBITS FILED HEREWITH
Exhibit No. Description of Exhibit
4.05 (a) Promissory Note in the original principal amount of $741,000
dated as of April 22, 1996 from Frank's Nursery & Crafts, Inc.
("Frank's") to First Union National Bank of North Carolina ("First
Union").
(b) Mortgage, Security Agreement and Assignment of Leases and Rents
dated as of April 22, 1996 by and between Frank's and First Union.
(c) First Amendment to Mortgage and Security Agreement dated as of
May 1, 1996, by and between Frank's and First Union.
(d) Guaranty dated as of April 22, 1996 by the Company in favor of First
Union.
4.06 (a) Mortgage-backed Credit Agreement in the aggregate face amount of
$40,000,000 dated as of November 29, 1996 by and between the
Company, Frank's Nursery & Crafts, Inc. ("Frank's") and Comerica
Bank ("Comerica").
(b) Mortgage-Backed Note in the original principal amount of $25,000,000
dated as of November 29, 1996 by and between the Company, Frank's
and Comerica.
(c) Mortgage, Security Agreement, Assignment of Rents and Leases,
Fixture Filing and Financing Statement dated as of November 29,
1996 by and between Frank's and Comerica.
(d) Guaranty dated as of November 29, 1996 by the Company in favor of
Comerica.
10.03(a) Frank's 1997 Executive Compensation Program.
(b) The Company's 1997 Executive Compensation Program.
11.01 Statement re: computation of per share earnings.
12.01 Statement re: computation of ratios.
21.01 Subsidiaries of the Registrant.
<PAGE> 57
Exhibit No. Description of Exhibit
23.01 Consent of Price Waterhouse LLP.
24.01 Powers of Attorney
(a) Christopher A. Forster Director
(b) S. Joseph Fortunato Director
(c) Philip B. Harley Director
(d) Richard W. Haskel Director
(e) Edward H. Hoornstra Director
(f) Charles B. Johnson Director
(g) Kelly Ashton Sant Albano Director
27.01 Financial Data Schedule.
<PAGE> 1
EXHIBIT 4.05(a)
PROMISSORY NOTE
Dated as of April 22, 1996
$741,000.00
FOR VALUE RECEIVED, the undersigned, FRANK'S NURSERY AND CRAFTS, INC.,
a Michigan corporation, (" Maker"), promises to pay to the order of FIRST UNION
NATIONAL BANK OF NORTH CAROLINA, a national banking association ("Payee"), at
the office of Payee at One First Union Center TW- 8, Charlotte, North Carolina
28288, or at such other place as Payee may designate to Maker in writing from
time to time, the principal sum of SEVEN HUNDRED FORTY-ONE THOUSAND AND NO/100
DOLLARS ($741,000.00), together with interest on so much thereof as is
outstanding and unpaid (the "Loan"), from the date of the advance of the
principal evidenced hereby, at the rate of 9.375% per annum (the "Note Rate"),
in lawful money of the United States of America, which shall at the time of
payment be legal tender in payment of all debts and dues, public and private.
ARTICLE I - SECURED NOTE
The indebtedness evidenced by this Promissory Note (the "Note") and
the obligations created hereby are secured by that certain mortgage and
security agreement (the "Security Instrument") from Maker for the benefit of
Payee, dated of even date herewith, concerning property located in Franklin
County, Ohio. The Security Instrument together with this Note and all other
documents to or of which Payee is a party or beneficiary now or hereafter
evidencing, securing, guarantying, modifying or otherwise relating to the
indebtedness evidenced hereby, are herein referred to collectively as the "Loan
Documents". All of the terms and provisions of the Loan Documents are
incorporated herein by reference. Some of the Loan Documents are to be filed
for record on or about the date hereof in the appropriate public records.
ARTICLE II - TERMS AND CONDITIONS
2.1 Computation of Interest. Interest shall be computed hereunder
based on a 360-day year and based on twelve (12) 30-day months for each full
calendar month and on the actual number of days elapsed for any partial month
in which interest is being calculated. In computing the number of days during
which interest accrues, the day on which funds are initially advanced shall be
included regardless of the time of day such advance is made, and
<PAGE> 2
the day on which funds are repaid shall be included unless repayment is
credited prior to close of business.
2.2 Payment of Principal and Interest. Payments in federal funds
immediately available in the place designated for payment received by Payee
prior to 2:00 p.m. local time at said place of payment shall be credited prior
to close of business, while other payments may, at the option of Payee, not be
credited until immediately available to Payee in federal funds in the place
designated for payment prior to 2:00 p.m. local time at said place of payment
on a day on which Payee is open for business. Such principal and interest
shall be payable in equal consecutive monthly installments of $6,846.72 each,
beginning on the first day of the second full calendar month following the date
of this Note (or on the first day of the first full calendar month following
the date hereof, in the event the advance of the principal amount evidenced by
this Note is the first day of a calendar month), and continuing on the first
day of each and every month thereafter through and including April 1, 2006. On
May 1, 2006 (the "Maturity Date") the entire outstanding principal balance
hereof, together with all accrued but unpaid interest thereon, shall be due and
payable in full.
2.3 Application of Payments. Each such monthly installment shall
be applied first to the payment of accrued interest and then to reduction of
principal.
2.4 Payment of "Short Interest". If the advance of the principal
amount evidenced by this Note is made on a date other than the first day of a
calendar month, then Maker shall pay to Payee contemporaneously with the
execution hereof interest at the Note Rate for a period from the date hereof
through and including the last day of this calendar month.
2.5 Prepayment.
(a) This Note may be prepaid in whole but not in part
(except as otherwise specifically provided herein) at any time after the fourth
(4th) anniversary of this Note provided (i) written notice of such prepayment
is received by Payee not more than ninety (90) days and not less than sixty
(60) days prior to the date of such prepayment, (ii) such prepayment is
accompanied by all interest accrued hereunder and all other sums due hereunder
or under the other Loan Documents, and (iii) if such prepayment occurs after
the fourth (4th) anniversary of this Note but before the date that is nine (9)
years and six (6) months after the date of this Note Payee is paid a prepayment
fee in an amount equal to the greater of (A) one percent (1.0%) of the
principal amount being prepaid, and (B) the positive excess of (1) the present
value ("PV") of all future installments of principal and interest due under
this Note absent any such prepayment including the principal amount due at
maturity (collectively, "All Future Payments"),
2
<PAGE> 3
discounted at an interest rate per annum equal to the sum of (a) the Treasury
Constant Maturity Yield Index published during the second full week preceding
the date on which such premium is payable for instruments having a maturity
coterminous with the remaining term of this Note, and (b) fifty (50) basis
points, over (2) the then outstanding principal balance hereof immediately
before such prepayment [(PV of All Future Payments) - (principal balance at
time of prepayment) = prepayment fee]. "Treasury Constant Maturity Yield
Index" shall mean the average yield for "This Week" as reported by the Federal
Reserve Board in Federal Reserve Statistical Release H.15(519). If there is no
Treasury Constant Maturity Yield Index for instruments having a maturity
coterminous with the remaining term of this Note, then the index shall be equal
to the weighted average yield to maturity of the Treasury Constant Maturity
Yield Indices with maturities next longer and shorter than such remaining
average life to maturity, calculated by averaging (and rounding upward to the
nearest whole multiple of 1/100 of 1% per annum, if the average is not such a
multiple) the yields of the relevant Treasury Constant Maturity Yield Indices
(rounded, if necessary, to the nearest 1/100 of 1% with any figure of 1/200 of
1% or above rounded upward). In the event that any prepayment fee is due
hereunder, Payee shall deliver to Maker a statement setting forth the amount
and determination of the prepayment fee, and, provided that Payee shall have in
good faith applied the formula described above, Maker shall not have the right
to challenge the calculation or the method of calculation set forth in any such
statement in the absence of manifest error, which calculation may be made by
Payee on any day during the fifteen (15) day period preceding the date of such
prepayment. Payee shall not be obligated or required to have actually
reinvested the prepaid principal balance at the Treasury Constant Maturity
Yield Index or otherwise as a condition to receiving the prepayment fee. No
prepayment fee or premium shall be due or payable in connection with any
prepayment of the indebtedness evidenced by this Note made on or after the date
that is nine (9) years and six (6) months after the date of this Note. In
addition to the aforesaid prepayment fee if, upon any such prepayment (whether
prior to or after the date that is nine (9) years and six (6) months after the
date of this Note, the aforesaid prior written notice has not been received by
Payee, the prepayment fee shall be increased by an amount equal to the lesser
of (i) thirty (30) days' unearned interest computed on the outstanding
principal balance of this Note so prepaid and (ii) unearned interest computed
on the outstanding principal balance of this Note so prepaid for the period
from, and including, the date of prepayment through the otherwise stated
maturity date of this Note.
3
<PAGE> 4
(b) Partial prepayments of this Note shall not be
permitted.
(c) The prepayment fees provided above shall be due, to
the extent permitted by applicable law, under any and all circumstances where
all or any portion of this Note is paid prior to the Maturity Date, whether
such prepayment is voluntary or involuntary, even if such prepayment results
from Payee's exercise of its rights upon Maker's default and acceleration of
the maturity date of this Note (irrespective of whether foreclosure proceedings
have been commenced), and shall be in addition to any other sums due hereunder
or under any of the other Loan Documents (as hereinafter defined); provided,
however, that no prepayment fee shall be due or payable in connection with any
prepayment of the indebtedness evidenced by this Note that results from Payee's
election to apply insurance or condemnation proceeds as provided in the
Mortgage to the prepayment of such indebtedness at any time during the loan
term. No tender of a prepayment of this Note with respect to which a
prepayment fee is due shall be effective unless such prepayment is accompanied
by the prepayment fee. If the indebtedness of this Note shall have been
declared due and payable by Payee pursuant to Article III hereof, due to a
default by Maker, then any tender of payment of such indebtedness made prior to
the first anniversary date hereof must include a prepayment fee computed as
provided in this Article II plus an additional prepayment fee of three percent
(3%) of the principal balance of this Note.
ARTICLE III - DEFAULT
3.1 Events of Default. It is hereby expressly agreed that should
any default occur in the payment of principal or interest as stipulated above
and such payment is not made within five (5) days of the date such payment is
due (provided that no grace period is provided for the payment of principal and
interest due on the Maturity Date), or should any other default occur under any
of the Loan Documents that is not cured within any applicable grace or cure
period, then a default shall exist hereunder, and in such event the
indebtedness evidenced hereby, including all sums advanced or accrued hereunder
or under any other Loan Document, and all unpaid interest accrued thereon,
shall, at the option of Payee and without notice to Maker, at once become due
and payable and may be collected forthwith, whether or not there has been a
prior demand for payment and regardless of the stipulated date of maturity.
3.2 Late Charges. In the event that any payment is not received
by Payee on the date when due (subject to the applicable grace period), then in
addition to any default interest payments due hereunder, Maker shall also pay
to Payee a late charge in an
4
<PAGE> 5
amount equal to five percent (5%) of the amount of such overdue payment.
3.3 Default Interest Rate. So long as any default exists
hereunder, regardless of whether or not there has been an acceleration of the
indebtedness evidenced hereby, and at all times after maturity of the
indebtedness evidenced hereby (whether by acceleration or otherwise), interest
shall accrue on the outstanding principal balance of this Note at a rate per
annum equal to three percent (3%) in excess of the Note Rate, or if such
increased rate of interest may not be collected under applicable law, then at
the maximum rate of interest, if any, which may be collected from Maker under
applicable law (the "Default Interest Rate"), and such default interest shall
be immediately due and payable.
3.4 Maker's Agreements. Maker acknowledges that it would be
extremely difficult or impracticable to determine Payee's actual damages
resulting from any late payment or default, and such late charges and default
interest are reasonable estimates of those damages and do not constitute a
penalty. The remedies of Payee in this Note or in the Loan Documents, or at
law or in equity, shall be cumulative and concurrent, and may be pursued
singly, successively or together, in Payee's discretion.
3.5 Maker to Pay Costs. In the event this Note, or any part
hereof, is collected by or through an attorney-at-law, Maker agrees to pay all
costs of collection, including, but not limited to, reasonable attorneys' fees.
3.6 Intentionally omitted.
ARTICLE IV - GENERAL CONDITIONS
4.1 No Waiver; Amendment. No failure to accelerate the debt
evidenced hereby by reason of default hereunder, acceptance of a partial or
past due payment, or indulgences granted from time to time shall be construed
(i) as a novation of this Note or as a reinstatement of the indebtedness
evidenced hereby or as a waiver of such right of acceleration or of the right
of Payee thereafter to insist upon strict compliance with the terms of this
Note, or (ii) to prevent the exercise of such right of acceleration or any
other right granted hereunder or by any applicable laws; and Maker hereby
expressly waives the benefit of any statute or rule of law or equity now
provided, or that may hereafter be provided, which would produce a result
contrary to or in conflict with the foregoing. No extension of the time for
the payment of this Note or any installment due hereunder, made by agreement
with any person now or hereafter liable for the payment of this Note shall
operate to release, discharge, modify, change or affect the original liability
of Maker under this Note, either in whole or in part
5
<PAGE> 6
unless Payee agrees otherwise in writing. This Note may not be changed orally,
but only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, modification or discharge is sought.
4.2 Waivers. Presentment for payment, demand, protest and notice
of demand, protest and nonpayment and all other notices are hereby waived by
Maker. Maker hereby further waives and renounces, to the fullest extent
permitted by law, all rights to the benefits of any moratorium, reinstatement,
marshalling, forbearance, valuation, stay, extension, redemption, appraisement,
exemption and homestead now or hereafter provided by the Constitution and laws
of the United States of America and of each state thereof, both as to itself
and in and to all of its property, real and personal, against the enforcement
and collection of the obligations evidenced by this Note or the other Loan
Documents.
4.3 Limit of Validity. The provisions of this Note and of all
agreements between Maker and Payee with respect to the Loan, whether now
existing or hereafter arising and whether written or oral, including, but not
limited to, the Loan Documents, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of this Note or otherwise, shall the amount contracted for,
charged, taken, reserved, paid or agreed to be paid ("Interest") to Payee for
the use, forbearance or detention of the money loaned under this Note exceed
the maximum amount permissible under applicable law. If, from any circumstance
whatsoever, performance or fulfillment of any provision hereof or of any
agreement between Maker and Payee shall, at the time performance or fulfillment
of such provision shall be due, exceed the limit for Interest prescribed by law
or otherwise transcend the limit of validity prescribed by applicable law, then
ipso facto the obligation to be performed or fulfilled shall be reduced to such
limit, and if, from any circumstance whatsoever, Payee shall ever receive
anything of value deemed Interest by applicable law in excess of the maximum
lawful amount, an amount equal to any excessive Interest shall be applied to
the reduction of the principal balance owing under this Note in the inverse
order of its maturity (whether or not then due) or at the option of Payee be
paid over to Maker, and not to the payment of Interest. All Interest
(including any amounts or payments judicially or otherwise under the law deemed
to be Interest) contracted for, charged, taken, reserved, paid or agreed to be
paid to Payee shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full term of this Note, including
any extensions and renewals hereof until payment in full of the principal
balance of this Note so that the Interest thereon for such full term will not
exceed at any time the maximum amount permitted by applicable law. To the
extent United States federal law permits a greater amount of interest than is
permitted under the law of the State in which the Mortgaged Property is
located, Payee will rely on United Stated federal law for the purpose of
6
<PAGE> 7
determining the maximum amount permitted by applicable law. Additionally, to
the extent permitted by applicable law now or hereafter in effect, Payee may,
at its option and from time to time, implement any other method of computing
the maximum lawful rate under the law of the State in which the Mortgaged
Property is located or under other applicable law by giving notice, if
required, to Maker as provided by applicable law now or hereafter in effect.
This Section 4.3 will control all agreements with respect to the Loan between
Maker and Payee.
4.4 Use of Funds. Maker hereby warrants, represents and covenants
that no funds disbursed hereunder shall be used for personal, family or
household purposes.
4.5 Unconditional Payment. Maker is and shall be obligated to pay
principal, interest and any and all other amounts that become payable hereunder
or under the other Loan Documents absolutely and unconditionally and without
any abatement, postponement, diminution or deduction and without any reduction
for counterclaim or setoff. In the event that at any time any payment received
by Payee hereunder shall be deemed by a court of competent jurisdiction to have
been a voidable preference or fraudulent conveyance under any bankruptcy,
insolvency or other debtor relief law, then the obligation to make such payment
shall survive any cancellation or satisfaction of this Note or return thereof
to Maker and shall not be discharged or satisfied with any prior payment
thereof or cancellation of this Note, but shall remain a valid and binding
obligation enforceable in accordance with the terms and provisions hereof, and
such payment shall be immediately due and payable upon demand.
4.6 Governing Law. THIS NOTE SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED ACCORDING TO THE LAWS OF THE STATE IN WHICH THE MORTGAGED PROPERTY IS
LOCATED.
ARTICLE V - MISCELLANEOUS PROVISIONS
The terms and provisions hereof shall be binding upon and inure to the
benefit of Maker and Payee and their respective heirs, executors, legal
representatives, successors, successors-in-title and assigns, whether by
voluntary action of the parties or by operation of law. As used herein, the
terms "Maker" and "Payee" shall be deemed to include their respective heirs,
executors, legal representatives, successors, successors-in-title and assigns,
whether by voluntary action of the parties or by operation of law. If Maker
consists of more than one person or entity, each shall be jointly and severally
liable to perform the obligations of Maker under this Note. All personal
pronouns used herein, whether used in the masculine, feminine or neuter gender,
shall include all other genders; the singular shall include the plural and vice
versa. Titles of articles and sections are for convenience only and in no way
define, limit, amplify or describe the scope or
7
<PAGE> 8
intent of any provisions hereof. Time is of the essence with respect to all
provisions of this Note. This Note and the other Loan Documents contain the
entire agreements between the parties hereto relating to the subject matter
hereof and thereof and all prior agreements relative hereto and thereto that
are not contained herein or therein are terminated.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE> 9
Maker's Tax Identification No.:
38-156-1374
- --------------------
IN WITNESS WHEREOF, Maker has executed this Note as of the date first
written above.
MAKER:
FRANK'S NURSERY AND CRAFTS, INC., a
Michigan corporation
By: Robert M. Lovejoy, Jr.
------------------------------------
Name: Robert M. Lovejoy, Jr.
Title: Vice President and Treasurer
<PAGE> 1
EXHIBIT 4.05(b)
================================================================================
FRANK'S NURSERY AND CRAFTS, INC.,
as Mortgagor
to
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Mortgagee
---------------------------
MORTGAGE AND SECURITY AGREEMENT
---------------------------
Date: April 22, 1996
PREPARED BY AND UPON RECORDATION RETURN TO:
Mitchell Fenton, Esq.
Graham & James LLP
885 Third Avenue
New York, New York 10022
================================================================================
<PAGE> 2
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (this "Mortgage") is made as of
April 22, 1996 by FRANK'S NURSERY AND CRAFTS, INC., a Michigan corporation, as
Mortgagor ("Mortgagor"), whose address is 6501 East Nevada, Detroit, MI
48234-2864, to FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a national banking
association, as Mortgagee ("Mortgagee"), whose address is One First Union
Center TW-8, Charlotte, North Carolina 28288.
W I T N E S S E T H:
THAT FOR AND IN CONSIDERATION OF THE SUM OF TEN AND NO/100 DOLLARS
($10.00), AND OTHER VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF
WHICH ARE HEREBY ACKNOWLEDGED, MORTGAGOR HEREBY IRREVOCABLY MORTGAGES, GRANTS,
BARGAINS, SELLS, CONVEYS, TRANSFERS, PLEDGES, SETS OVER AND ASSIGNS, with power
of sale, all of Mortgagor's estate, right, title and interest in, to and under
any and all of the following described property, whether now owned or hereafter
acquired (collectively, the "Mortgaged Property"):
(A) All that certain real property situated in the County of
Franklin, State of Ohio, more particularly described on Exhibit A attached
hereto and incorporated herein by this reference (the "Premises"), together
with all of the easements, rights, privileges, franchises, tenements,
hereditaments and appurtenances now or hereafter thereunto belonging or in any
way appertaining thereto, and all of the estate, right, title, interest, claim
and demand whatsoever of Mortgagor therein or thereto, either at law or in
equity, in possession or in expectancy, now or hereafter acquired;
(B) All structures, buildings and improvements of every kind and
description now or at any time hereafter located or placed on the Premises (the
"Improvements");
(C) All furniture, furnishings, fixtures, goods, equipment or
personal property owned by Mortgagor and now or hereafter located on, attached
to or used in and about the Improvements, including, but not limited to, all
machines, engines, boilers, dynamos, elevators, stokers, tanks, cabinets,
awnings, screens, shades, blinds, carpets, draperies, lawn mowers, and all
appliances, plumbing, heating, air conditioning, lighting, ventilating,
refrigerating, disposal and incinerating equipment, and all fixtures and
appurtenances thereto, and such other goods and chattels and personal property
owned by Mortgagor as are now or hereafter used or furnished in operating the
Improvements or the activities conducted therein (the "Personal Property"),
excluding, however, any inventory, fork lifts, computers, pallet jacks, skids,
push carts, display carts, registers or such other Personal
<PAGE> 3
Property used in the operation of Mortgagor's retail business and all building
materials and equipment now or hereafter situated on or about the Premises or
Improvements, and all warranties and guaranties relating thereto, and all
additions thereto and substitutions and replacements therefor (exclusive of any
of the foregoing owned or leased by tenants of space in the Improvements);
(D) All easements, rights-of-way, strips and gores of land,
vaults, streets, ways, alleys, passages, sewer rights, and other emblements now
or hereafter located on the Premises or under or above the same or any part or
parcel thereof, and all estates, rights, titles, interests, tenements,
hereditaments and appurtenances, reversions and remainders whatsoever, in any
way belonging, relating or appertaining to the Mortgaged Property or any part
thereof, or that hereafter shall in any way belong, relate or be appurtenant
thereto, whether now owned or hereafter acquired by Mortgagor;
(E) All water, ditches, wells, reservoirs and drains and all
water, ditch, well, reservoir and drainage rights that are appurtenant to,
located on, under or above or used in connection with the Premises or the
Improvements, or any part thereof, whether now existing or hereafter created or
acquired;
(F) All minerals, crops, timber, trees, shrubs, flowers and
landscaping features now or hereafter located on, under or above the Premises;
(G) All cash funds, deposit accounts and other rights and evidence
of rights to cash, now or hereafter created or held by Mortgagee pursuant to
this Mortgage or any other of the Loan Documents (as hereinafter defined),
including, without limitation, all funds now or hereafter on deposit in the
Impound Account, the Payment Reserve, the Replacement Reserve and the Repair
and Remediation Reserve (each as hereinafter defined);
(H) All leases, licenses, concessions and occupancy agreements of
the Premises or the Improvements (collectively, "Leases"), whether written or
oral, now or hereafter entered into and all rents, royalties, issues, profits,
bonus money, revenue, income, rights and other benefits (collectively, the
"Rents") of the Premises or the Improvements, now or hereafter arising from the
use or enjoyment of all or any portion thereof or from any present or future
lease (including, without limitation, oil, gas and mineral leases), license,
concession, occupancy agreement or other agreement pertaining thereto or
arising from any of the Leases or any of the General Intangibles (as
hereinafter defined) and all cash or securities deposited to secure performance
by the tenants, lessees or licensees, as applicable, of their obligations under
any such Leases, whether said cash or securities are to be held until the
expiration of the terms of said Leases or applied to one or more of the
installments of rent coming due prior to the expiration of said terms, subject,
however, to the provisions contained in Section 1.11 hereinbelow;
2
<PAGE> 4
(I) All contracts and agreements now or hereafter entered into
covering any part of the Premises or the Improvements (including, without
limitation, all Leases) and all revenue, income and other benefits thereof,
including, without limitation, management agreements, service contracts,
maintenance contracts, equipment leases, personal property leases and any
contracts or documents relating to construction on any part of the Premises or
the Improvements (including plans, drawings, surveys, tests, reports, bonds and
governmental approvals) or to the management or operation of any part of the
Premises or the Improvements;
(J) All present and future monetary deposits given to any public
or private utility with respect to utility services furnished to any part of
the Premises or the Improvements;
(K) All present and future funds, accounts, instruments, accounts
receivable, documents, causes of action, claims, general intangibles
(excluding, however, trademarks, trade names, service marks and symbols now or
hereafter used in connection with the operation of Mortgagor's retail business
on the Premises or the Improvements), including all rights, interest and
privileges that Mortgagor has or may have as developer or declarant under any
covenants, restrictions or declarations now or hereafter relating to the
Premises or the Improvements and all notes or chattel paper now or hereafter
arising from or by virtue of any transactions related to the Premises or the
Improvements (collectively, the "General Intangibles");
(L) All water taps, sewer taps, certificates of occupancy,
permits, licenses, franchises, certificates, consents, approvals and other
rights and privileges now or hereafter obtained in connection with the Premises
or the Improvements and all present and future warranties and guaranties
relating to the Improvements or to any equipment, fixtures, furniture,
furnishings, personal property or components of any of the foregoing now or
hereafter located or installed on the Premises or the Improvements;
(M) All building materials, supplies and equipment now or
hereafter placed on the Premises or in the Improvements and all architectural
renderings, models, drawings, plans, specifications, studies and data now or
hereafter relating to the Premises or the Improvements;
(N) All right, title and interest of Mortgagor in any insurance
policies or binders now or hereafter relating to the Mortgaged Property (but
only that portion of such interest that relates to the Mortgaged Property),
including any unearned premiums thereon;
(O) With respect to the Mortgaged Property, all proceeds,
products, substitutions and accessions (including claims and demands therefor)
of the conversion, voluntary or involuntary, of any of the foregoing into cash
or liquidated claims, including,
3
<PAGE> 5
without limitation, proceeds of insurance and condemnation awards; and
(P) All other or greater rights and interests of every nature in
the Premises or the Improvements and in the possession or use thereof and
income therefrom, whether now owned or hereafter acquired by Mortgagor.
FOR THE PURPOSE OF SECURING:
(1) The debt evidenced by that certain Promissory Note (such
Promissory Note, together with any and all renewals, modifications,
consolidations and extensions thereof, is hereinafter referred to as the
"Note") of even date with this Mortgage, made by Mortgagor payable to the order
of Mortgagee in the principal face amount of SEVEN HUNDRED FORTY-ONE THOUSAND
AND NO/100 DOLLARS ($741,000.00), together with interest as therein provided;
(2) The full and prompt payment and performance of all of the
provisions, agreements, covenants and obligations herein contained and
contained in any other agreements, documents or instruments now or hereafter
evidencing, securing, guarantying, indemnifying or otherwise relating to the
Debt (the Note, this Mortgage, and such other agreements, documents and
instruments, together with any and all renewals, amendments, extensions and
modifications thereof, are hereinafter collectively referred to as the "Loan
Documents") and the payment of all other sums therein covenanted to be paid;
(3) Any and all additional advances made by Mortgagee to protect
or preserve the Mortgaged Property or the lien or security interest created
hereby on the Mortgaged Property, or for taxes, assessments or insurance
premiums as hereinafter provided or for performance of any of Mortgagor's
obligations hereunder or under the other Loan Documents or for any other
purpose provided herein or in the other Loan Documents (whether or not the
original Mortgagor remains the owner of the Mortgaged Property at the time of
such advances); and
(4) Any and all other indebtedness now owing or that may hereafter
be owing by Mortgagor to Mortgagee in connection with the Mortgaged Property,
however and whenever incurred or evidenced, whether express or implied, direct
or indirect, absolute or contingent, or due or to become due, and all renewals,
modifications, consolidations, replacements and extensions thereof, it being
contemplated by Mortgagor and Mortgagee that Mortgagor may hereafter become so
indebted to Mortgagee.
(All of the sums referred to in Paragraphs (1) through (4) above are herein
referred to as the "Debt").
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee, its
successors and assigns forever, and Mortgagor does hereby bind itself, its
successors and assigns, to WARRANT AND FOREVER DEFEND the title to the
Mortgaged Property, subject to the Permitted
4
<PAGE> 6
Encumbrances (as hereinafter defined), to Mortgagee against every person
whomsoever lawfully claiming or to claim the same or any part thereof;
PROVIDED, HOWEVER, that if the principal and interest and all other
sums due or to become due under the Note, including, without limitation, any
prepayment fees required pursuant to the terms of the Note, shall have been
paid at the time and in the manner stipulated therein and the Debt shall have
been paid and all other covenants contained in the Loan Documents shall have
been performed, then, in such case, the liens, security interests, estates and
rights granted by this Mortgage shall be satisfied and the estate, right, title
and interest of Mortgagee in the Mortgaged Property shall cease, and upon
payment to Mortgagee of all costs and expenses incurred for the preparation of
the release hereinafter referenced and all recording costs if allowed by law,
Mortgagee shall promptly satisfy and release this Mortgage of record and the
lien hereof by proper instrument.
ARTICLE I
COVENANTS OF MORTGAGOR
For the purpose of further securing the Debt and for the protection of
the security of this Mortgage, for so long as the Debt or any part thereof
remains unpaid, Mortgagor covenants and agrees as follows:
1.1 Warranties of Mortgagor. Mortgagor, for itself and its
successors and assigns, does hereby represent, warrant and covenant to and with
Mortgagee, its successors and assigns, that:
(a) Mortgagor has good, marketable and indefeasible fee
simple title to the Mortgaged Property, subject only to those matters expressly
set forth as exceptions to or subordinate matters in the title insurance policy
insuring the lien of this Mortgage (such items being the "Permitted
Encumbrances"), and has full power and lawful authority to grant, bargain,
sell, convey, assign, transfer, encumber and mortgage its interest in the
Mortgaged Property in the manner and form hereby done or intended. Mortgagor
will preserve its interest in and title to the Mortgaged Property and will
forever warrant and defend the same to Mortgagee against any and all claims
whatsoever and will forever warrant and defend the validity and priority of the
lien and security interest created herein against the claims of all persons and
parties whomsoever, subject to the Permitted Encumbrances. The foregoing
warranty of title shall survive the foreclosure of this Mortgage and shall
inure to the benefit of and be enforceable by Mortgagee in the event Mortgagee
acquires title to the Mortgaged Property pursuant to any foreclosure;
(b) No bankruptcy or insolvency proceedings are pending
or contemplated by Mortgagor or, to the best knowledge of
5
<PAGE> 7
Mortgagor, against Mortgagor or by or against any endorser, cosigner or
guarantor of the Note;
(c) All reports, certificates, affidavits, statements and
other data furnished by Mortgagor to Mortgagee in connection with the loan
evidenced by the Note are true and correct in all material respects and do not
omit to state any fact or circumstance necessary to make the statements
contained therein not misleading;
(d) The execution, delivery and performance of this
Mortgage, the Note and all of the other Loan Documents have been duly
authorized by all necessary action to be, and are binding and enforceable
against Mortgagor in accordance with the respective terms thereof and do not
contravene, result in a breach of or constitute a default (nor upon the giving
of notice or the passage of time or both will same constitute a default) under
the partnership agreement, articles of incorporation or other organizational
documents of Mortgagor or, to the best knowledge of Mortgagor, any contract or
agreement of any nature to which Mortgagor is a party or by which Mortgagor or
any of its property may be bound and do not violate or contravene any law,
order, decree, rule or regulation to which Mortgagor is subject;
(e) To the best knowledge of Mortgagor, the Premises and
the Improvements and the intended use thereof by Mortgagor comply with all
applicable restrictive covenants, zoning ordinances, subdivision and building
codes, flood disaster laws, applicable health and environmental laws and
regulations and all other ordinances, orders or requirements issued by any
state, federal or municipal authorities having or claiming jurisdiction over
the Mortgaged Property. To the best knowledge of Mortgagor, the Premises and
Improvements constitute a separate tax parcel for purposes of ad valorem
taxation. The Premises and Improvements do not require any rights over, or
restrictions against, other property in order to comply with any of the
aforesaid governmental ordinances, orders or requirements;
(f) All utility services necessary and sufficient for the
full use, occupancy, operation and disposition of the Premises and the
Improvements for their current purposes are available to the Mortgaged
Property, including water, storm sewer, sanitary sewer, gas, electric, cable
and telephone facilities, through public rights-of-way or perpetual private
easements approved by Mortgagee;
(g) All streets, roads, highways, bridges and waterways
necessary for access to and full use, occupancy, operation and disposition of
the Premises and the Improvements have been completed, to the best knowledge of
Mortgagor have been dedicated to and accepted by the appropriate municipal
authority, and are open and available to the Premises and the Improvements
without further condition or cost to Mortgagor;
6
<PAGE> 8
(h) All curb cuts, driveways and traffic signals shown on
the survey delivered to Mortgagee prior to the execution and delivery of this
Mortgage are existing and to the best knowledge of Mortgagor, have been fully
approved by the appropriate governmental authority;
(i) There are no judicial, administrative, mediation or
arbitration actions, suits or proceedings pending or to the best knowledge of
Mortgagor, threatened against or affecting Mortgagor (or, if Mortgagor is a
partnership, any of its general partners) or the Mortgaged Property which, if
adversely determined, would materially impair either the Mortgaged Property or
Mortgagor's ability to perform the covenants or obligations required to be
performed under the Loan Documents;
(j) To the best knowledge of Mortgagor, the Mortgaged
Property is free from delinquent water charges, sewer rents, taxes and
assessments;
(k) As of the date of this Mortgage, the Mortgaged
Property is free from unrepaired damage caused by fire, flood, accident or
other casualty;
(l) As of the date of this Mortgage, no part of the
Premises or the Improvements has been taken in condemnation, eminent domain or
like proceeding nor is any such proceeding pending or, to the best knowledge of
Mortgagor, threatened or contemplated;
(m) Mortgagor possesses all franchises, patents,
copyrights, trademarks, trade names, licenses and permits necessary for the
conduct of its business substantially as now conducted;
(n) The Improvements are structurally sound, in good
repair and, to the best knowledge of Mortgagor, are free of defects in
materials and workmanship and have been constructed and installed in
substantial compliance with the plans and specifications relating thereto. All
major building systems located within the Improvements, including, without
limitation, the heating and air conditioning systems and the electrical and
plumbing systems, are in good working order and condition;
(o) Mortgagor has delivered to Mortgagee true, correct
and complete copies of all Leases and all amendments thereto or modifications
thereof;
(p) Mortgagor and the Mortgaged Property are free from
any past due obligations for sales and payroll taxes;
(q) There are no security agreements or financing
statements affecting any of the Mortgaged Property other than (i) as disclosed
in writing by Mortgagor to Mortgagee prior to the date hereof and (ii) the
security agreements and financing statements created in favor of Mortgagee; and
7
<PAGE> 9
(r) There are no Leases affecting the Mortgaged Property
as of the date hereof.
1.2 Defense of Title. If, while this Mortgage is in force, the
title to the Mortgaged Property or the interest of Mortgagee therein shall be
the subject, directly or indirectly, of any action at law or in equity, or be
attached directly or indirectly, or endangered, clouded or adversely affected
in any manner, Mortgagor, at Mortgagor's expense, shall take all necessary and
proper steps for the defense of said title or interest, including the
employment of counsel (which counsel shall be approved by Mortgagee at anytime
during an Event of Default hereunder), the prosecution or defense of
litigation, and the compromise or discharge of claims made against said title
or interest. Notwithstanding the foregoing, in the event that Mortgagee
determines that Mortgagor is not adequately performing its obligations under
this Section, Mortgagee may, without limiting or waiving any other rights or
remedies of Mortgagee hereunder, take such steps with respect thereto as
Mortgagee shall deem necessary or proper and any and all costs and expenses
incurred by Mortgagee in connection therewith, together with interest thereon
at the Default Interest Rate (as defined in the Note) from the date incurred by
Mortgagee until actually paid by Mortgagor, shall be immediately paid by
Mortgagor on demand and shall be secured by this Mortgage and by all of the
other Loan Documents securing all or any part of the indebtedness evidenced by
the Note.
1.3 Performance of Obligations. Mortgagor shall pay when due the
principal of and the interest on the Debt in accordance with the terms of the
Note. Mortgagor shall also pay all charges, fees and other sums required to be
paid by Mortgagor as provided in the Loan Documents, in accordance with the
terms of the Loan Documents, and shall observe, perform and discharge all
obligations, covenants and agreements to be observed, performed or discharged
by Mortgagor set forth in the Loan Documents in accordance with their terms.
Further, Mortgagor shall promptly and strictly perform and comply with all
covenants, conditions, obligations and prohibitions required of Mortgagor in
connection with any other document or instrument affecting title to the
Mortgaged Property, or any part thereof, regardless of whether such document or
instrument is superior or subordinate to this Mortgage.
1.4 Insurance. Mortgagor shall, at Mortgagor's expense, maintain
in force and effect on the Mortgaged Property at all times while this Mortgage
continues in effect the following insurance:
(a) Insurance against loss or damage to the Mortgaged
Property by fire, windstorm, tornado and hail and against loss and damage by
such other, further and additional risks as may be now or hereafter embraced by
an "all-risk" form of insurance policy. The amount of such insurance shall be
not less than one hundred percent (100%) of the full replacement cost of the
Improvements, furniture, furnishings, fixtures, equipment and other items
(whether personalty or fixtures) included in the Mortgaged Property and
8
<PAGE> 10
owned by Mortgagor from time to time, without reduction for depreciation. The
determination of the replacement cost amount shall be adjusted annually to
comply with the requirements of the insurer issuing such coverage or, at
Mortgagee's election, by reference to such indices, appraisals or information
as Mortgagee determines in its reasonable discretion. Full replacement cost,
as used herein, means, with respect to the Improvements, the cost of replacing
the Improvements without regard to deduction for depreciation, exclusive of the
cost of excavations, foundations and footings below the lowest basement floor,
and means, with respect to such furniture, furnishings, fixtures, equipment and
other items, the cost of replacing the same, in each cases, with inflation
guard coverage to reflect the effect of inflation. Each policy or policies
shall contain a replacement cost endorsement and either an agreed amount
endorsement (to avoid the operation of any co-insurance provisions) or a waiver
of any co-insurance provisions, all subject to Mortgagee's approval.
(b) Commercial comprehensive general liability insurance
for personal injury, bodily injury, death and property damage liability in
amounts not less than $3,000,000.00, (inclusive of umbrella coverage) combined
single limit "per occurrence" for bodily injury, personal injury and property
damage. This policy must contain, but not be limited to, coverage for premises
and operations liability, products and completed operations liability,
contractual liability, hired and non-owned automobile liability, personal
injury liability and property damage liability. During any construction on the
Premises, Mortgagor's general contractor for such construction shall also
provide the insurance required in this Subsection (b). Mortgagee hereby
retains the right to periodically review the amount of said liability insurance
being maintained by Mortgagor and to require an increase in the amount of said
liability insurance should Mortgagee deem an increase to be reasonably prudent
under then existing circumstances.
(c) 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 the
Improvements, which policies shall insure against physical damage to and loss
of occupancy and use of the Improvements arising out of an accident or
breakdown covered thereunder.
(d) If the Premises or any part thereof is identified by
the Secretary of Housing and Urban Development as being situated in an area now
or subsequently designated as having special flood hazards (including, without
limitation, those areas designated as Zone A or Zone V), flood insurance in an
amount equal to the lesser of: (a) the minimum amount required, under the terms
of coverage, to compensate for any damage or loss on a replacement basis (or
the unpaid balance of the mortgage if replacement cost coverage is not
available for the type of building insured); or (b) the maximum
9
<PAGE> 11
insurance available under the appropriate National Flood Insurance
Administration program.
(e) During the period of any construction on the Premises
or renovation or alteration of the Improvements, a so-called "Builder's
All-Risk Completed Value" or "Course of Construction" insurance policy in
non-reporting form for any Improvements under construction, renovation or
alteration in an amount approved by Mortgagee and Worker's Compensation
Insurance covering all persons engaged in such construction, renovation or
alteration.
(f) Loss of rents or loss of business income insurance in
amounts sufficient to compensate Mortgagor for all Rents during a period of not
less than one year in which the Mortgaged Property may be damaged or destroyed.
(g) Such other insurance on the Mortgaged Property or on
any replacements or substitutions thereof or additions thereto as may from time
to time be required by Mortgagee against other insurable hazards or casualties
that at the time are commonly insured against in the case of property similarly
situated, due regard being given to the height and type of buildings, their
construction, location, use and occupancy.
All such insurance shall (i) be with insurers authorized to do
business in the state within which the Premises is located and who have and
maintain a rating of at least (A) A from Standard & Poors or (B) A: VIII from
A.M. Best, (ii) contain the complete address of the Premises (or a complete
legal description), (iii) be for terms of at least one year, (iv) contain
deductibles that do not exceed $50,000.00 or, with respect to the policy
described in clause (d) above, $3,000, and (v) be subject to the approval of
Mortgagee as to insurance companies, amounts, content, forms of policies,
method by which premiums are paid and expiration dates.
Mortgagor shall as of the date hereof deliver to Mortgagee evidence
that said insurance policies have been paid current as of the date hereof and
certified copies of such insurance policies and original certificates of
insurance signed by an authorized agent evidencing such insurance satisfactory
to Mortgagee. Mortgagor shall renew all such insurance and deliver to
Mortgagee certificates evidencing such renewals at least thirty (30) days
before any such insurance shall expire. Without limiting the required
endorsements to insurance policies, Mortgagor further agrees that all such
policies include a standard, non-contributory, mortgagee clause naming:
First Union National Bank of North Carolina, its Successors
and Assigns ATIMA
c/o First Union Mortgage Corporation
P.O. Box 20068
Charlotte, NC 28202.
10
<PAGE> 12
Mortgagee, its successors and assigns, (a) as an additional insured
under all liability insurance policies, (b) as the first mortgagee on all
property insurance policies and (c) as the lender's loss payee on all loss of
rents or loss of business income insurance policies. Mortgagor further agrees
that all such insurance policies: (i) shall provide for at least thirty (30)
days' prior written notice to Mortgagee prior to any cancellation or
termination thereof and prior to any modification thereof that affects the
interest of Mortgagee; (ii) shall contain an endorsement or agreement by the
insurer that any loss shall be payable to Mortgagee in accordance with the
terms of such policy notwithstanding any act or negligence of Mortgagor that
might otherwise result in forfeiture of such insurance; (iii) shall either name
Mortgagee as an additional insured or waive all rights of subrogation against
Mortgagee; (iv) in the event that the Mortgaged Property constitutes a legal
non-conforming use, shall include an ordinance or law coverage endorsement that
will contain "Demolition Cost", "Loss to the Undamaged Portion of the Building"
and "Increased Cost of Construction" coverages; (v) in the event that any Lease
requires that any insurance policies affecting the Mortgaged Property contain a
waiver of subrogation provision, shall, either by their terms or by
endorsement, provide such a waiver; and (vi) may be in the form of blanket
policies provided that such policies contain an endorsement to the effect that
the coverage provided thereby will not be affected by the failure to pay any
portion of the premium therefor that is not allocable to the Mortgaged Property
or by any other action not relating to the Mortgaged Property that would
otherwise permit the issuer thereof to cancel the coverage thereof. The
delivery to Mortgagee of the insurance policies or the certificates of
insurance as provided above shall constitute an assignment of all proceeds
payable under such insurance policies relating to the Mortgaged Property by
Mortgagor to Mortgagee as further security for the Debt. In the event of
foreclosure of this Mortgage, or other transfer of title to the Mortgaged
Property in extinguishment in whole or in part of the Debt, all right, title
and interest of Mortgagor in and to all proceeds payable under such policies
then in force concerning the Mortgaged Property shall thereupon vest in the
purchaser at such foreclosure, or in Mortgagee or other transferee in the event
of such other transfer of title. Approval of any insurance by Mortgagee shall
not be a representation of the solvency of any insurer or the sufficiency of
any amount of insurance. In the event Mortgagor fails to provide, maintain,
keep in force or deliver and furnish to Mortgagee the policies of insurance
required by this Mortgage or evidence of their renewal as required herein,
Mortgagee may, but shall not be obligated to, procure such insurance and
Mortgagor shall pay all amounts advanced by Mortgagee therefor, together with
interest thereon at the Default Interest Rate from and after the date advanced
by Mortgagee until actually repaid by Mortgagor, promptly upon demand by
Mortgagee. Any amounts so advanced by Mortgagee, together with interest
thereon, shall be secured by this Mortgage and by all of the other Loan
Documents securing all or any part of the Debt evidenced by the Note.
Mortgagee shall not be responsible for nor incur any
11
<PAGE> 13
liability for the insolvency of the insurer or other failure of the insurer to
perform, even though Mortgagee has caused the insurance to be placed with the
insurer after failure of Mortgagor to furnish such insurance.
1.5 Payment of Taxes. Mortgagor shall pay or cause to be paid,
except to the extent provision is actually made therefor pursuant to Section
1.6 of this Mortgage, all taxes and assessments that are or may become a lien
on the Mortgaged Property or that are assessed against or imposed upon the
Mortgaged Property. Mortgagor shall furnish Mortgagee with receipts (or if
receipts are not immediately available, with copies of canceled checks
evidencing payment with receipts to follow promptly after they become
available) showing payment of such taxes and assessments at least fifteen (15)
days prior to the applicable delinquency date therefor. Notwithstanding the
foregoing, Mortgagor may in good faith, by appropriate proceedings and upon
notice to Mortgagee, contest the validity, applicability or amount of any
asserted tax or assessment so long as (a) such contest is diligently pursued,
(b) Mortgagee determines, in its subjective opinion, that such contest suspends
the obligation to pay the tax and that nonpayment of such tax or assessment
will not result in the sale, loss, forfeiture or diminution of the Mortgaged
Property or any part thereof or any interest of Mortgagee therein, and (c)
prior to the earlier of the commencement of such contest or the delinquency
date of the asserted tax or assessment, Mortgagor deposits in the Impound
Account (as hereinafter defined) an amount determined by Mortgagee to be
adequate to cover the payment of such tax or assessment and a reasonable
additional sum to cover possible interest, costs and penalties; provided,
however, that, unless Mortgagor duly pays the contested tax or assessment prior
to the commencement of such contest, Mortgagor shall promptly cause to be paid
any amount adjudged by a court of competent jurisdiction to be due, with all
interest, costs and penalties thereon, promptly after such judgment becomes
final; and provided further that in any event each such contest shall be
concluded and the taxes, assessments, interest, costs and penalties shall be
paid prior to the date any writ or order is issued under which the Mortgaged
Property may be sold, lost or forfeited.
1.6 Tax and Insurance Impound Account. Mortgagor shall establish
and maintain at all times while this Mortgage continues in effect an impound
account (the "Impound Account") with Mortgagee for payment of real estate taxes
and assessments and insurance on the Mortgaged Property and as additional
security for the Debt. Simultaneously with the execution hereof, Mortgagor
shall deposit in the Impound Account an amount determined by Mortgagee to be
necessary to ensure that there will be on deposit with Mortgagee an amount
which, when added to the monthly payments subsequently required to be deposited
with Mortgagee hereunder on account of real estate taxes, assessments and
insurance premiums, will result in there being on deposit with Mortgagee in the
Impound Account an amount sufficient to pay the next due annual installment of
real estate taxes and assessments on the Mortgaged Property at least one
12
<PAGE> 14
(1) month prior to the delinquency date thereof (if paid in one installment)
and the next due annual insurance premiums with respect to the Mortgaged
Property at least one (1) month prior to the due date thereof (if paid in one
installment). Commencing on the first monthly payment date under the Note and
continuing thereafter on each monthly payment date under the Note, Mortgagor
shall pay to Mortgagee, concurrently with and in addition to the monthly
payment due under the Note and until the Debt is fully paid and performed,
deposits in an amount equal to one-twelfth (1/12) of the amount of the annual
real estate taxes and assessments that will next become due and payable on the
Mortgaged Property, plus one-twelfth (1/12) of the amount of the annual
premiums that will next become due and payable on insurance policies that
Mortgagor is required to maintain hereunder, each as estimated and determined
by Mortgagee. So long as no default hereunder or under the other Loan
Documents has occurred and is continuing, all sums in the Impound Account shall
be held by Mortgagee in the Impound Account to pay said taxes, assessments and
insurance premiums in one installment before the same become delinquent.
Mortgagor shall be responsible for ensuring the receipt by Mortgagee, at least
thirty (30) days prior to the respective due date for payment thereof, of all
bills, invoices and statements for all taxes, assessments and insurance
premiums to be paid from the Impound Account (unless Mortgagor has not received
any such bill, invoice or statement, in which case Mortgagor shall so advise
Mortgagee in writing at least thirty (30) days prior to the respective due date
and shall deliver a copy of such bill, invoice or statement to Mortgagee upon
receipt thereof), and so long as no default hereunder or under the other Loan
Documents has occurred and is continuing, Mortgagee shall pay the governmental
authority or other party entitled thereto directly to the extent funds are
available for such purpose in the Impound Account. In making any payment from
the Impound Account, Mortgagee shall be entitled to rely on any bill, statement
or estimate procured from the appropriate public office or insurance company or
agent without any inquiry into the accuracy of such bill, statement or estimate
and without any inquiry into the accuracy, validity, enforceability or
contestability of any tax, assessment, valuation, sale, forfeiture, tax lien or
title or claim thereof. The Impound Account shall not, unless otherwise
explicitly required by applicable law, be or be deemed to be escrow or trust
funds, but, at Mortgagee's option and in Mortgagee's discretion, may either be
held in a separate account or be commingled by Mortgagee with the general funds
of Mortgagee. No interest on funds contained in the Impound Account, if any,
shall be paid by Mortgagee to Mortgagor. The Impound Account is solely for the
protection of Mortgagee and entails no responsibility on Mortgagee's part
beyond the payment of taxes, assessments and insurance premiums following
receipt of bills, invoices or statements therefor in accordance with the terms
hereof and beyond the allowing of due credit for the sums actually received;
provided, however, that so long as there is no default under this Mortgage that
is not cured within any applicable grace or cure period, and provided that the
Impound Account shall contain sufficient funds to pay the sums required
hereunder at least fifteen (15) days prior to their respective due date for
payment
13
<PAGE> 15
therefor, Mortgagee shall be responsible for any late charges, interests and
penalties that become payable as a result of Mortgagee's failure to timely pay
such sums. Upon assignment of this Mortgage by Mortgagee, any funds in the
Impound Account shall be turned over to the assignee and any responsibility of
Mortgagee, as assignor, with respect thereto shall terminate. If the total
funds in the Impound Account shall exceed the amount of payments actually
applied by Mortgagee for the purposes of the Impound Account, such excess may
be credited by Mortgagee on subsequent payments to be made hereunder or, at the
option of Mortgagee, refunded to Mortgagor. If, however, the Impound Account
shall not contain sufficient funds to pay the sums required when the same shall
become due and payable, Mortgagor shall, within ten (10) days after receipt of
written notice thereof, deposit with Mortgagee the full amount of any such
deficiency. If Mortgagor shall fail to deposit with Mortgagee the full amount
of such deficiency as provided above, Mortgagee shall have the option, but not
the obligation, to make such deposit, and all amounts so deposited by
Mortgagee, together with interest thereon at the Default Interest Rate from the
date so deposited by Mortgagee until actually paid by Mortgagor, shall be
immediately paid by Mortgagor on demand and shall be secured by this Mortgage
and by all of the other Loan Documents securing all or any part of the Debt.
If there is a default under this Mortgage that is not cured within any
applicable grace or cure period, Mortgagee may, but shall not be obligated to,
apply at any time the balance then remaining in the Impound Account against the
Debt in whatever order Mortgagee shall subjectively determine. No such
application of the Impound Account shall be deemed to cure any default
hereunder. Upon full payment of the Debt in accordance with its terms or at
such earlier time as Mortgagee may elect, the balance of the Impound Account
then in Mortgagee's possession shall be paid over to Mortgagor and no other
party shall have any right or claim thereto.
1.7 Payment Reserve.
(a) Contemporaneously with the execution hereof,
Mortgagor has established with Mortgagee a reserve in the amount of $18,579.51
(the "Payment Reserve"). Mortgagor understands and agrees that,
notwithstanding the establishment of the Payment Reserve as herein required,
all of the proceeds of the Note have been, and shall be considered, fully
disbursed and shall bear interest and be payable on the terms provided therein.
No interest on funds contained in the Payment Reserve shall be paid by
Mortgagee to Mortgagor.
(b) For so long as no default has occurred hereunder or
under any of the other Loan Documents beyond any applicable grace or cure
period, Mortgagee shall on each monthly payment due date under the Note to and
including May 1, 2006, advance from the Payment Reserve to itself the amount of
the monthly installment due and payable by Mortgagor under the Note on such
monthly payment due date and shall also advance from the Payment Reserve into
the Impound Account the amount of any deposit for taxes and insurance
14
<PAGE> 16
premiums and into the Replacement Reserve (as hereinafter defined) the amount
of any deposit for Repairs (as hereinafter defined) required to be paid by
Mortgagor concurrently with each such monthly installment pursuant to the terms
hereof. Provided no default, or event that with the passage of time or the
giving of notice, or both, which would constitute a default, has occurred after
the final disbursement from the Payment Reserve on May 1, 2006 any amounts then
remaining in the Payment Reserve shall be paid to Mortgagor. Nothing contained
herein, including, without limitation, the existence of the Payment Reserve,
shall release Mortgagor of any obligation to make payments under the Note, this
Mortgage or the other Loan Documents strictly in accordance with the terms
hereof or thereof and, in this regard, without limiting the generality of the
foregoing, should the amounts contained in the Payment Reserve not be
sufficient to pay in full the monthly installments and the Impound Account and
Replacement Reserve deposits referenced above in this subparagraph, Mortgagor
shall be responsible for paying such deficiency on the due date of any such
monthly installment.
1.8 Replacement Reserve.
(a) As additional security for the Debt, Mortgagor shall
establish and maintain at all times while this Mortgage continues in effect a
repair reserve (the "Replacement Reserve") with Mortgagee for payment of costs
and expenses incurred by Mortgagor in connection with the performance of work
to the roofs, chimneys, gutters, downspouts, paving, curbs, ramps, driveways,
balconies, porches, patios, exterior walls, exterior doors and doorways,
windows, elevators, lighting, ballasts, lamps and mechanical and HVAC equipment
(collectively, the "Repairs"). Commencing on the first monthly payment date
under the Note and continuing thereafter on each monthly payment date under the
Note, Mortgagor shall pay to Mortgagee, concurrently with and in addition to
the monthly payment due under the Note and until the Debt is fully paid and
performed, a deposit to the Replacement Reserve in an amount equal to $1,044.51
per month. So long as no default hereunder or under the other Loan Documents
has occurred and is continuing, all sums in the Replacement Reserve shall be
held by Mortgagee in the Replacement Reserve to pay the costs and expenses of
Repairs. So long as no default hereunder or under the other Loan Documents has
occurred and is continuing, Mortgagee shall, to the extent funds are available
for such purpose in the Replacement Reserve, disburse to Mortgagor the amount
paid or incurred by Mortgagor in performing such Repairs within ten (10) days
following: (a) the receipt by Mortgagee of a written request from Mortgagor for
disbursement from the Replacement Reserve and a certification by Mortgagor in a
form approved in writing by Mortgagee that the applicable item of Repair has
been completed; (b) the delivery to Mortgagee of invoices, receipts or other
evidence satisfactory to Mortgagee, verifying the cost of performing the
Repairs; (c) for disbursement requests in excess of $20,000.00, the delivery to
Mortgagee of affidavits, lien waivers or other evidence reasonably satisfactory
to Mortgagee showing that all materialmen, laborers, subcontractors and any
15
<PAGE> 17
other parties who might or could claim statutory or common law liens and are
furnishing or have furnished material or labor to the Mortgaged Property have
been paid all amounts due for labor and materials furnished to the Mortgaged
Property; (d) for disbursement requests in excess of $20,000.00 (other than
such disbursement requests for routine, nonstructural repairs to the Premises),
delivery to Mortgagee of a certification from an inspecting architect or other
third party acceptable to Mortgagee describing the completed Repairs and
verifying the completion of the Repairs and the value of the completed Repairs;
and (e) for disbursement requests in excess of $20,000.00, delivery to
Mortgagee of a new certificate of occupancy for the portion of the Improvements
covered by such Repairs, if said new certificate of occupancy is required by
law, or a certification by Mortgagor that no new certificate of occupancy is
required. Mortgagee shall not be required to make advances from the
Replacement Reserve more frequently than once in any sixty (60) day period. In
making any payment from the Replacement Reserve, Mortgagee shall be entitled to
rely on such request from Mortgagor without any inquiry into the accuracy,
validity or contestability of any such amount. Mortgagee may, at Mortgagor's
expense, make or cause to be made during the term of this Mortgage an annual
inspection of the Mortgaged Property to determine the need, as determined by
Mortgagee in its reasonable judgment, for further Repairs of the Mortgaged
Property. In the event that such inspection reveals that further Repairs of
the Mortgaged Property are required, Mortgagee shall provide Mortgagor with a
written description of the required Repairs and Mortgagor shall complete such
Repairs to the reasonable satisfaction of Mortgagee within ninety (90) days
after the receipt of such description from Mortgagee, or such later date as may
be approved by Mortgagee in its sole discretion. The Replacement Reserve shall
not, unless otherwise explicitly required by applicable law, be or be deemed to
be escrow or trust funds, but, at Mortgagee's option and in Mortgagee's
discretion, may either be held in a separate account or be commingled by
Mortgagee with the general funds of Mortgagee. Interest on the funds contained
in the Replacement Reserve shall be credited to Mortgagor as provided in
Section 4.31 hereof. The Replacement Reserve is solely for the protection of
Mortgagee and entails no responsibility on Mortgagee's part beyond the
reimbursement of Mortgagor for the payment of the costs and expenses described
in this Section in accordance with the terms hereof and the allowing of due
credit for the sums actually received. In the event that the amounts on
deposit or available in the Replacement Reserve are inadequate to pay the cost
of the Repairs, Mortgagor shall pay the amount of such deficiency. Upon
assignment of this Mortgage by Mortgagee, any funds in the Replacement Reserve
shall be turned over to the assignee and any responsibility of Mortgagee, as
assignor, with respect thereto shall terminate. If there is a default under
this Mortgage that is not cured within any applicable grace or cure period,
Mortgagee may, but shall not be obligated to, apply at any time the balance
then remaining in the Replacement Reserve against the Debt in whatever order
Mortgagee shall subjectively determine. No such application of the Replacement
Reserve shall be deemed to
16
<PAGE> 18
cure any default hereunder. Upon full payment of the Debt in accordance with
its terms or at such earlier time as Mortgagee may elect, the balance of the
Replacement Reserve then in Mortgagee's possession shall be paid over to
Mortgagor and no other party shall have any right or claim thereto.
(b) As additional security for the payment and
performance by Mortgagor of all duties, responsibilities and obligations under
the Note and the other Loan Documents, Mortgagor hereby unconditionally and
irrevocably assigns, conveys, pledges, mortgages, transfers, delivers,
deposits, sets over and confirms unto Mortgagee, and hereby grants to Mortgagee
a security interest in, (i) the Impound Account, the Payment Reserve, the
Replacement Reserve and the Repair and Remediation Reserve (as hereinafter
defined) (collectively, the "Reserves"), (ii) the accounts into which the
Reserves have been deposited, (iii) all insurance on said accounts, (iv) all
accounts, contract rights and General Intangibles or other rights and interests
pertaining thereto, (v) all sums now or hereafter therein or represented
thereby, (vi) all replacements, substitutions or proceeds thereof, (vii) all
instruments and documents now or hereafter evidencing the Reserves or such
accounts, (viii) all powers, options, rights, privileges and immunities
pertaining to the Reserves (including the right to make withdrawals therefrom),
and (ix) all proceeds of the foregoing. Mortgagor hereby authorizes and
consents to the account into which the Reserves have been deposited being held
in Mortgagee's name or the name of any entity servicing the Note for Mortgagee
and hereby acknowledges and agrees that Mortgagee, or at Mortgagee's election,
such servicing agent, shall have exclusive control over said account. Notice
of the assignment and security interest granted to Mortgagee herein may be
delivered by Mortgagee at any time to the financial institution wherein the
Reserves have been established, and Mortgagee, or such servicing entity, shall
have possession of all passbooks or other evidences of such accounts.
Mortgagee agrees to provide Mortgagor with monthly statements setting forth the
then current principal balance in each of the Reserve and the interest accrued
on such balance in the Replacement Reserve. Mortgagor hereby assumes all risk
of loss with respect to amounts on deposit in the Reserves, except to the
extent such loss is caused by the gross negligence or willful misconduct of
Mortgagor. Mortgagor hereby knowingly, voluntarily and intentionally
stipulates, acknowledges and agrees that the advancement of the funds from the
Reserves as set forth herein is at Mortgagor's direction and is not the
exercise by Mortgagee of any right of set-off or other remedy upon a default.
Mortgagor hereby waives all right to withdraw funds from the Reserves except as
provided for in this Mortgage. If a default shall occur hereunder or under any
other of the Loan Documents that is not cured within any applicable grace or
cure period, then Mortgagee may, without notice or demand on Mortgagor, at its
option: (A) withdraw any or all of the funds (including, without limitation,
interest) then remaining in the Reserves and apply the same, after deducting
all costs and expenses of safekeeping, collection and delivery (including, but
not limited to, reasonable attorneys'
17
<PAGE> 19
fees, costs and expenses) to the Debt or any other obligations of Mortgagor
under the other Loan Documents in such manner or as Mortgagee shall deem
appropriate in its sole discretion, and the excess, if any, shall be paid to
Mortgagor, (B) exercise any and all rights and remedies of a secured party
under any applicable Uniform Commercial Code, or (C) exercise any other
remedies available at law or in equity. No such use or application of the
funds contained in the Reserves shall be deemed to cure any default hereunder
or under the other Loan Documents.
1.9 Casualty and Condemnation. Mortgagor shall give Mortgagee
prompt written notice of the occurrence of any casualty affecting the Mortgaged
Property or any portion thereof, the estimated cost of which is, in Mortgagor's
reasonable opinion, in excess of $5,000.00. Mortgagor shall give Mortgagee
prompt written notice of the institution of any proceedings for eminent domain
or for the condemnation of the Mortgaged Property or any portion thereof. All
insurance proceeds on the Mortgaged Property, and all causes of action, claims,
compensation, awards and recoveries for any damage, condemnation or taking of
all or any part of the Mortgaged Property or for any damage or injury to it for
any loss or diminution in value of the Mortgaged Property, are hereby assigned
to and shall be paid to Mortgagee. Mortgagee may participate in any suits or
proceedings relating to any such proceeds, causes of action, claims,
compensation, awards or recoveries. Mortgagee shall apply any sums received by
it under this Section first to the payment of all of its costs and expenses
(including, but not limited to, legal fees and disbursements) incurred in
obtaining those sums, and then, as follows:
(a) In the event that amount of the insurance proceeds or
condemnation award is equal to or less than twenty percent (20%) of the
appraised value of the Premises, as determined pursuant to that certain
Appraisal by Aaron & Wright dated August 7, 1995 (the "Appraisal"), then if:
(1) no default is then continuing hereunder or
under any of the other Loan Documents and no event has occurred which,
with the giving of notice or the passage of time or both, would
constitute a default hereunder or under any of the other Loan
Documents, and
(2) the Mortgaged Property can, in Mortgagee's
judgment, with diligent restoration or repair, be returned to a
condition at least equal to the condition thereof that existed prior
to the casualty or partial taking causing the loss or damage within
the earlier to occur of (i) six (6) months after the receipt of
insurance proceeds or condemnation awards by either Mortgagor or
Mortgagee, and (ii) the stated maturity date of the Note, and
(3) all necessary governmental approvals can be
obtained to allow the rebuilding and reoccupancy of the Mortgaged
Property as described in Section (a)(2) above, and
18
<PAGE> 20
(4) there are sufficient sums available (through
insurance proceeds or condemnation awards and contributions by
Mortgagor, the full amount of which shall at Mortgagee's option have
been deposited with Mortgagee) for such restoration or repair
(including, without limitation, for any costs and expenses of
Mortgagee to be incurred in administering said restoration or repair)
and for payment of principal and interest to become due and payable
under the Note during such restoration or repair, and
(5) the economic feasibility of the Improvements
after such restoration or repair will be such that income from their
operation is reasonably anticipated to be sufficient to pay operating
expenses of the Mortgaged Property and debt service on the Debt in
full with the same coverage ratio considered by Mortgagee in its
determination to make the loan secured hereby, and
(6) Mortgagor shall have delivered to Mortgagee,
at Mortgagor's sole cost and expense, an appraisal report in form and
substance satisfactory to Mortgagee appraising the value of the
Mortgaged Property as so restored or repaired to be not less than the
appraised value of the Mortgaged Property considered by Mortgagee in
its determination to make the loan secured hereby, and
(7) Mortgagor so elects by written notice
delivered to Mortgagee within five (5) days after settlement of the
aforesaid insurance or condemnation claim,
then, Mortgagee shall, solely for the purposes of such restoration or repair,
advance so much of the remainder of such sums as may be required for such
restoration or repair, and any funds deposited by Mortgagor therefor, to
Mortgagor in the manner and upon such terms and conditions as would be required
by a prudent interim construction lender, including, but not limited to, the
prior approval by Mortgagee of plans and specifications, contractors and form
of construction contracts and the furnishing to Mortgagee of permits, bonds,
lien waivers, invoices, receipts and affidavits from contractors and
subcontractors, in form and substance satisfactory to Mortgagee in its
discretion, with any remainder being applied by Mortgagee for payment of the
Debt in whatever order Mortgagee directs in its absolute discretion.
(b) In all other cases, namely, in the event that the
amount of the insurance proceeds or condemnation award is greater than twenty
percent (20%) of the appraised value of the Premises determined pursuant to the
Appraisal or Mortgagor does not elect to restore or repair the Mortgaged
Property pursuant to clause (a) above, or otherwise fails to meet the
requirements of clause (a) above, then, in any of such events, Mortgagee may
elect to accelerate the maturity date of the Note and declare any and all Debt
to be immediately due and payable and apply the remainder of such sums received
pursuant to this Section to the payment of the
19
<PAGE> 21
Debt in whatever order Mortgagee directs in its absolute discretion, with any
remainder being paid to Mortgagor.
Any reduction in the Debt resulting from Mortgagee's application of any sums
received by it hereunder shall take effect only when Mortgagee actually
receives such sums and elects to apply such sums to the Debt and, in any event,
the unpaid portion of the Debt shall remain in full force and effect and
Mortgagor shall not be excused in the payment thereof. Partial payments
received by Mortgagee, as described in the preceding sentence, shall be applied
first to the final payment due under the Note and thereafter to installments
due under the Note in the inverse order of their due date. If Mortgagor elects
to restore or repair the Mortgaged Property after the occurrence of a casualty
or partial taking of the Mortgaged Property as provided above, Mortgagor shall
promptly and diligently, at Mortgagor's sole cost and expense and regardless of
whether the insurance proceeds or condemnation award, as appropriate, shall be
sufficient for the purpose, restore, repair, replace and rebuild the Mortgaged
Property as nearly as possible to its value, condition and character
immediately prior to such casualty or partial taking in accordance with the
foregoing provisions and Mortgagor shall pay to Mortgagee all costs and
expenses of Mortgagee incurred in administering said rebuilding, restoration or
repair, provided that Mortgagee makes such proceeds or award available for such
purpose. Mortgagor agrees to execute and deliver from time to time such
further instruments as may be requested by Mortgagee to confirm the foregoing
assignment to Mortgagee of any award, damage, insurance proceeds, payment or
other compensation. Upon and during the continuance of an Event of Default
hereunder, Mortgagee is hereby irrevocably constituted and appointed the
attorney-in-fact of Mortgagor with respect to the Mortgaged Property (which
power of attorney shall be irrevocable so long as any portion of the Debt is
outstanding, shall be deemed coupled with an interest, shall survive the
voluntary or involuntary dissolution of Mortgagor and shall not be affected by
any disability or incapacity suffered by Mortgagor subsequent to the date
hereof), with full power of substitution, subject to the terms of this Section,
to adjust, settle or compromise for, collect and receive any such awards,
damages, insurance proceeds, payments or other compensation from the parties or
authorities making the same, to appear in and prosecute any proceedings
therefor and to give receipts and acquittances therefor; provided, however,
that Mortgagee shall only exercise such power-of-attorney during the
continuance of an Event of Default.
(c) If the amount of the insurance proceeds or
condemnation award is greater than twenty percent (20%) of the appraised value
of the Premises determined pursuant to the Appraisal, Mortgagor may elect to
prepay the Debt in its entirety, subject to any prepayment penalties or fees
under the Note, and Mortgagor may apply the insurance proceeds or condemnation
award toward such prepayment.
20
<PAGE> 22
1.10 Construction Liens. Mortgagor shall pay when due all claims
and demands of mechanics, materialmen, laborers and others for any work
performed or materials delivered for the Premises or the Improvements;
provided, however, that, Mortgagor shall have the right to contest in good
faith any such claim or demand, so long as it does so diligently, by
appropriate proceedings and without prejudice to Mortgagee and provided that
neither the Mortgaged Property nor any interest therein would be in any danger
of sale, loss or forfeiture as a result of such proceeding or contest. In the
event Mortgagor shall contest any such claim or demand, Mortgagor shall
promptly notify Mortgagee of such contest and thereafter shall, upon
Mortgagee's request, promptly provide a bond, cash deposit or other security
satisfactory to Mortgagee to protect Mortgagee's interest and security should
the contest be unsuccessful. If Mortgagor shall fail to immediately discharge
or provide security against any such claim or demand as aforesaid, Mortgagee
may do so and any and all expenses incurred by Mortgagee, together with
interest thereon at the Default Interest Rate from the date incurred by
Mortgagee until actually paid by Mortgagor, shall be immediately paid by
Mortgagor on demand and shall be secured by this Mortgage and by all of the
other Loan Documents securing all or any part of the Debt.
1.11 Rents. As additional and collateral security for the payment
of the Debt and cumulative of any and all rights and remedies herein provided
for, Mortgagor hereby absolutely and presently assigns to Mortgagee all
existing and future Rents, if any, with respect to the Mortgaged Property.
Mortgagor hereby grants to Mortgagee the sole, exclusive and immediate right,
without taking possession of the Mortgaged Property, to demand, collect (by
suit or otherwise), receive and give valid and sufficient receipts for any and
all of said Rents, for which purpose Mortgagor does hereby irrevocably make,
constitute and appoint Mortgagee its attorney-in-fact with full power to
appoint substitutes or a trustee to accomplish such purpose (which power of
attorney shall be irrevocable so long as any portion of the Debt is
outstanding, shall be deemed to be coupled with an interest, shall survive the
voluntary or involuntary dissolution of Mortgagor and shall not be affected by
any disability or incapacity suffered by Mortgagor subsequent to the date
hereof); provided, however, that Mortgagee shall only exercise such
power-of-attorney during the continuance of an Event of Default. Mortgagee
shall be without liability for any loss that may arise from a failure or
inability to collect Rents, proceeds or other payments. However, until the
occurrence of a default under this Mortgage that has not been cured within any
applicable grace or cure period, Mortgagor shall have a license to collect,
receive, use and enjoy the Rents when due and prepayments thereof for not more
than one (1) month prior to due date thereof. Upon the occurrence of a default
hereunder that has not been cured within any applicable grace or cure period,
Mortgagor's license shall automatically terminate without notice to Mortgagor
and Mortgagee may thereafter, without taking possession of the Mortgaged
Property, collect the Rents itself or by an agent or receiver. From and after
the termination of such license,
21
<PAGE> 23
Mortgagor shall be the agent of Mortgagee in collection of the Rents, and all
of the Rents so collected by Mortgagor shall be held in trust by Mortgagor for
the sole and exclusive benefit of Mortgagee, and Mortgagor shall, within one
(1) business day after receipt of any Rents, pay the same to Mortgagee to be
applied by Mortgagee as hereinafter set forth. Neither the demand for or
collection of Rents by Mortgagee shall constitute any assumption by Mortgagee
of any obligations under any agreement relating thereto. Mortgagee is
obligated to account only for such Rents as are actually collected or received
by Mortgagee. Mortgagor irrevocably agrees and consents that the respective
payors of the Rents shall, upon demand and notice from Mortgagee of a default
hereunder, pay said Rents to Mortgagee without liability to determine the
actual existence of any default claimed by Mortgagee. Mortgagor hereby waives
any right, claim or demand that Mortgagor may now or hereafter have against any
such payor by reason of such payment of Rents to Mortgagee, and any such
payment shall discharge such payor's obligation to make such payment to
Mortgagor. All Rents collected or received by Mortgagee may be applied against
all expenses of collection, including, without limitation, reasonable
attorneys' fees, against costs of operation and management of the Mortgaged
Property and against the Debt, in whatever order or priority as to any of the
items so mentioned as Mortgagee directs in its sole subjective discretion and
without regard to the adequacy of its security. Neither the exercise by
Mortgagee of any rights under this Section nor the application of any Rents to
the Debt shall cure or be deemed a waiver of any default hereunder. The
assignment of Rents hereinabove granted shall continue in full force and effect
during any period of foreclosure or redemption with respect to the Mortgaged
Property. Mortgagor agrees to execute and deliver, within ten (10) days after
written request of Mortgagee, an Assignment of Leases and Rents (the
"Assignment") in favor of Mortgagee covering all of the right, title and
interest of Mortgagor, as landlord, lessor or licensor, in and to any Leases
relating to all or portions of the Mortgaged Property. All rights and remedies
granted to Mortgagee under such Assignment shall be in addition to and
cumulative of all rights and remedies granted to Mortgagee hereunder.
1.12 Leases.
(a) Mortgagor covenants and agrees that it shall not
enter into any Lease affecting 5,000 square feet or more of the Mortgaged
Property or having a term of more than five (5) years without the prior written
approval of Mortgagee, which approval shall not be unreasonably withheld. The
request for approval of each such proposed new Lease shall be made to Mortgagee
in writing and shall state that, pursuant to the terms of this Mortgage,
failure to approve or disapprove such proposed Lease within fifteen (15)
business days is deemed approval and Mortgagor shall furnish to Mortgagee (and
any loan servicer specified from time to time by Mortgagee): (i) such
biographical and financial information about the proposed tenant as Mortgagee
may require in conjunction with its review, (ii) a copy of the proposed form of
Lease, and (iii) a
22
<PAGE> 24
summary of the material terms of such proposed Lease (including, without
limitation, rental terms and the term of the proposed Lease and any options).
It is acknowledged that Mortgagee intends to include among its criteria for
approval of any such proposed Lease the following: (i) such Lease shall be with
a bona-fide arm's-length tenant; (ii) such Lease shall not contain any rental
or other concessions that are not then customary and reasonable for similar
properties and leases in the market area of the Premises; (iii) such Lease
shall provide that the tenant pays for its expenses; (iv) the rental shall be
at least at the market rate then prevailing for similar properties and leases
in the market areas of the Premises; and (v) such Lease shall contain
subordination and attornment provisions in form and content acceptable to
Mortgagee. Failure of Mortgagee to approve or disapprove any such proposed
Lease within fifteen (15) business days after receipt of such written request
and all the documents and information required to be furnished to Mortgagor
with such request shall be deemed approval, provided that the written request
for approval specifically mentioned the same.
(b) Prior to execution of any Leases of space in the
Improvements after the date hereof, Mortgagor shall submit to Mortgagee, for
Mortgagee's prior approval, which approval shall not be unreasonably withheld,
a copy of the form lease Mortgagor plans to use in leasing space in the
Improvements or at the Mortgaged Property. All such Leases of space in the
Improvements or at the property shall be on terms consistent with the terms for
similar leases in the market area of the Premises, shall provide for free rent
only if the same is consistent with prevailing market conditions and shall
provide for market rents then prevailing in the market area of the Premises.
Such Leases shall also provide for security deposits in reasonable amounts.
Mortgagor shall also submit to Mortgagee for Mortgagee's approval, which
approval shall not be unreasonably withheld, prior to the execution thereof,
any proposed Lease of the Improvements or any portion thereof that differs
materially and adversely from the aforementioned form Lease. Mortgagor shall
not execute any Lease for all or a substantial portion of the Mortgaged
Property, except for an actual occupancy by the tenant, lessee or licensee
thereunder, and shall at all times promptly and faithfully perform, or cause to
be performed, all of the covenants, conditions and agreements contained in all
Leases with respect to the Mortgaged Property, now or hereafter existing, on
the part of the landlord, lessor or licensor thereunder to be kept and
performed. Mortgagor shall furnish to Mortgagee, within ten (10) days after a
request by Mortgagee to do so, a current rent roll, certified by Mortgagor as
being true and correct, containing the names of all tenants, lessees and
licensees with respect to the Mortgaged Property, if any, the terms of their
respective Leases, the spaces occupied and the rentals or fees payable
thereunder and the amount of each tenant's security deposit. Upon the request
of Mortgagee, Mortgagor shall deliver to Mortgagee a copy of each such Lease.
Mortgagor shall not do or suffer to be done any act that might result in a
default by the landlord, lessor or licensor under any
23
<PAGE> 25
such Lease or allow the tenant, lessee or licensee thereunder to withhold
payment or rent and shall not further assign any such Lease or any such rents.
Mortgagor, at no cost or expense to Mortgagee, shall enforce, short of
termination, the performance and observance of each and every condition and
covenant of each of the parties under such Leases. Mortgagor shall not,
without the prior written consent of Mortgagee, modify any of the Leases,
terminate or accept the surrender of any Leases, waive or release any other
party from the performance or observance of any obligation or condition under
such Leases except, with respect only to Leases affecting less than 5,000
square feet and having a term of five (5) years or less, in the normal of
course of business in a manner that is consistent with sound and customary
leasing and management practices for similar properties in the community in
which the Mortgaged Property is located. Mortgagor shall not permit the
prepayment of any rents under any of the Leases for more than one (1) month
prior to the due date thereof.
(c) Each Lease executed after the date hereof affecting
any of the Premises or the Improvements must provide, in a manner approved by
Mortgagee, that the tenant, lessee or licensee, as appropriate, will recognize
as its landlord, lessor or licensor and attorn to any person succeeding to the
interest of Mortgagor upon any foreclosure of this Mortgage or deed in lieu of
foreclosure. Each such Lease shall also provide that, upon request of said
successor in interest, the tenant, lessee or licensee shall execute and deliver
an instrument or instruments confirming its attornment as provided for in this
Section; provided, however, that neither Mortgagee nor any
successor-in-interest shall be bound by any payment of rental for more than one
(1) month in advance, or any amendment or modification of said Lease or rental
agreement made without the express written consent of Mortgagee or said
successor-in-interest.
(d) Upon the occurrence of a default under this Mortgage
that is not cured within any applicable grace period, whether before or after
the whole principal sum secured hereby is declared to be immediately due or
whether before or after the institution of legal proceedings to foreclose this
Mortgage, forthwith, upon demand of Mortgagee, Mortgagor shall surrender to
Mortgagee, and Mortgagee shall be entitled to take actual possession of, the
Mortgaged Property or any part thereof personally, or by its agent or
attorneys. In such event, Mortgagee shall have, and Mortgagor hereby gives and
grants to Mortgagee, the right, power and authority to make and enter into
Leases with respect to the Mortgaged Property or portions thereof for such
rents and for such periods of occupancy and upon conditions and provisions as
Mortgagee may deem desirable in its sole discretion, and Mortgagor expressly
acknowledges and agrees that the term of such Lease may extend beyond the date
of any foreclosure sale of the Mortgaged Property; it being the intention of
Mortgagor that in such event Mortgagee shall be deemed to be and shall be the
attorney-in-fact of Mortgagor for the purpose of making and entering into
Leases of parts or portions of the Mortgaged Property for the rents and upon
24
<PAGE> 26
the terms, conditions and provisions deemed desirable to Mortgagee in its sole
discretion and with like effect as if such Leases had been made by Mortgagor as
the owner in fee simple of the Mortgaged Property free and clear of any
conditions or limitations established by this Mortgage. The power and
authority hereby given and granted by Mortgagor to Mortgagee shall be deemed to
be coupled with an interest, shall not be revocable by Mortgagor so long as any
portion of the Debt is outstanding, shall survive the voluntary or involuntary
dissolution of Mortgagor and shall not be affected by any disability or
incapacity suffered by Mortgagor subsequent to the date hereof. In connection
with any action taken by Mortgagee pursuant to this Section, Mortgagee shall
not be liable for any loss sustained by Mortgagor resulting from any failure to
let the Mortgaged Property, or any part thereof, or from any other act or
omission of Mortgagee in managing the Mortgaged Property, nor shall Mortgagee
be obligated to perform or discharge any obligation, duty or liability under
any Lease covering the Mortgaged Property or any part thereof or under or by
reason of this instrument or the exercise of rights or remedies hereunder.
Mortgagor shall, and does hereby, indemnify Mortgagee for, and hold Mortgagee
harmless from, any and all claims, actions, demands, liabilities, loss or
damage that may or might be incurred by Mortgagee under any such Lease or under
this Mortgage or by the exercise of rights or remedies hereunder and from any
and all claims and demands whatsoever that may be asserted against Mortgagee by
reason of any alleged obligations or undertakings on its part to perform or
discharge any of the terms, covenants or agreements contained in any such Lease
other than those finally determined to have resulted solely from the gross
negligence or willful misconduct of Mortgagee. Should Mortgagee incur any such
liability, the amount thereof, including, without limitation, costs, expenses
and reasonable attorneys' fees, together with interest thereon at the Default
Interest Rate from the date incurred by Mortgagee until actually paid by
Mortgagor, shall be immediately due and payable to Mortgagee by Mortgagor on
demand and shall be secured hereby and by all of the other Loan Documents
securing all or any part of the Debt. Nothing in this Section shall impose on
Mortgagee any duty, obligation or responsibility for the control, care,
management or repair of the Mortgaged Property, or for the carrying out of any
of the terms and conditions of any such Lease, nor shall it operate to make
Mortgagee responsible or liable for any waste committed on the Mortgaged
Property by the tenants or by any other parties or for any dangerous or
defective condition of the Mortgaged Property, or for any negligence in the
management, upkeep, repair or control of the Mortgaged Property. Mortgagor
hereby assents to, ratifies and confirms any and all actions of Mortgagee with
respect to the Mortgaged Property taken under this Section.
25
<PAGE> 27
1.13 Alienation and Further Encumbrances.
(a) Mortgagor acknowledges that Mortgagee has relied upon
the principals of Mortgagor and their experience in owning and operating
properties similar to the Mortgaged Property in connection with the closing of
the loan evidenced by the Note. Accordingly, except as specifically allowed
hereinbelow in this Section and notwithstanding anything to the contrary
contained in Section 4.6 hereof, in the event that the Mortgaged Property or
any part thereof or interest therein shall be sold, conveyed, disposed of,
alienated, hypothecated, leased (except to tenants of space in the Improvements
in accordance with the provisions of Section 1.12 hereof), assigned, pledged,
mortgaged, further encumbered or otherwise transferred or Mortgagor shall be
divested of its title to the Mortgaged Property or any interest therein, in any
manner or way, whether voluntarily or involuntarily, without the prior written
consent of Mortgagee being first obtained, which consent may be withheld in
Mortgagee's sole discretion, then the same shall constitute a default hereunder
and Mortgagee shall have the right, at its option, to declare any or all of the
Debt, irrespective of the maturity date specified in the Note, immediately due
and payable and to otherwise exercise any of its other rights and remedies
contained in Article III hereof. If such acceleration is during any period
when a prepayment fee is payable pursuant to the provisions set forth in the
Note, then, in addition to all of the foregoing, such prepayment fee shall also
then be immediately due and payable to the same end as though Mortgagor were
prepaying the entire Debt on the date of such acceleration. For the purposes
of this Section, the following events shall be deemed to be a transfer of
interest in the Mortgaged Property: (i) the transfer of greater than
twenty-five percent (25%) of the outstanding common stock Mortgagor or (ii) a
"change of control" of General Host Corporation, the guarantor of the Loan
("Guarantor"). A "change of control" with respect to Guarantor shall be deemed
to have occurred if: (A) any person or group within the meaning of Section
13(d) (3) of the Securities Exchange Act of 1934 (the "Exchange Act"), together
with any affiliates of any such person or group, shall beneficially own,
directly or indirectly (within the meaning of Rule 13d-3 under the Exchange
Act), at least twenty-five percent (25%) of the total voting power of all
classes of capital stock of the Guarantor entitled to vote generally in the
election of directors of the Guarantor, (B) the Guarantor consolidates with,
merges into or sells, leases or conveys all or substantially all of its assets
to, any other Person, or (C) the Guarantor is liquidated or dissolved or the
stockholders of the Guarantor adopt a plan for the liquidation or dissolution
of the Guarantor. Notwithstanding the foregoing, however, (x) limited
partnership interests in Mortgagor or in any general partner of Mortgagor shall
be freely transferable without the consent of Mortgagee, and (y) any
involuntary transfer caused by the death of Mortgagor or any general partner,
shareholder, joint venturer, or beneficial owner of a trust shall not be a
default under this Mortgage so long as Mortgagor is reconstituted, if required,
following such death and so long as those persons responsible for the
management of the
26
<PAGE> 28
Mortgaged Property remain unchanged as a result of such death or any
replacement management is approved by Lender.
(b) Intentionally Deleted.
(c) Notwithstanding the foregoing provisions of this
Section, Mortgagee shall consent to a one time sale, conveyance or transfer of
the Mortgaged Property in its entirety (hereinafter, "Sale") to any person or
entity provided that each of the following terms and conditions are satisfied:
(1) No default is then continuing hereunder or
under any of the other Loan Documents;
(2) Mortgagor gives Mortgagee written notice of
the terms of such prospective Sale not less than sixty (60) days
before the date on which such Sale is scheduled to close and,
concurrently therewith, gives Mortgagee all such information
concerning the proposed transferee of the Mortgaged Property
(hereinafter, "Buyer") as Mortgagee would require in evaluating an
initial extension of credit to a borrower and pays to Mortgagee a
non-refundable application fee in the amount of $5,000. Mortgagee
shall have the right to approve or disapprove the proposed Buyer. In
determining whether to give or withhold its approval of the proposed
Buyer, Mortgagee shall consider the Buyer's experience and track
record in owning and operating facilities similar to the Mortgaged
Property, the Buyer's financial strength, the Buyer's general business
standing and the Buyer's relationships and experience with
contractors, vendors, tenants, lenders and other business entities;
provided, however, that, notwithstanding Mortgagee's agreement to
consider the foregoing factors in determining whether to give or
withhold such approval, such approval shall be given or withheld based
on what Mortgagee determines to be commercially reasonable in
Mortgagee's sole discretion and, if given, may be given subject to
such conditions as Mortgagee may deem appropriate;
(3) Mortgagor pays Mortgagee, concurrently with
the closing of such Sale, a non-refundable assumption fee in an amount
equal to all out-of-pocket costs and expenses, including, without
limitation, reasonable attorneys' fees, incurred by Mortgagee in
connection with the Sale, plus an amount equal to one percent (1.0%)
of the then outstanding principal balance of the Note.
(4) The Buyer assumes and agrees to pay the Debt
subject to the provisions of Section 4.27 hereof and, prior to or
concurrently with the closing of such Sale, the Buyer executes,
without any cost or expense to Mortgagee, such documents and
agreements as Mortgagee shall reasonably require to evidence and
effectuate said assumption and delivers such legal opinions as
Mortgagee may require;
27
<PAGE> 29
(5) Mortgagor and the Buyer execute, without any
cost or expense to Mortgagee, new financing statements or financing
statement amendments and any additional documents reasonably requested
by Mortgagee;
(6) Mortgagor delivers to Mortgagee, without any
cost or expense to Mortgagee, such endorsements to Mortgagee's title
insurance policy, hazard insurance endorsements or certificates and
other similar materials as Mortgagee may deem necessary at the time of
the Sale, all in form and substance satisfactory to Mortgagee,
including, without limitation, an endorsement or endorsements to
Mortgagee's title insurance policy insuring the lien of this Mortgage,
extending the effective date of such policy to the date of execution
and delivery (or, if later, of recording) of the assumption agreement
referenced above in subparagraph (4) of this Section, with no
additional exceptions added to such policy, and insuring that fee
simple title to the Mortgaged Property is vested in the Buyer;
(7) Mortgagor executes and delivers to Mortgagee,
without any cost or expense to Mortgagee, a release of Mortgagee, its
officers, directors, employees and agents, from all claims and
liability relating to the transactions evidenced by the Loan
Documents, through and including the date of the closing of the Sale,
which agreement shall be in form and substance satisfactory to
Mortgagee and shall be binding upon the Buyer;
(8) Subject to the provisions of Section 4.27
hereof, such Sale is not construed so as to relieve Mortgagor of any
personal liability under the Note or any of the other Loan Documents
for any acts or events occurring or obligations arising prior to or
simultaneously with the closing of such Sale, and Mortgagor executes,
without any cost or expense to Mortgagee, such documents and
agreements as Mortgagee shall reasonably require to evidence and
effectuate the ratification of said personal liability; and
(9) Such Sale is not construed so as to relieve
any current guarantor or indemnitor of its obligations under any
guaranty or indemnity agreement executed in connection with the loan
secured hereby and each such current guarantor and indemnitor
executes, without any cost or expense to Mortgagee, such documents and
agreements as Mortgagee shall reasonably require to evidence and
effectuate the ratification of each such guaranty and indemnity
agreement, provided that if the Buyer or a party associated with the
Buyer approved by Mortgagee in its sole discretion assumes the
obligations of the current guarantor or indemnitor under its guaranty
or indemnity agreement and the Buyer or such party associated with the
Buyer, as applicable, executes, without any cost or expense to
Mortgagee, a new guaranty or indemnity agreement in form and substance
satisfactory to Mortgagee, then Mortgagee
28
<PAGE> 30
shall release the current guarantor or indemnitor from all obligations
arising under its guaranty or indemnity agreement after the closing of
such Sale.
1.14 Payment of Utilities, Assessments, Charges, Etc. Mortgagor
shall pay when due all utility charges that are incurred by Mortgagor or that
may become a charge or lien against any portion of the Mortgaged Property for
gas, electricity, water and sewer services furnished to the Premises and/or the
Improvements and all other assessments or charges of a similar nature, or
assessments payable pursuant to any restrictive covenants, whether public or
private, affecting the Premises and/or the Improvements or any portion thereof,
whether or not such assessments or charges are or may become liens thereon.
1.15 Access Privileges and Inspections. Mortgagee and the agents,
representatives and employees of Mortgagee shall, subject to the rights of
tenants, have full and free access to the Premises and the Improvements and
books and records concerning the Mortgaged Property at all reasonable times for
the purposes of inspecting the Mortgaged Property and of examining, copying and
making extracts from the books and records of Mortgagor relating to the
Mortgaged Property. Mortgagor shall lend assistance to all such agents,
representatives and employees of Mortgagee.
1.16 Waste; Alteration of Improvements. Mortgagor shall not
commit, suffer or permit any waste on the Mortgaged Property nor take any
actions that might invalidate any insurance carried on the Mortgaged Property.
Mortgagor shall maintain the Mortgaged Property in good condition and repair.
No part of the Improvements may be removed, demolished or materially altered,
without the prior written consent of Mortgagee. Without the prior written
consent of Mortgagee, which consent shall not be unreasonably withheld,
Mortgagor shall not commence construction of any improvements on the Premises
other than improvements required for the maintenance or repair of the Mortgaged
Property.
1.17 Zoning. Without the prior written consent of Mortgagee,
Mortgagor shall not seek, make, suffer, consent to or acquiesce in any change
in the zoning or conditions of use of the Premises or the Improvements.
Mortgagor shall comply with and make all payments required under the provisions
of any covenants, conditions or restrictions affecting the Premises or the
Improvements. Mortgagor shall comply with all existing and future requirements
of all governmental authorities having jurisdiction over the Mortgaged
Property. Mortgagor shall keep all licenses, permits, franchises and other
approvals necessary for the operation of the Mortgaged Property in full force
and effect. Mortgagor shall operate the Mortgaged Property as a retail
operation for so long as the Debt is outstanding. If, under applicable zoning
provisions, the use of all or any part of the Premises or the Improvements is
or becomes a nonconforming use, Mortgagor shall not cause or permit such use to
be discontinued or abandoned without the prior written consent of Mortgagee.
Further, without Mortgagee's prior written consent,
29
<PAGE> 31
Mortgagor shall not file or subject any part of the Premises or the
Improvements to any declaration of condominium or co-operative or convert any
part of the Premises or the Improvements to a condominium, co-operative or
other form of multiple ownership and governance.
1.18 Financial Statements and Books and Records. Mortgagor shall
cause to be kept accurate books and records of account of the Mortgaged
Property and its own and Guarantor's financial affairs sufficient to permit the
preparation of the financial information required by this Mortgage and the
other Loan Documents in accordance with generally accepted accounting
principles. So long as this Mortgage continues in effect, Mortgagor shall
provide to Mortgagee, in addition to any other financial statements required
hereunder or under any of the other Loan Documents, the following financial
information:
(a) monthly operating statements for the Mortgaged
Property, within fifteen (15) days after the end of each of the first (1st)
twelve (12) calendar months following the date hereof;
(b) within forty-five (45) days following the end of each
fiscal quarter of Guarantor, Guarantor's 10-Q report;
(c) within ninety (90) days following the end of each fiscal
year of Guarantor, Guarantor's 10-K report; and
(d) such other information with respect to the Mortgaged
Property and Guarantor that may be reasonably requested from time to time by
Mortgagee, within a reasonable time after the applicable request.
Notwithstanding anything to the contrary in clause (b), (c) or (d) above, if
Guarantor shall obtain an extension for the filing of its 10-Q or 10-K reports,
Mortgagor shall provide or cause to be provided to Mortgagee preliminary
quarterly or annual, as applicable, reports within forty-five (45) or ninety
(90) days, as applicable, following the end of the quarter or fiscal year in
question, and the 10-Q or 10-K report in question shall be provided to
Mortgagee when filed with the Securities Exchange Commission. All financial
information shall be in form reasonably satisfactory to Mortgagee.
If any of the aforementioned materials are not furnished to Mortgagee within
the applicable time periods or Mortgagee is dissatisfied with the contents of
any of the foregoing, in addition to any other rights and remedies of Mortgagee
contained herein, Mortgagee shall have the right, but not the obligation, to
obtain the same by means of an audit by an independent certified public
accountant selected by Mortgagee, in which event Mortgagor agrees to pay, or to
reimburse Mortgagee for, any expense of such audit and further agrees to
provide all necessary information to said accountant and to otherwise cooperate
in the making of such audit.
30
<PAGE> 32
1.19 Further Documentation. Mortgagor shall, on the request of
Mortgagee and at the expense of Mortgagor: (a) promptly correct any defect,
error or omission that may be discovered in the contents of this Mortgage or in
the contents of any of the other Loan Documents; (b) promptly execute,
acknowledge, deliver and record or file such further instruments (including,
without limitation, further mortgages, deeds of trust, security deeds, security
agreements, financing statements, continuation statements and assignments of
rents or leases) and promptly do such further acts as may be necessary,
desirable or proper to carry out more effectively the purposes of this Mortgage
and the other Loan Documents and to subject to the liens and security interests
hereof and thereof any property intended by the terms hereof and thereof to be
covered hereby and thereby, including specifically, but without limitation, any
renewals, additions, substitutions, replacements or appurtenances to the
Mortgaged Property; (c) promptly execute, acknowledge, deliver, procure and
record or file any document or instrument (including specifically any financing
statement) deemed advisable by Mortgagee to protect, continue or perfect the
liens or the security interests hereunder against the rights or interests of
third persons; and (d) promptly furnish to Mortgagee, upon Mortgagee's request,
a duly acknowledged written statement and estoppel certificate addressed to
such party or parties as directed by Mortgagee and in form and substance
supplied by Mortgagee, setting forth all amounts due under the Note, stating
whether any event has occurred which, with the passage of time or the giving of
notice or both, would constitute an event of default hereunder, stating whether
any offsets or defenses exist against the Debt and containing such other
matters as Mortgagee may reasonably require.
1.20 Payment of Costs; Reimbursement to Mortgagee. Mortgagor shall
pay all costs and expenses of every character reasonably incurred in connection
with the closing of the loan evidenced by the Note and secured hereby or
otherwise attributable or chargeable to Mortgagor as the owner of the Mortgaged
Property, including, without limitation, appraisal fees, recording fees,
documentary, stamp, mortgage or intangible taxes, brokerage fees and
commissions, title policy premiums and title search fees, uniform commercial
code/tax lien/litigation search fees, escrow fees and reasonable attorneys'
fees. If Mortgagor defaults in any such payment, which default is not cured
within any applicable grace or cure period, Mortgagee may pay the same and
Mortgagor shall reimburse Mortgagee on demand for all such costs and expenses
incurred or paid by Mortgagee, together with such interest thereon at the
Default Interest Rate from and after the date of Mortgagee's making such
payment until reimbursement thereof by Mortgagor. Any such sums disbursed by
Mortgagee, together with such interest thereon, shall be additional
indebtedness of Mortgagor secured by this Mortgage and by all of the other Loan
Documents securing all or any part of the Debt. Further, Mortgagor shall
promptly notify Mortgagee in writing of any litigation or threatened litigation
affecting the Mortgaged Property, or any other demand or claim which, if
enforced, could impair or threaten to impair Mortgagee's
31
<PAGE> 33
security hereunder. Without limiting or waiving any other rights and remedies
of Mortgagee hereunder, if (i) Mortgagor fails to perform any of its covenants
or agreements contained in this Mortgage or in any of the other Loan Documents
and such failure is not cured within any applicable grace or cure period, or
(ii) (a) any action or proceeding of any kind (including, but not limited to,
any bankruptcy, insolvency, arrangement, reorganization or other debtor relief
proceeding) is commenced that might affect Mortgagee's interest in the
Mortgaged Property or Mortgagee's right to enforce its security and (b)
Mortgagor fails to diligently and continuously defend such action or proceeding
(provided, however, that clause (b) shall not apply if Mortgagee is a named
party in any such action), then Mortgagee may, at its option, with or without
notice to Mortgagor, make any appearances, disburse any sums and take any
actions as may be necessary or desirable to protect or enforce the security of
this Mortgage or to remedy the failure of Mortgagor to perform its covenants
and agreements (without, however, waiving any default of Mortgagor). Mortgagor
agrees to pay on demand all expenses of Mortgagee incurred with respect to the
foregoing (including, but not limited to, fees and disbursements of counsel),
together with interest thereon at the Default Interest Rate from and after the
date on which Mortgagee incurs such expenses until reimbursement thereof by
Mortgagor. Any such expenses so incurred by Mortgagee, together with interest
thereon as provided above, shall be additional indebtedness of Mortgagor
secured by this Mortgage and by all of the other Loan Documents securing all or
any part of the Debt. The necessity for any such actions and of the amounts to
be paid shall be determined by Mortgagee in its discretion. Mortgagee is
hereby empowered to enter and to authorize others to enter upon the Mortgaged
Property or any part thereof for the purpose of performing or observing any
such defaulted term, covenant or condition without thereby becoming liable to
Mortgagor or any person in possession holding under Mortgagor. Mortgagor
hereby acknowledges and agrees that the remedies set forth in this Section 1.20
shall be exercisable by Mortgagee, and any and all payments made or costs or
expenses incurred by Mortgagee in connection therewith shall be secured hereby
and shall be, without demand, immediately repaid by Mortgagor with interest
thereon at the Default Interest Rate, notwithstanding the fact that such
remedies were exercised and such payments made and costs incurred by Mortgagee
after the filing by Mortgagor of a voluntary case or the filing against
Mortgagor of an involuntary case pursuant to or within the meaning of the
Bankruptcy Reform Act of 1978, as amended, Title 11 U.S.C., or after any
similar action pursuant to any other debtor relief law (whether statutory,
common law, case law or otherwise) of any jurisdiction whatsoever, now or
hereafter in effect, which may be or become applicable to Mortgagor, Mortgagee,
any guarantor or indemnitor, the Debt or any of the Loan Documents. Mortgagor
hereby indemnifies and holds Mortgagee harmless from and against all loss, cost
and expenses with respect to any default hereof, any liens (i.e., judgments,
mechanics' and materialmen's liens, or otherwise), charges and encumbrances
filed against the Mortgaged Property, and from any claims and demands for
damages or injury,
32
<PAGE> 34
including claims for property damage, personal injury or wrongful death,
arising out of or in connection with any accident or fire or other casualty on
the Premises or the Improvements or any nuisance made or suffered thereon,
except those that are due to Mortgagee's gross negligence or willful
misconduct, including, in any case, reasonable attorneys' fees, costs and
expenses as aforesaid, whether at pretrial, trial or appellate level, and such
indemnity shall survive payment in full of the Debt. This Section shall not be
construed to require Mortgagee to incur any expenses, make any appearances or
take any actions.
1.21 Security Interest. This Mortgage is also intended to encumber
and create a security interest in, and Mortgagor hereby grants to Mortgagee a
security interest in all sums on deposit with Mortgagee pursuant to the
provisions of Section 1.6, and Section 1.8 hereof or any other Section hereof
and all fixtures, chattels, accounts, equipment, contract rights, General
Intangibles and other personal property included within the Mortgaged Property,
all renewals, replacements of any of the aforementioned items, or articles in
substitution therefor or in addition thereto or the proceeds thereof (said
property is hereinafter referred to collectively as the "Collateral"), whether
or not the same shall be attached to the Premises or the Improvements in any
manner. It is hereby agreed that to the extent permitted by law, all of the
foregoing property is to be deemed and held to be a part of and affixed to the
Premises and the Improvements. The foregoing security interest shall also
cover Mortgagor's leasehold interest in any of the foregoing property that is
leased by Mortgagor. Notwithstanding the foregoing, all of the foregoing
property shall be owned by Mortgagor and no leasing or installment sales or
other financing or title retention agreement in connection therewith shall be
permitted without the prior written approval of Mortgagee. Mortgagor shall,
from time to time upon the request of Mortgagee, supply Mortgagee with a
current inventory of all of the property in which Mortgagee is granted a
security interest hereunder, in such detail as Mortgagee may require.
Mortgagor shall promptly replace all of the Collateral subject to the lien or
security interest of this Mortgage when worn or obsolete with Collateral
comparable to the worn out or obsolete Collateral when new and will not,
without the prior written consent of Mortgagee, remove from the Premises or the
Improvements any of the Collateral subject to the lien or security interest of
this Mortgage except such as is replaced by an article of equal suitability and
value as above provided, owned by Mortgagor free and clear of any lien or
security interest except that created by this Mortgage and the other Loan
Documents. All of the Collateral shall be kept at the location of the Premises
except as otherwise required by the terms of the Loan Documents. Mortgagor
shall not use any of the Collateral in violation of any applicable statute,
ordinance or insurance policy.
1.22 Security Agreement. This Mortgage constitutes a security
agreement between Mortgagor and Mortgagee with respect to the Collateral in
which Mortgagee is granted a security interest hereunder, and, cumulative of
all other rights and remedies of
33
<PAGE> 35
Mortgagee hereunder, Mortgagee shall have all of the rights and remedies of a
secured party under any applicable Uniform Commercial Code. Mortgagor hereby
agrees to execute and deliver on demand and hereby irrevocably constitutes and
appoints Mortgagee the attorney-in-fact of Mortgagor to execute and deliver
and, if appropriate, to file with the appropriate filing officer or office such
security agreements, financing statements, continuation statements or other
instruments as Mortgagee may request or require in order to impose, perfect or
continue the perfection of the lien or security interest created hereby.
Except with respect to Rents to the extent specifically provided herein to the
contrary, Mortgagee shall have the right of possession of all cash, securities,
instruments, negotiable instruments, documents, certificates and any other
evidences of cash or other property or evidences of rights to cash rather than
property, which are now or hereafter a part of the Mortgaged Property, and
Mortgagor shall promptly deliver the same to Mortgagee, endorsed to Mortgagee,
without further notice from Mortgagee. Mortgagor agrees to furnish Mortgagee
with notice of any change in the name, identity, corporate structure,
residence, or principal place of business or mailing address of Mortgagor
within ten (10) days of the effective date of any such change. Upon the
occurrence of any default hereunder not cured within any applicable grace or
cure period, Mortgagee shall have the rights and remedies as prescribed in this
Mortgage, or as prescribed by general law, or as prescribed by any applicable
Uniform Commercial Code, all at Mortgagee's election. Any disposition of the
Collateral may be conducted by an employee or agent of Mortgagee. Any person,
including both Mortgagor and Mortgagee, shall be eligible to purchase any part
or all of the Collateral at any such disposition. Expenses of retaking,
holding, preparing for sale, selling or the like (including, without
limitation, Mortgagee's reasonable attorneys' fees and legal expenses),
together with interest thereon at the Default Interest Rate from the date
incurred by Mortgagee until actually paid by Mortgagor, shall be paid by
Mortgagor on demand and shall be secured by this Mortgage and by all of the
other Loan Documents securing all or any part of the Debt. Mortgagee shall
have the right to enter upon the Premises and the Improvements or any real
property where any of the property which is the subject of the security
interest granted herein is located to take possession of, assemble and collect
the same or to render it unusable, or Mortgagor, upon demand of Mortgagee,
shall assemble such property and make it available to Mortgagee at the
Premises, or at a place that is hereby deemed to be reasonably convenient to
Mortgagee and Mortgagor. If notice is required by law, Mortgagee shall give
Mortgagor at least ten (10) days' prior written notice of the time and place of
any public sale of such property, or adjournments thereof, or of the time of or
after which any private sale or any other intended disposition thereof is to be
made, and if such notice is sent to Mortgagor, as the same is provided for the
mailing of notices herein, it is hereby deemed that such notice shall be and is
reasonable notice to Mortgagor. No such notice is necessary for any such
property that is perishable, threatens to decline speedily in value or is of a
type customarily sold on a
34
<PAGE> 36
recognized market. Any sale made pursuant to the provisions of this Section
shall be deemed to have been a public sale conducted in a commercially
reasonable manner if held contemporaneously with the foreclosure sale as
provided in Section 3.1(e) hereof upon giving the same notice with respect to
the sale of the Mortgaged Property hereunder as is required under said Section
3.1(e). Furthermore, to the extent permitted by law, in conjunction with, in
addition to or in substitution for the rights and remedies available to
Mortgagee pursuant to any applicable Uniform Commercial Code:
(a) In the event of a foreclosure sale, the Mortgaged
Property may, at the option of Mortgagee, be sold as a whole; and
(b) It shall not be necessary that Mortgagee take
possession of the aforementioned Collateral, or any part thereof, prior to the
time that any sale pursuant to the provisions of this Section is conducted and
it shall not be necessary that said Collateral, or any part thereof, be present
at the location of such sale; and
(c) Mortgagee may appoint or delegate any one or more
persons as agent to perform any act or acts necessary or incident to any sale
held by Mortgagee, including the sending of notices and the conduct of the
sale, but in the name and on behalf of Mortgagee.
The name and address of Mortgagor (as Debtor under any applicable Uniform
Commercial Code) are:
FRANK'S NURSERY AND CRAFTS, INC.
6501 East Nevada
Detroit, MI 48231
The name and address of Mortgagee (as Secured Party under any applicable
Uniform Commercial Code) are:
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
One First Union Center TW-8
Charlotte, North Carolina 28288
1.23 Easements and Rights-of-Way. Mortgagor shall not grant any
easement or right-of-way with respect to all or any portion of the Premises or
the Improvements without the prior written consent of Mortgagee. The purchaser
at any foreclosure sale hereunder may, at its discretion, disaffirm any
easement or right-of-way granted in violation of any of the provisions of this
Mortgage and may take immediate possession of the Mortgaged Property free from,
and despite the terms of, such grant of easement or right-of-way. If Mortgagee
consents to the grant of an easement or right-of-way, Mortgagee agrees to grant
such consent without charge to Mortgagor other than expenses, including,
without limitation, reasonable attorneys' fees, incurred by Mortgagee in the
review of Mortgagor's
35
<PAGE> 37
request and in the preparation of documents effecting the subordination.
1.24 Compliance with Laws. Mortgagor shall at all times comply
with all applicable statutes, ordinances, regulations and other governmental or
quasi-governmental requirements and private covenants now or hereafter relating
to the ownership, construction, use or operation of the Mortgaged Property,
including, but not limited to, those concerning employment and compensation of
persons engaged in operation and maintenance of the Mortgaged Property and any
environmental or ecological requirements, even if such compliance shall require
structural changes to the Mortgaged Property; provided, however, that,
Mortgagor may, upon providing Mortgagee with security satisfactory to
Mortgagee, proceed diligently and in good faith to contest the validity or
applicability of any such statute, ordinance, regulation or requirement so long
as such contest does not subject the Mortgaged Property to any lien, charge,
fine or other liability and shall not be in danger of being forfeited, lost or
closed. Mortgagor shall not use or occupy, or allow the use or occupancy of,
the Mortgaged Property in any manner that materially violates any lease of or
any other agreement applicable to the Mortgaged Property or that violates any
applicable law, rule, regulation or order or that constitutes a public or
private nuisance or that makes void, voidable or cancelable, or increases the
premium of, any insurance then in force with respect thereto.
1.25 Additional Taxes. In the event of the enactment after this
date of any law of the state in which the Mortgaged Property is located or of
any other governmental entity deducting from the value of the Mortgaged
Property for the purpose of taxation any lien or security interest thereon, or
imposing upon Mortgagee the payment of the whole or any part of the taxes or
assessments or charges or liens herein required to be paid by Mortgagor, or
changing in any way the laws relating to the taxation of deeds of trust,
mortgages or security agreements or debts secured by deeds of trust, mortgages
or security agreements or the interest of the beneficiary, mortgagee or secured
party in the property covered thereby, or the manner of collection of such
taxes, so as to adversely affect this Mortgage or the Debt or Mortgagee, then,
and in any such event, Mortgagor, upon demand by Mortgagee, shall pay such
taxes, assessments, charges or liens, or reimburse Mortgagee therefor;
provided, however, that if in the opinion of counsel for Mortgagee (a) it might
be unlawful to require Mortgagor to make such payment, or (b) the making of
such payment might result in the imposition of interest beyond the maximum
amount permitted by law, then and in either such event, Mortgagee may elect, by
notice in writing given to Mortgagor, to declare all of the Debt to be and
become due and payable in full thirty (30) days from the giving of such notice.
36
<PAGE> 38
1.26 Secured Indebtedness. It is understood and agreed that this
Mortgage shall secure payment of not only the indebtedness evidenced by the
Note but also any and all substitutions, replacements, renewals and extensions
of the Note, any and all indebtedness and obligations arising pursuant to the
terms hereof and any and all indebtedness and obligations arising pursuant to
the terms of any of the other Loan Documents, all of which indebtedness is
equally secured with and has the same priority as any amounts advanced as of
the date hereof. It is agreed that any future advances made by Mortgagee to or
for the benefit of Mortgagor from time to time under this Mortgage or the other
Loan Documents and whether or not such advances are obligatory or are made at
the option of Mortgagee, or otherwise, made for any purpose under this Mortgage
or any of the other Loan Documents, within twenty (20) years from the date
hereof, and all interest accruing thereon, shall be equally secured by this
Mortgage and shall have the same priority as all amounts, if any, advanced as
of the date hereof and shall be subject to all of the terms and provisions of
this Mortgage.
1.27 Mortgagor's Waivers. To the full extent permitted by law,
Mortgagor agrees that Mortgagor shall not at any time insist upon, plead, claim
or take the benefit or advantage of any law now or hereafter in force providing
for any appraisement, valuation, stay, moratorium or extension, or any law now
or hereafter in force providing for the reinstatement of the Debt prior to any
sale of the Mortgaged Property to be made pursuant to any provisions contained
herein or prior to the entering of any decree, judgment or order of any court
of competent jurisdiction, or any right under any statute to redeem all or any
part of the Mortgaged Property so sold. Mortgagor, for Mortgagor and
Mortgagor's successors and assigns, and for any and all persons ever claiming
any interest in the Mortgaged Property, to the full extent permitted by law,
hereby knowingly, intentionally and voluntarily with and upon the advice of
competent counsel: (a) waives, releases, relinquishes and forever forgoes all
rights of valuation, appraisement, stay of execution, reinstatement and notice
of election or intention to mature or declare due the Debt (except such notices
as are specifically provided for herein); (b) waives, releases, relinquishes
and forever forgoes all right to a marshalling of the assets of Mortgagor,
including the Mortgaged Property, to a sale in the inverse order of alienation,
or to direct the order in which any of the Mortgaged Property shall be sold in
the event of foreclosure of the liens and security interests hereby created and
agrees that any court having jurisdiction to foreclose such liens and security
interests may order the Mortgaged Property sold as an entirety; and (c) waives,
releases, relinquishes and forever forgoes all rights and periods of redemption
provided under applicable law. To the full extent permitted by law, Mortgagor
shall not have or assert any right under any statute or rule of law pertaining
to the exemption of homestead or other exemption under any federal, state or
local law now or hereafter in effect, the administration of estates of
decedents or other matters whatever to defeat, reduce or affect the right of
Mortgagee under the terms of
37
<PAGE> 39
this Mortgage to a sale of the Mortgaged Property, for the collection of the
Debt without any prior or different resort for collection, or the right of
Mortgagee under the terms of this Mortgage to the payment of the Debt out of
the proceeds of sale of the Mortgaged Property in preference to every other
claimant whatever. Mortgagor covenants and agrees that upon the commencement
of a voluntary or involuntary bankruptcy proceeding by or against Mortgagor,
Mortgagor shall not seek a supplemental stay or otherwise shall not seek
pursuant to 11 U.S.C. Section 105 or any other provision of the Bankruptcy
Reform Act of 1978, as amended, or any other debtor relief law (whether
statutory, common law, case law, or otherwise) of any jurisdiction whatsoever,
now or hereafter in effect, which may be or become applicable, to stay,
interdict, condition, reduce or inhibit the ability of Mortgagee to enforce any
rights of Mortgagee against any guarantor or indemnitor of the secured
obligations or any other party liable with respect thereto by virtue of any
indemnity, guaranty or otherwise.
1.28 SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
(a) MORTGAGOR, TO THE FULL EXTENT PERMITTED BY LAW,
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF
COMPETENT COUNSEL, (i) SUBMITS TO PERSONAL JURISDICTION IN THE STATE IN WHICH
THE PREMISES IS LOCATED OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON
ARISING FROM OR RELATING TO THE NOTE, THIS MORTGAGE OR ANY OTHER OF THE LOAN
DOCUMENTS, (ii) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE BROUGHT
IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING IN THE COUNTY
IN WHICH THE PREMISES IS LOCATED, (iii) SUBMITS TO THE JURISDICTION OF SUCH
COURTS, AND (iv) TO THE FULLEST EXTENT PERMITTED BY LAW, AGREES THAT IT WILL
NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM (BUT NOTHING HEREIN
SHALL AFFECT THE RIGHT OF MORTGAGEE TO BRING ANY ACTION, SUIT OR PROCEEDING IN
ANY OTHER FORUM). MORTGAGOR FURTHER CONSENTS AND AGREES TO SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT, ACTION OR
PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO THE
MORTGAGOR AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 4.5 HEREOF, AND
CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID
AND EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR
EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW).
(b) MORTGAGOR, TO THE FULL EXTENT PERMITTED BY LAW,
HEREBY KNOWINGLY, INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF
COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY
WAY RELATING TO THE DEBT OR ANY CONDUCT, ACT OR OMISSION OF MORTGAGEE OR
MORTGAGOR, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES,
AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS AFFILIATED WITH MORTGAGEE OR
MORTGAGOR, IN EACH OR THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT
OR OTHERWISE.
1.29 Intentionally Omitted.
38
<PAGE> 40
1.30 Management. The management of the Mortgaged Property shall be
by either: (a) Mortgagor or an entity affiliated with Mortgagor approved by
Mortgagee for so long as Mortgagor or said affiliated entity is managing the
Mortgaged Property in a first class manner; or (b) a professional property
management company approved by Mortgagee. Such management by an affiliated
entity or a professional property management company shall be pursuant to a
written agreement approved by Mortgagee. In no event shall any manager be
removed or replaced or the terms of any management agreement modified or
amended without the prior written consent of Mortgagee. In the event of
default hereunder or under any management contract then in effect, which
default is not cured within any applicable grace or cure period, Mortgagee
shall have the right to terminate, or to direct Mortgagor to terminate, such
management contract upon thirty (30) days' notice and to retain, or to direct
Mortgagor to retain, a new management agent approved by Mortgagee. All Rents
generated by or derived from the Mortgaged Property shall first be utilized
solely for current expenses directly attributable to the ownership and
operation of the Mortgaged Property, including, without limitation, current
expenses relating to Mortgagor's liabilities and obligations with respect to
this Mortgage and the other Loan Documents, and none of the Rents generated by
or derived from the Mortgaged Property shall be diverted by Mortgagor and
utilized for any other purposes unless all such current expenses attributable
to the ownership and operation of the Mortgaged Property have been fully paid
and satisfied.
1.31 Hazardous Waste and Other Substances.
(a) Mortgagor hereby represents and warrants to Mortgagee
that, as of the date hereof: (i) to the best of Mortgagor's knowledge,
information and belief, the Mortgaged Property is not in direct or indirect
violation of any local, state or federal law, rule or regulation pertaining to
environmental regulation, contamination or clean-up (collectively,
"Environmental Statutes"), including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 (42 U.S.C.
Section 9601 et seq. and 40 CFR Section 302.1 et seq.), the Resource
Conservation and Recovery Act of 1976 (42 U.S.C. Section 6901 et seq.), The
Federal Water Pollution Control Act (33 U.S.C. Section 1251 et seq. and 40 CFR
Section 116.1 et seq.), and the Hazardous Materials Transportation Act (49
U.S.C. Section 1801 et seq.), and the regulations promulgated pursuant to said
laws, all as amended; (ii) to the best of Mortgagor's knowledge, information
and belief, no hazardous, toxic or harmful substances, wastes, materials,
pollutants or contaminants (including, without limitation, asbestos,
polychlorinated biphenyls, petroleum products, flammable explosives,
radioactive materials, infectious substances or raw materials that include
hazardous constituents) or any other substances or materials that are included
under or regulated by Environmental Statutes (collectively, "Hazardous
Materials") are located on or have been handled, generated, stored, processed
or disposed of on or released or discharged from the Mortgaged
39
<PAGE> 41
Property (including underground contamination), except for those substances
used by Mortgagor in the ordinary course of its business and in compliance with
all Environmental Statutes; (iii) to the best of Mortgagor's knowledge,
information and belief, the Mortgaged Property is not subject to any private or
governmental lien or judicial or administrative notice or action relating to
Hazardous Materials; (iv) to the best of Mortgagor's knowledge, information and
belief, there are no existing or closed underground storage tanks or other
underground storage receptacles for Hazardous Materials on the Mortgaged
Property; (v) Mortgagor has received no notice of, and to the best of
Mortgagor's knowledge, information and belief, there exists no investigation,
action, proceeding or claim by any agency, authority or unit of government or
by any third party that could result in any liability, penalty, sanction or
judgment under any Environmental Statutes with respect to any condition, use or
operation of the Mortgaged Property, nor does Mortgagor know of any basis for
such a claim; and (vi) Mortgagor has received no notice of and, to the best of
Mortgagor's knowledge, information and belief, there has been no claim by any
party that any use, operation or condition of the Mortgaged Property has caused
any nuisance or any other liability or adverse condition on any other property,
nor does Mortgagor know of any basis for such a claim.
(b) Mortgagor shall keep or cause the Mortgaged Property
to be kept free from Hazardous Materials (except those substances used by
Mortgagor in the ordinary course of its business and in compliance with all
Environmental Statutes) and in compliance with all Environmental Statutes,
shall not install or use any underground storage tanks, shall expressly
prohibit the use, generation, handling, storage, production, processing and
disposal of Hazardous Materials by all tenants of space in the Improvements,
and, without limiting the generality of the foregoing, during the term of this
Mortgage, shall not install in the Improvements or permit to be installed in
the Improvements asbestos or any substance containing asbestos.
(c) Mortgagor shall promptly notify Mortgagee if
Mortgagor shall become aware of the possible existence of any Hazardous
Materials on the Mortgaged Property or if Mortgagor shall become aware that the
Mortgaged Property is or may be in direct or indirect violation of any
Environmental Statutes. Further, immediately upon receipt of the same,
Mortgagor shall deliver to Mortgagee copies of any and all orders, notices,
permits, applications, reports, and other communications, documents and
instruments pertaining to the actual, alleged or potential presence or
existence of any Hazardous Materials at, on, about, under, within, near or in
connection with the Mortgaged Property. Mortgagor shall, promptly and when and
as required by any Environmental Statute, at Mortgagor's sole cost and expense,
take all actions as shall be necessary for the clean-up of any and all portions
of the Mortgaged Property or other affected property, including, without
limitation, all investigative, monitoring, removal, containment and remedial
actions in accordance with all
40
<PAGE> 42
applicable Environmental Statutes and shall further pay or cause to be paid, at
no expense to Mortgagee, all clean-up, administrative and enforcement costs of
applicable governmental agencies that may be asserted against the Mortgaged
Property. In the event Mortgagor fails to do so, Mortgagee may, but shall not
be obligated to, after thirty (30) days' notice to Mortgagor, cause the
Mortgaged Property or other affected property to be freed from any Hazardous
Materials or otherwise brought into conformance with Environmental Statutes and
any and all costs and expenses incurred by Mortgagee in connection therewith,
together with interest thereon at the Default Interest Rate from the date
incurred by Mortgagee until actually paid by Mortgagor, shall be immediately
paid by Mortgagor on demand and shall be secured by this Mortgage and by all of
the other Loan Documents securing all or any part of the Debt. In connection
with such self-help rights, Mortgagor hereby grants to Mortgagee and its agents
and employees access to the Mortgaged Property and a license to remove any
Hazardous Materials and to do all things necessary to bring the Mortgaged
Property in conformance with Environmental Statutes. Mortgagor covenants and
agrees, at Mortgagor's sole cost and expense, to indemnify, defend (at trial
and appellate levels, and with attorneys, consultants and experts acceptable to
Mortgagee), and hold Mortgagee harmless from and against any and all liens,
damages, losses, liabilities, obligations, settlement payments, penalties,
assessments, citations, directives, claims, litigation, demands, defenses,
judgments, suits, proceedings, costs, disbursements or expenses of any kind or
of any nature whatsoever (including, without limitation, reasonable attorneys',
consultants' and experts' fees and disbursements actually incurred in
investigating, defending, settling or prosecuting any claim, litigation or
proceeding) which may at any time be imposed upon, incurred by or asserted or
awarded against Mortgagee or the Mortgaged Property (except those that result
solely from the gross negligence or willful misconduct of Mortgagee), and
arising directly or indirectly from or out of: (i) the presence, release or
threat of release of any Hazardous Materials on, in, under or affecting all or
any portion of the Mortgaged Property or any surrounding areas, regardless of
whether or not caused by or within the control of Mortgagor; (ii) the violation
of any Environmental Statutes relating to or affecting the Mortgaged Property,
whether or not caused by or within the control of Mortgagor; (iii) the failure
by Mortgagor to comply fully with the terms and conditions of this Section
1.31; (iv) the breach of any representation or warranty contained in this
Section 1.31; or (v) the enforcement of this Section 1.31, including, without
limitation, the cost of assessment, containment and/or removal of any and all
Hazardous Materials from all or any portion of the Mortgaged Property or any
surrounding areas, the cost of any actions taken in response to the presence,
release or threat of release of any Hazardous Materials on, in, under or
affecting any portion of the Mortgaged Property or any surrounding areas to
prevent or minimize such release or threat of release so that it does not
migrate or otherwise cause or threaten danger to present or future public
health, safety, welfare or the environment, and costs incurred to comply with
the Environmental Statutes in connection with all or any portion of the
41
<PAGE> 43
Mortgaged Property or any surrounding areas. The indemnity set forth in this
Section 1.31(c) shall also include any diminution in the value of the security
afforded by the Mortgaged Property or any future reduction in the sales price
of the Mortgaged Property by reason of any matter set forth in this Section
1.31(c). Mortgagee's rights under this Section shall survive payment in full
of the Debt and shall be in addition to all other rights of Mortgagee under
this Mortgage, the Note and the other Loan Documents.
(d) Upon Mortgagee's request, at any time after the
occurrence of a default hereunder or at such other time as Mortgagee has
reasonable grounds to believe that Hazardous Materials are or have been
released, stored or disposed of in violation of this Section 1.31 or any
Environmental Statute on the Mortgaged Property, or on property contiguous with
the Mortgaged Property, or that the Mortgaged Property may be in violation of
the Environmental Statutes, Mortgagor shall provide, at Mortgagor's sole cost
and expense, an inspection or audit of the Mortgaged Property prepared by a
hydrogeologist or environmental engineer or other appropriate consultant
approved by Mortgagee indicating the presence or absence of Hazardous Materials
on the Mortgaged Property or an inspection or audit of the Improvements
prepared by an engineering or consulting firm approved by Mortgagee indicating
the presence or absence of friable asbestos or substances containing asbestos
on the Mortgaged Property. If Mortgagor fails to provide such inspection or
audit within thirty (30) days after such request, Mortgagee may order the same,
and Mortgagor hereby grants to Mortgagee and its employees and agents access to
the Mortgaged Property and a license to undertake such inspection or audit.
The cost of such inspection or audit, together with interest thereon at the
Default Interest Rate from the date incurred by Mortgagee until actually paid
by Mortgagor, shall be immediately paid by Mortgagor on demand and shall be
secured by this Mortgage and by all of the other Loan Documents securing all or
any part of the Debt.
(e) Without limiting the foregoing, Mortgagor shall
establish and comply with an operations and maintenance program, in form and
substance acceptable to Mortgagee, for the Mortgaged Property prepared by an
environmental consultant acceptable to Mortgagee, which program shall address
any Hazardous Materials that may now or in the future be detected on the
Mortgaged Property. Without limiting the generality of the preceding sentence,
Mortgagee may require (i) periodic notices or reports to Mortgagee in form,
substance and at such intervals as Mortgagee may specify, (ii) an amendment to
such operations and maintenance program to address changing circumstances, laws
or other matters, (iii) at Mortgagee's sole expense, supplemental examination
of the Mortgaged Property by consultants specified by Mortgagee, and (iv)
variation of the operations and maintenance program in response to the reports
provided by any such consultants.
42
<PAGE> 44
1.32 Indemnification; Subrogation.
(a) Mortgagor shall indemnify, defend and hold Mortgagee
harmless against: (i) any and all claims for brokerage, leasing, finders or
similar fees that may be made relating to the Mortgaged Property or the Debt,
and (ii) any and all liability, obligations, losses, damages, penalties,
claims, actions, suits, costs and expenses (including Mortgagee's reasonable
attorneys' fees, together with reasonable appellate counsel fees, if any) of
whatever kind or nature that may be asserted against, imposed on or incurred by
Mortgagee in connection with the Debt, this Mortgage, the Mortgaged Property,
or any part thereof, or the exercise by Mortgagee of any rights or remedies
granted to it under this Mortgage; provided, however, that nothing herein shall
be construed to obligate Mortgagor to indemnify, defend and hold harmless
Mortgagee from and against any and all liabilities, obligations, losses,
damages, penalties, claims, actions, suits, costs and expenses enacted against,
imposed on or incurred by Mortgagee by reason of Mortgagee's willful misconduct
or gross negligence.
(b) If Mortgagee is made a party defendant to any
litigation or any claim is threatened or brought against Mortgagee concerning
the Debt, this Mortgage, the Mortgaged Property, or any part thereof, or any
interest therein, or the construction, maintenance, operation or occupancy or
use thereof, then Mortgagor shall indemnify, defend and hold Mortgagee harmless
from and against all liability by reason of said litigation or claims,
including reasonable attorneys' fees (together with reasonable appellate
counsel fees, if any) and expenses incurred by Mortgagee in any such litigation
or claim, whether or not any such litigation or claim is prosecuted to
judgment; provided, however, that Mortgagor shall have the right, at its sole
cost and expense, to participate in any such litigation. If Mortgagee
commences an action against Mortgagor to enforce any of the terms hereof or to
prosecute any breach by Mortgagor of any of the terms hereof or to recover any
sum secured hereby, Mortgagor shall pay to Mortgagee its reasonable attorneys'
fees (together with reasonable appellate counsel, fees, if any) and expenses.
The right to such attorneys' fees (together with reasonable appellate counsel
fees, if any) and expenses shall be deemed to have accrued on the commencement
of such action, and shall be enforceable whether or not such action is
prosecuted to judgment. If Mortgagor breaches any term of this Mortgage,
Mortgagee may engage the services of an attorney or attorneys to protect its
rights hereunder, and in the event of such engagement following any breach by
Mortgagor, Mortgagor shall pay the reasonable attorneys' fees (together with
reasonable appellate counsel fees, if any) and expenses incurred by Mortgagee,
whether or not an action is actually commenced against Mortgagor by reason of
such breach. All references to "attorneys" in this Subsection and elsewhere in
this Mortgage shall include, without limitation, any attorney or law firm
engaged by Mortgagee and Mortgagee's in-house counsel, and all references to
"fees and expenses" in this Subsection and elsewhere in this Mortgage shall
include, without limitation, any fees of such attorney or law firm and any
43
<PAGE> 45
allocation charges and allocation costs of Mortgagee's in-house counsel, but
shall exclude any (i) out-of-pocket costs that do not result directly from the
subject litigation and (ii) general corporate overhead charges.
(c) A waiver of subrogation shall be obtained by
Mortgagor from its insurance carrier and, consequently, Mortgagor waives any
and all right to claim or recover against Mortgagee, its officers, employees,
agents and representatives, for loss of or damage to Mortgagor, the Mortgaged
Property, Mortgagor's property or the property of others under Mortgagor's
control from any cause insured against or required to be insured against by the
provisions of this Mortgage.
1.33 Covenants with Respect to Indebtedness, Operations,
Fundamental Changes of Mortgagor. Mortgagor hereby represents, warrants and
covenants as of the date hereof and until such time as the Debt is paid in
full, that Mortgagor:
(a) will not dissolve or terminate or materially amend
the terms of its certificate of incorporation, partnership agreement or
operating agreement;
(b) will not enter into any transaction of merger or
consolidation, or liquidate or dissolve (or suffer any liquidation or
dissolution), or acquire by purchase or otherwise all or substantially all the
business or assets of unless Mortgagor is the surviving entity;
(c) [intentionally omitted];
(d) [intentionally omitted];
(e) [intentionally omitted];
(f) [intentionally omitted];
(g) no other debt may be secured (senior, subordinate or
pari passu) by the Mortgaged Property;
(h) [intentionally omitted];
(i) is and will be solvent and pay its debts from its
assets as the same shall become due;
(j) has done or caused to be done and will do all things
necessary to preserve its existence;
(k) will conduct and operate its business substantially
as presently conducted and operated;
(l) will maintain books and records and bank accounts
separate from those of its affiliates, including its general partners or
members, as applicable;
44
<PAGE> 46
(m) [intentionally omitted];
(n) will file tax returns;
(o) will maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations in a manner consistent with
its current practice of maintaining capital;
(p) will not seek the dissolution or winding up, in whole
or in part, of Mortgagor;
(q) [intentionally omitted];
(r) has and will maintain its assets in such a manner
that it is not costly or difficult to segregate, ascertain or identify its
individual assets from those of any affiliate or any other person; and
(s) [intentionally omitted].
1.34 Repair and Remediation Reserve. Prior to the execution of
this Mortgage, Mortgagee has caused the Mortgaged Property to be inspected and
such inspection has revealed that the Mortgaged Property is in need of certain
maintenance, repairs and/or remedial or corrective work. Contemporaneously
with the execution hereof, Mortgagor has established with the Mortgagee a
reserve in the amount of $34,990.00 (the "Repair and Remediation Reserve") by
depositing such amount with Mortgagee. Mortgagor shall cause each of the items
described in that certain Engineering Report dated September 11, 1995 and
prepared by Albert A. Roupp Associates (the "Deferred Maintenance") to be
completed, performed, remediated and corrected to the reasonable satisfaction
of Mortgagee and as necessary to bring the Mortgaged Property into compliance
with all applicable laws, ordinances, rules and regulations on or before the
expiration of six (6) months after the effective date hereof, as such time
period may be extended by Mortgagee in its sole discretion. So long as no
default hereunder or under the other Loan Documents has occurred and is
continuing, all sums in the Repair and Remediation Reserve shall be held by
Mortgagee in the Repair and Remediation Reserve to pay the costs and expenses
of completing the Deferred Maintenance. So long as no default hereunder or
under the other Loan Documents has occurred and is continuing, Mortgagee shall,
to the extent funds are available for such purpose in the Repair and
Remediation Reserve, disburse to Mortgagor the amount paid or incurred by
Mortgagor in completing, performing, remediating or correcting the Deferred
Maintenance upon (a) the receipt by Mortgagee of a written request from
Mortgagor for disbursement from the Repair and Remediation Reserve and a
certification by Mortgagor in a form as may be required by Mortgagee that the
applicable item of Deferred Maintenance has been completed in accordance with
the terms of this Mortgage, (b) delivery to Mortgagee of invoices, receipts or
other evidence
45
<PAGE> 47
satisfactory to Mortgagee verifying the costs of the Deferred Maintenance to be
reimbursed, (c) delivery to Mortgagee of a certification from an inspecting
architect, engineer or other consultant reasonably acceptable to Mortgagee
describing the completed work, verifying the completion of the work and the
value of the completed work and, if applicable, certifying that the Mortgaged
Property is, as a result of such work, in compliance with all applicable laws,
ordinances, rules and regulations relating to the Deferred Maintenance so
performed, and (d) delivery to Mortgagee of affidavits, lien waivers or other
evidence reasonably satisfactory to Mortgagee showing that all materialmen,
laborers, subcontractors and any other parties who might or could claim
statutory or common law liens and are furnishing or have furnished materials or
labor to the Mortgaged Property have been paid all amounts due for such labor
and materials furnished to the Mortgaged Property. Mortgagee shall not be
required to make advances from the Repair and Remediation Reserve more
frequently than once in any sixty (60) day period. In making any payment from
the Repair and Remediation Reserve, Mortgagee shall be entitled to rely on such
request from Mortgagor without any inquiry into the accuracy, validity or
contestability of any such amount. Mortgagor hereby grants to Mortgagee, as
additional security for payment of the Debt, a security interest in the Repair
and Remediation Reserve. The Repair and Remediation Reserve shall not, unless
otherwise explicitly required by applicable law, be or be deemed to be escrow
or trust funds, but at Mortgagee's option and in Mortgagee's discretion, may
either be held in a separate account or be commingled by Mortgagee with the
general funds of Mortgagee. No interest on the funds contained in the Repair
and Remediation Reserve shall be paid by Mortgagee to Mortgagor. The Repair
and Remediation Reserve is solely for the protection of Mortgagee and entails
no responsibility on Mortgagee's part beyond the payment of the costs and
expenses described in this paragraph in accordance with the terms hereof and
beyond the allowing of due credit for the sums actually received. In the event
that the amounts on deposit or available in the Repair and Remediation Reserve
are inadequate to pay the costs of the Deferred Maintenance, Mortgagor shall
pay the amount of such deficiency. Upon assignment of this Mortgage by
Mortgagee, any funds in the Repair and Remediation Reserve shall be turned over
to the assignee and any responsibility of Mortgagee, as assignor, with respect
thereto shall terminate. If there is a default under this Mortgage that is not
cured within any applicable grace or cure period, Mortgagee may, but shall not
be obligated to, apply at any time the balance then remaining in the Repair and
Remediation Reserve against the Debt in whatever order Mortgagee shall
subjectively determine. No such application of the Repair and Remediation
Reserve shall be deemed to cure any default hereunder. Mortgagor hereby grants
to Mortgagee a power-of-attorney, coupled with an interest, to cause the
Deferred Maintenance to be completed, performed, remediated and corrected to
the satisfaction of Mortgagee upon Mortgagor's failure to do so in accordance
with the terms and conditions of this Section 1.34, and to apply the amounts on
deposit in the Repair and Remediation Reserve to the costs associated
therewith, all as Mortgagee may
46
<PAGE> 48
determine in its sole and absolute discretion but without obligation to do so.
Upon the earlier to occur of full payment of the Debt in accordance with its
terms, the completion of the Deferred Maintenance to the satisfaction of the
Mortgagee or at such earlier time as Mortgagee may elect, the balance of the
Repair and Remediation Reserve then in Mortgagee's possession shall be paid
over to Mortgagor and no other party shall have any right or claim thereto.
ARTICLE II
EVENTS OF DEFAULT
2.1 Events of Default. The occurrence of any of the following
events shall be a default hereunder:
(a) Mortgagor fails to punctually perform any covenant,
agreement, obligation, term or condition hereof that requires payment of any
money to Mortgagee (except those regarding payments to be made under the Note,
which failure is subject to any grace periods set forth in the Note).
(b) Mortgagor fails to provide insurance as required by
Section 1.4 hereof or fails to perform any covenant, agreement, obligation,
term or condition set forth in Section 1.15 or Section 1.31 hereof.
(c) Mortgagor fails to perform any other covenant,
agreement, obligation, term or condition set forth herein, other than those
otherwise described in this Section 2.1, and, to the extent such failure or
default is susceptible of being cured, the continuance of such failure or
default for thirty (30) days after written notice thereof from Mortgagee to
Mortgagor; provided, however, that if such default is susceptible of cure but
such cure cannot be accomplished with reasonable diligence within said period
of time, and if Mortgagor commences to cure such default promptly after receipt
of notice thereof from Mortgagee, and thereafter prosecutes the curing of such
default with reasonable diligence, such period of time shall be extended for
such period of time as may be necessary to cure such default with reasonable
diligence, but not to exceed an additional sixty (60) days.
(d) Any representation or warranty made herein, in or in
connection with any application or commitment relating to the loan evidenced by
the Note, or in any of the other Loan Documents to Mortgagee by Mortgagor, by
any principal, general partner or member in Mortgagor or by any indemnitor or
guarantor (including, without limitation, Guarantor) under any indemnity or
guaranty executed in connection with the loan secured hereby is determined by
Mortgagee to have been false or misleading in any material respect at the time
made.
(e) There shall be a sale, conveyance, disposition,
alienation, hypothecation, leasing, assignment, pledge, mortgage,
47
<PAGE> 49
granting of a security interest in or other transfer or further encumbrancing
of the Mortgaged Property, Mortgagor or its general partners or members, or any
portion thereof or any interest therein, in violation of Section 1.13 hereof.
(f) A default occurs under any of the other Loan
Documents that has not been cured within any applicable grace or cure period
therein provided.
(g) In connection with any other loan from Mortgagee to
Mortgagor that is secured by property or properties located at (1) 4810 Outer
Loop, Louisville, Kentucky, (2) 5354 Dixie Highway, Louisville, Kentucky, (3)
4180 Plainfield, N.E., Grand Rapids, Michigan, (4) 5504 Miller Road, Flint,
Michigan, or (5) 801 Eastgate Drive, Cincinnati, Ohio (each, an "Additional
Loan"), a default occurs under any note, mortgage, indemnity or guaranty, or
any other agreement, document or instrument now or hereafter evidencing,
securing, guarantying, indemnifying or otherwise relating to an Additional Loan
(together with any and all renewals, amendments, extensions and modifications
thereof), which default has not been cured within any applicable grace or cure
period therein provided.
(h) Mortgagor, any principal, general partner or member
in Mortgagor or any indemnitor or guarantor (including, without limitation,
Guarantor) under any indemnity or guaranty executed in connection with the loan
secured hereby becomes insolvent, or shall make a transfer in fraud of
creditors, or shall make an assignment for the benefit of creditors, shall file
a petition in bankruptcy, shall voluntarily be adjudicated insolvent or
bankrupt or shall admit in writing the inability to pay debts as they mature,
shall petition or apply to any tribunal for or shall consent to or shall not
contest the appointment of a receiver, trustee, custodian or similar officer
for Mortgagor, for any such principal, general partner or member of Mortgagor
or for any such indemnitor or guarantor (including, without limitation,
Guarantor) or for a substantial part of the assets of Mortgagor, of any such
principal, general partner or member of Mortgagor or of any such indemnitor or
guarantor, or shall commence any case, proceeding or other action under any
bankruptcy, reorganization, arrangement, readjustment or debt, dissolution or
liquidation law or statute of any jurisdiction, whether now or hereafter in
effect.
(i) A petition is filed or any case, proceeding or other
action is commenced against Mortgagor, against any principal, general partner
or member of Mortgagor or against any indemnitor or guarantor (including,
without limitation, Guarantor) under any indemnity or guaranty executed in
connection with the loan secured hereby seeking to have an order for relief
entered against it as debtor or seeking reorganization, arrangement,
adjustment, liquidation, dissolution or composition of it or its debts or other
relief under any law relating to bankruptcy, insolvency, arrangement,
reorganization, receivership or other debtor relief under any law or statute of
any jurisdiction, whether now or
48
<PAGE> 50
hereafter in effect, or a court of competent jurisdiction enters an order for
relief against Mortgagor, against any principal, general partner or member of
Mortgagor or against any indemnitor or guarantor (including, without
limitation, Guarantor) under any indemnity or guaranty executed in connection
with the loan secured hereby, as debtor, or an order, judgment or decree is
entered appointing, with or without the consent of Mortgagor, of any such
principal, general partner or member of Mortgagor or of any such indemnitor or
guarantor, a receiver, trustee, custodian or similar officer for Mortgagor, for
any such principal, general partner or member of Mortgagor or for any such
indemnitor or guarantor, or for any substantial part of any of the properties
of Mortgagor, of any such principal, general partner or member of Mortgagor or
of any such indemnitor or guarantor, and if any such event shall occur, such
petition, case, proceeding, action, order, judgment or decree shall not be
dismissed within sixty (60) days after being commenced.
(j) The Mortgaged Property or any part thereof shall be
taken on execution or other process of law in any action against Mortgagor.
(k) Mortgagor abandons all or a portion of the Mortgaged
Property.
(l) The holder of any lien or security interest on the
Mortgaged Property (without implying the consent of Mortgagee to the existence
or creation of any such lien or security interest), whether superior or
subordinate to this Mortgage or any of the other Loan Documents, declares a
default and such default is not cured within any applicable grace or cure
period set forth in the applicable document or such holder institutes
foreclosure or other proceedings for the enforcement of its remedies
thereunder.
(m) Subject to Section 1.9 hereof, the Mortgaged
Property, or any part thereof, is subjected to actual or threatened (in
writing) waste or to removal, demolition or material alteration so that the
value of the Mortgaged Property is materially diminished thereby and Mortgagee
determines (in its subjective determination) that it is not adequately
protected from any loss, damage or risk associated therewith.
(n) Any dissolution, termination, partial or complete
liquidation, merger or consolidation of Mortgagor, any of its principals, any
general partner or any member, unless Mortgagor is the surviving entity and no
material adverse change in the financial condition of Mortgagor results
therefrom.
49
<PAGE> 51
ARTICLE III
REMEDIES
3.1 Remedies Available. If there shall occur a default under this
Mortgage, and such default has not been cured within any applicable grace or
cure period, then this Mortgage is subject to foreclosure as provided by law
and Mortgagee may, at its option and by or through a trustee, nominee, assignee
or otherwise, to the fullest extent permitted by law, exercise any or all of
the following rights, remedies and recourses, either successively or
concurrently:
(a) Acceleration. Accelerate the maturity date of the
Note and declare any or all of the Debt to be immediately due and payable
without any presentment, demand, protest, notice or action of any kind whatever
(each of which is hereby expressly waived by Mortgagor), whereupon the same
shall become immediately due and payable. Upon any such acceleration, payment
of such accelerated amount shall constitute a prepayment of the principal
balance of the Note and any applicable prepayment fee provided for in the Note
shall then be immediately due and payable.
(b) Entry on the Mortgaged Property. Either in person or
by agent, with or without bringing any action or proceeding, or by a receiver
appointed by a court and without regard to the adequacy of its security, enter
upon and take possession of the Mortgaged Property, or any part thereof,
without force or with such force as is permitted by law and without notice or
process or with such notice or process as is required by law, unless such
notice and process is waivable, in which case Mortgagor hereby waives such
notice and process, and do any and all acts and perform any and all work that
may be desirable or necessary in Mortgagee's judgment to complete any
unfinished construction on the Premises, to preserve the value, marketability
or rentability of the Mortgaged Property, to increase the income therefrom, to
manage and operate the Mortgaged Property or to protect the security hereof,
and all sums expended by Mortgagee therefor, together with interest thereon at
the Default Interest Rate, shall be immediately due and payable to Mortgagee by
Mortgagor on demand and shall be secured hereby and by all of the other Loan
Documents securing all or any part of the Debt.
(c) Collect Rents. With or without taking possession of
the Mortgaged Property, sue or otherwise collect the Rents, including those
past due and unpaid.
(d) Appointment of Receiver. Upon, or at any time prior
or after, initiating the exercise of any power of sale, instituting any
judicial foreclosure or instituting any other foreclosure of the liens and
security interests provided for herein or any other legal proceedings
hereunder, make application to a court of competent jurisdiction for
appointment of a receiver for all or any part of the Mortgaged Property, as a
matter of strict right and without notice to Mortgagor and without regard to
the adequacy of
50
<PAGE> 52
the Mortgaged Property for the repayment of the Debt or the solvency of
Mortgagor or any person or persons liable for the payment of the Debt, and
Mortgagor does hereby irrevocably consent to such appointment, waive any and
all notices of and defenses to such appointment and agree not to oppose any
application therefor by Mortgagee, but nothing herein is to be construed to
deprive Mortgagee of any other right, remedy or privilege Mortgagee may now
have under the law to have a receiver appointed, provided, however, that the
appointment of such receiver, trustee or other appointee by virtue of any court
order, statute or regulation shall not impair or in any manner prejudice the
rights of Mortgagee to receive payment of the Rents pursuant to other terms and
provisions hereof. Any such receiver shall have all of the usual powers and
duties of receivers in similar cases, including, without limitation, the full
power to hold, develop, rent, lease, manage, maintain, operate and otherwise
use or permit the use of the Mortgaged Property upon such terms and conditions
as said receiver may deem to be prudent and reasonable under the circumstances
as more fully set forth in Section 3.3 below. Such receivership shall, at the
option of Mortgagee, continue until full payment of all of the Debt or until
title to the Mortgaged Property shall have passed by foreclosure sale under
this Mortgage or deed in lieu of foreclosure.
(e) Foreclosure. Immediately commence an action to
foreclose this Mortgage or to specifically enforce its provisions with respect
to any of the Debt, pursuant to the statutes in such case made and provided,
and sell the Mortgaged Property or cause the Mortgaged Property to be sold in
accordance with the requirements and procedures provided by said statutes in a
single parcel or in several parcels at the option of Mortgagee.
(1) In the event foreclosure proceedings are
instituted by Mortgagee, all expenses incident to such proceedings,
including, but not limited to, attorneys' fees and costs, shall be
paid by Mortgagor and secured by this Mortgage and by all of the other
Loan Documents securing all or any part of the Debt. The Debt and all
other obligations secured by this Mortgage, including, without
limitation, interest at the Default Interest Rate (as defined in the
Note), any prepayment charge, fee or premium required to be paid under
the Note in order to prepay principal (to the extent permitted by
applicable law), reasonable attorneys' fees and any other amounts due
and unpaid to Mortgagee under the Loan Documents, may be bid by
Mortgagee in the event of a foreclosure sale hereunder. In the event
of a judicial sale pursuant to a foreclosure decree, it is understood
and agreed that Mortgagee or its assigns may become the purchaser of
the Mortgaged Property or any part thereof.
(f) Judicial Remedies. Proceed by suit or suits, at law
or in equity, instituted by Mortgagee, upon written request of Mortgagee, to
enforce the payment of the Debt or the other obligations of Mortgagor hereunder
or pursuant to the Loan
51
<PAGE> 53
Documents, to foreclose the liens and security interests of this Mortgage as
against all or any part of the Mortgaged Property, and to have all or any part
of the Mortgaged Property sold under the judgment or decree of a court of
competent jurisdiction. This remedy shall be cumulative of any other
non-judicial remedies available to the Mortgagee with respect to the Loan
Documents. Proceeding with the request or receiving a judgment for legal
relief shall not be or be deemed to be an election of remedies or bar any
available non-judicial remedy of the Mortgagee.
(g) Other. Exercise any other right or remedy available
hereunder, under any of the other Loan Documents or at law or in equity.
3.2 Application of Proceeds. To the fullest extent permitted by
law, the proceeds of any sale under this Mortgage shall be applied, to the
extent funds are so available, to the following items in such order as
Mortgagee in its discretion may determine:
(a) To payment of the reasonable costs, expenses and fees
of taking possession of the Mortgaged Property, and of holding, operating,
maintaining, using, leasing, repairing, improving, marketing and selling the
same and of otherwise enforcing Mortgagee's right and remedies hereunder and
under the other Loan Documents, including, but not limited to, receivers' fees,
court costs, attorneys', accountants', appraisers', managers' and other
professional fees, title charges and transfer taxes.
(b) To payment of all sums expended by Mortgagee under
the terms of any of the Loan Documents and not yet repaid, together with
interest on such sums at the Default Interest Rate.
(c) To payment of the Debt and all other obligations
secured by this Mortgage, including, without limitation, interest at the
Default Interest Rate and, to the extent permitted by applicable law, any
prepayment fee, charge or premium required to be paid under the Note in order
to prepay principal, in any order that Mortgagee chooses in its sole
discretion.
(d) The remainder, if any, of such funds shall be
disbursed to Mortgagor or to the person or persons legally entitled thereto.
3.3 Right and Authority of Receiver or Mortgagee in the Event of
Default; Power of Attorney. Upon the occurrence of a default hereunder, which
default is not cured within any applicable grace or cure period, and entry upon
the Mortgaged Property pursuant to Section 3.1(b) hereof or appointment of a
receiver pursuant to Section 3.1(d) hereof, and under such terms and conditions
as may be prudent and reasonable under the circumstances in Mortgagee's or the
receiver's sole discretion, all at Mortgagor's expense, Mortgagee or said
receiver, or such other persons or entities as they shall hire, direct or
engage, as the case may be, may do or permit one or more of the following,
successively or concurrently:
52
<PAGE> 54
(a) enter upon and take possession and control of any and all of the Mortgaged
Property; (b) take and maintain possession of all documents, books, records,
papers and accounts relating to the Mortgaged Property; (c) exclude Mortgagor
and its agents, servants and employees wholly from the Mortgaged Property; (d)
manage and operate the Mortgaged Property; (e) preserve and maintain the
Mortgaged Property; (f) make repairs and alterations to the Mortgaged Property;
(g) complete any construction or repair of the Improvements, with such changes,
additions or modifications of the plans and specifications or intended
disposition and use of the Improvements as Mortgagee may in its sole discretion
deem appropriate or desirable to place the Mortgaged Property in such condition
as will, in Mortgagee's sole discretion, make it or any part thereof readily
marketable or rentable; (h) conduct a marketing or leasing program with respect
to the Mortgaged Property, or employ a marketing or leasing agent or agents to
do so, directed to the leasing or sale of the Mortgaged Property under such
terms and conditions as Mortgagee may in its sole discretion deem appropriate
or desirable; (i) employ such contractors, subcontractors, materialmen,
architects, engineers, consultants, managers, brokers, marketing agents, or
other employees, agents, independent contractors or professionals, as Mortgagee
may in its sole discretion deem appropriate or desirable to implement and
effectuate the rights and powers herein granted; (j) execute and deliver, in
the name of Mortgagee as attorney-in-fact and agent of Mortgagor or in its own
name as Mortgagee, such documents and instruments as are necessary or
appropriate to consummate authorized transactions; (k) enter such leases,
whether of real or personal property, or tenancy agreements, under such terms
and conditions as Mortgagee may in its sole discretion deem appropriate or
desirable; (1) collect and receive the Rents from the Mortgaged Property; (m)
eject tenants or repossess personal property, as provided by law, for breaches
of the conditions of their leases or other agreements; (n) sue for unpaid
Rents, payments, income or proceeds in the name of Mortgagor or Mortgagee; (o)
maintain actions in forcible entry and detainer, ejectment for possession and
actions in distress for rent; (p) compromise or give acquittance for Rents,
payments, income or proceeds that may become due; (q) delegate or assign any
and all rights and powers given to Mortgagee by this Mortgage; and (r) do any
acts that Mortgagee in its sole discretion deems appropriate or desirable to
protect the security hereof and use such measures, legal or equitable, as
Mortgagee may in its sole discretion deem appropriate or desirable to implement
and effectuate the provisions of this Mortgage. This Mortgage shall constitute
a direction to and full authority to any lessee, or other third party who has
heretofore dealt or contracted or may hereafter deal or contract with Mortgagor
or Mortgagee, at the request of Mortgagee, to pay all amounts owing under any
lease, contract, concession, license or other agreement to Mortgagee without
proof of the default relied upon. Any such lessee or third party is hereby
irrevocably authorized to rely upon and comply with (and shall be fully
protected by Mortgagor in so doing) any request, notice or demand by Mortgagee
for the payment to Mortgagee of any Rents or other sums that may be or
thereafter become due
53
<PAGE> 55
under its lease, contract, concession, license or other agreement, or for the
performance of any undertakings under any such lease, contract, concession,
license or other agreement, and shall have no right or duty to inquire whether
any default under this Mortgage or under any of the other Loan Documents has
actually occurred or is then existing. Mortgagor hereby constitutes and
appoints Mortgagee, its assignees, successors, transferees and nominees, as
Mortgagor's true and lawful attorney-in-fact and agent, with full power of
substitution in the Mortgaged Property, in Mortgagor's name, place and stead,
to do or permit any one or more of the foregoing described rights, remedies,
powers and authorities, successively or concurrently, and said power of
attorney shall be deemed a power coupled with an interest and irrevocable so
long as any portion of the Debt is outstanding. Any money advanced by
Mortgagee in connection with any action taken under this Section 3.3, together
with interest thereon at the Default Interest Rate from the date of making such
advancement by Mortgagee until actually paid by Mortgagor, shall be a demand
obligation owing by Mortgagor to Mortgagee and shall be secured by this
Mortgage and by every other instrument securing the Debt.
3.4 Occupancy After Foreclosure. In the event there is a
foreclosure sale hereunder and at the time of such sale, Mortgagor or
Mortgagor's representatives, successors or assigns, or any other persons
claiming any interest in the Mortgaged Property by, through or under Mortgagor
(except tenants of space in the Improvements subject to leases entered into
prior to the date hereof), are occupying or using the Mortgaged Property, or
any part thereof, then, to the extent not prohibited by applicable law, each
and all shall, at the option of Mortgagee or the purchaser at such sale, as the
case may be, immediately become the tenant of the purchaser at such sale, which
tenancy shall be a tenancy from day-to-day, terminable at the will of either
landlord or tenant, at a reasonable rental per day based upon the value of the
Mortgaged Property occupied or used, such rental to be due daily to the
purchaser. Further, to the extent permitted by applicable law, in the event
the tenant fails to surrender possession of the Mortgaged Property upon the
termination of such tenancy, the purchaser shall be entitled to institute and
maintain an action for unlawful detainer of the Mortgaged Property in the
appropriate court of the county in which the Premises is located.
3.5 Notice to Account Debtors. Mortgagee may, at any time after a
default hereunder, which default is not cured within any applicable grace or
cure period, notify the account debtors and obligors of any accounts, chattel
paper, negotiable instruments or other evidences of indebtedness to Mortgagor
included in the Mortgaged Property to pay Mortgagee directly. Mortgagor shall
at any time or from time to time upon the request of Mortgagee provide to
Mortgagee a current list of all such account debtors and obligors and their
addresses.
3.6 Cumulative Remedies. All remedies contained in this Mortgage
are cumulative and Mortgagee shall also have all other
54
<PAGE> 56
remedies provided at law and in equity or in any other Loan Documents. Such
remedies may be pursued separately, successively or concurrently at the sole
subjective direction of Mortgagee and may be exercised in any order and as
often as occasion therefor shall arise. No act of Mortgagee shall be construed
as an election to proceed under any particular provisions of this Mortgage to
the exclusion of any other provision of this Mortgage or as an election of
remedies to the exclusion of any other remedy that may then or thereafter be
available to Mortgagee. No delay or failure by Mortgagee to exercise any right
or remedy under this Mortgage shall be construed to be a waiver of that right
or remedy or of any default hereunder. Mortgagee may exercise any one or more
of its rights and remedies at its option without regard to the adequacy of its
security.
3.7 Payment of Expenses. Mortgagor shall pay on demand all of
Mortgagee's expenses incurred in any efforts to enforce any terms of this
Mortgage, whether or not any lawsuit is filed and whether or not foreclosure is
commenced but not completed, including, but not limited to, legal fees and
disbursements, foreclosure costs and title charges, together with interest
thereon from and after the date incurred by Mortgagee until actually paid by
Mortgagor at the Default Interest Rate, and the same shall be secured by this
Mortgage and by all of the other Loan Documents securing all or any part of the
indebtedness evidenced by the Note.
ARTICLE IV
MISCELLANEOUS TERMS AND CONDITIONS
4.1 Time of Essence. Time is of the essence with respect to all
provisions of this Mortgage.
4.2 Release of Mortgage. If all of the Debt be paid, then and in
that event only, all rights under this Mortgage, except for those provisions
hereof that by their terms survive, shall terminate and the Mortgaged Property
shall become wholly clear of the liens, security interests, conveyances and
assignments evidenced hereby, which shall be promptly released of record by
Mortgagee in due form at Mortgagor's cost. No release of this Mortgage or the
lien hereof shall be valid unless executed by Mortgagee.
4.3 Certain Rights of Mortgagee. Without affecting Mortgagor's
liability for the payment of any of the Debt, Mortgagee may from time to time
and without notice to Mortgagor: (a) release any person liable for the payment
of the Debt; (b) extend or materially modify the terms of payment of the Debt;
(c) accept additional real or personal property of any kind as security or
alter, substitute or release any property securing the Debt; (d) recover any
part of the Mortgaged Property; (e) consent in writing to the making of any
subdivision map or plat thereof; (f) join in granting any easement therein; or
(g) join in any extension
55
<PAGE> 57
agreement of this Mortgage or any agreement subordinating the lien hereof.
4.4 Waiver of Certain Defenses. No action for the enforcement of
the lien hereof or of any provision hereof shall be subject to any defense that
would not be good and available to the party interposing the same in an action
at law upon the Note or any of the other Loan Documents.
4.5 Notices. All notices, demands, requests or other
communications to be sent by one party to the other hereunder or required by
law shall be in writing and shall be deemed to have been validly given or
served by delivery of the same in person to the intended addressee, or by
depositing the same with Federal Express or another reputable private courier
service for next business day delivery, or by depositing the same in the United
States mail, postage prepaid, registered or certified mail, return receipt
requested, in any event addressed to the intended addressee at its address set
forth on the first page of this Mortgage or at such other address as may be
designated by such party as herein provided. All notices, demands and requests
shall be effective upon such personal delivery, or one (1) business day after
being deposited with the private courier service, or three (3) business days
after being deposited in the United States mail as required above. Rejection
or other refusal to accept or the inability to deliver because of changed
address of which no notice was given as herein required shall be deemed to be
receipt of the notice, demand or request sent. By giving to the other party
hereto at least fifteen (15) days' prior written notice thereof in accordance
with the provisions hereof, the parties hereto shall have the right from time
to time to change their respective addresses and each shall have the right to
specify as its address any other address within the United States of America.
4.6 Successors and Assigns. The terms, provisions, indemnities,
covenants and conditions hereof shall be binding upon Mortgagor and the
successors and assigns of Mortgagor, including all successors in interest of
Mortgagor in and to all or any part of the Mortgaged Property, and shall inure
to the benefit of Mortgagee, its directors, officers, shareholders, employees
and agents and their respective successors and assigns and shall constitute
covenants running with the land. All references in this Mortgage to Mortgagor
or Mortgagee shall be deemed to include all such parties' successors and
assigns, and the term "Mortgagee" as used herein shall also mean and refer to
any lawful holder or owner, including pledgees and participants, of any of the
Debt. If Mortgagor consists of more than one person or entity, each will be
jointly and severally liable to perform the obligations of Mortgagor.
4.7 Severability. A determination that any provision of this
Mortgage is unenforceable or invalid shall not affect the enforceability or
validity of any other provision, and any determination that the application of
any provision of this
56
<PAGE> 58
Mortgage to any person or circumstance is illegal or unenforceable shall not
affect the enforceability or validity of such provision as it may apply to any
other persons or circumstances.
4.8 Gender. Within this Mortgage, words of any gender shall be
held and construed to include any other gender, and words in the singular shall
be held and construed to include the plural, and vice versa, unless the context
otherwise requires.
4.9 Waiver; Discontinuance of Proceedings. Mortgagee may waive
any single default by Mortgagor hereunder without waiving any other prior or
subsequent default. Mortgagee may remedy any default by Mortgagor hereunder
without waiving the default remedied. Neither the failure by Mortgagee to
exercise, nor the delay by Mortgagee in exercising, any right, power or remedy
upon any default by Mortgagor hereunder shall be construed as a waiver of such
default or as a waiver of the right to exercise any such right, power or remedy
at a later date. No single or partial exercise by Mortgagee of any right,
power or remedy hereunder shall exhaust the same or shall preclude any other or
further exercise thereof, and every such right, power or remedy hereunder may
be exercised at any time and from time to time. No modification or waiver of
any provision hereof nor consent to any departure by Mortgagor therefrom shall
in any event be effective unless the same shall be in writing and signed by
Mortgagee, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose given. No notice to nor demand
on Mortgagor in any case shall of itself entitle Mortgagor to any other or
further notice or demand in similar or other circumstances. Acceptance by
Mortgagee of any payment in an amount less than the amount then due on any of
the Debt shall be deemed an acceptance on account only and shall not in any way
affect the existence of a default hereunder. In case Mortgagee shall have
proceeded to invoke any right, remedy or recourse permitted hereunder or under
the other Loan Documents and shall thereafter elect to discontinue or abandon
the same for any reason, Mortgagee shall have the unqualified right to do so
and, in such an event, Mortgagor and Mortgagee shall be restored to their
former positions with respect to the Debt, the Loan Documents, the Mortgaged
Property and otherwise, and the rights, remedies, recourses and powers of
Mortgagee shall continue as if the same had never been invoked.
4.10 Section Headings. The headings of the sections and paragraphs
of this Mortgage are for convenience of reference only, are not to be
considered a part hereof and shall not limit or otherwise affect any of the
terms hereof.
4.11 GOVERNING LAW. THIS MORTGAGE WILL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PREMISES IS
LOCATED, PROVIDED THAT TO THE EXTENT THAT ANY OF SUCH LAWS MAY NOW OR HEREAFTER
BE PREEMPTED BY FEDERAL LAW, SUCH FEDERAL LAW SHALL SO GOVERN AND BE
CONTROLLING.
57
<PAGE> 59
4.12 Counting of Days. The term "days" when used herein shall mean
calendar days. If any time period ends on a Saturday, Sunday or holiday
officially recognized by the state within which the Premises is located, the
period shall be deemed to end on the next succeeding business day. The term
"business day" when used herein shall mean a weekday, Monday through Friday,
except a legal holiday or a day on which banking institutions in New York, New
York are authorized by law to be closed.
4.13 Relationship of the Parties. The relationship between
Mortgagor and Mortgagee is that of a borrower and a lender only and neither of
those parties is, nor shall it hold itself out to be, the agent, employee,
joint venturer or partner of the other party.
4.14 Application of the Proceeds of the Note. To the extent that
proceeds of the Note are used to pay indebtedness secured by any outstanding
lien, security interest, charge or prior encumbrance against the Mortgaged
Property, such proceeds have been advanced by Mortgagee at Mortgagor's request
and Mortgagee shall be subrogated to any and all rights, security interests and
liens owned by any owner or holder of such outstanding liens, security
interests, charges or encumbrances, irrespective of whether said liens,
security interests, charges or encumbrances are released.
4.15 Unsecured Portion of Indebtedness. If any part of the Debt
cannot be lawfully secured by this Mortgage or if any part of the Mortgaged
Property cannot be lawfully subject to the lien and security interest hereof to
the full extent of such indebtedness, then all payments made shall be applied
on said indebtedness first in discharge of that portion thereof that is
unsecured by this Mortgage.
4.16 Cross Default. A default hereunder that has not been cured
within any applicable grace or cure period shall be a default under each of the
other Loan Documents.
4.17 Interest After Sale. In the event the Mortgaged Property or
any part thereof shall be sold upon foreclosure as provided hereunder, to the
extent permitted by law, the sum for which the same shall have been sold shall,
for purposes of redemption (pursuant to the laws of the State of in which the
Premises is located), bear interest at the Default Interest Rate.
4.18 Inconsistency with Other Loan Documents. In the event of any
inconsistency between the provisions hereof and the provisions in any of the
other Loan Documents, it is intended that the provisions selected to control by
Mortgagee in its sole subjective discretion shall be controlling.
4.19 Construction of this Document. This document may be construed
as a mortgage, security deed, deed of trust, chattel mortgage, conveyance,
assignment, security agreement, pledge, financing statement, hypothecation or
contract, or any one or more of the foregoing, in order to fully effectuate the
liens and
58
<PAGE> 60
security interests created hereby and the purposes and agreements herein set
forth.
4.20 No Merger. It is the desire and intention of the parties
hereto that this Mortgage and the lien hereof do not merge in fee simple title
to the Mortgaged Property. It is hereby understood and agreed that should
Mortgagee acquire any additional or other interests in or to the Mortgaged
Property or the ownership thereof, then, unless a contrary intent is manifested
by Mortgagee as evidenced by an appropriate document duly recorded, this
Mortgage and the lien hereof shall not merge in such other or additional
interests in or to the Mortgaged Property, toward the end that this Mortgage
may be foreclosed as if owned by a stranger to said other or additional
interests.
4.21 Rights With Respect to Junior Encumbrances. Any person or
entity purporting to have or to take a junior mortgage or other lien upon the
Mortgaged Property or any interest therein shall be subject to the rights of
Mortgagee to amend, modify, increase, vary, alter or supplement this Mortgage,
the Note or any of the other Loan Documents, and to extend the maturity date of
the Debt, and to increase the amount of the Debt, and to waive or forebear the
exercise of any of its rights and remedies hereunder or under any of the other
Loan Documents and to release any collateral or security for the Debt, in each
and every case without obtaining the consent of the holder of such junior lien
and without the lien or security interest of this Mortgage losing its priority
over the rights of any such junior lien.
4.22 Mortgagee May File Proofs of Claim. In the case of any
receivership, insolvency, bankruptcy, reorganization, arrangement, adjustment,
composition or other proceedings affecting Mortgagor or the principals or
general partners in Mortgagor, or their respective creditors or property,
Mortgagee, to the extent permitted by law, shall be entitled to file such
proofs of claim and other documents as may be necessary or advisable in order
to have the claims of Mortgagee allowed in such proceedings for the entire Debt
at the date of the institution of such proceedings and for any additional
amount that may become due and payable by Mortgagor hereunder after such date.
4.23 Fixture Filing. This Mortgage shall be effective from the
date of its recording as a financing statement filed as a fixture filing with
respect to all goods constituting part of the Mortgaged Property that are or
are to become fixtures. This Mortgage shall also be effective as a financing
statement covering minerals or the like (including oil and gas) and is to be
filed for record in the Real Estate Records of the county where the Mortgaged
Property is situated. The mailing address of Mortgagor and the address of
Mortgagee from which information concerning the security interests may be
obtained are set forth in Section 1.22 above.
4.24 After-Acquired Mortgaged Property. All property acquired by
Mortgagor after the date of this Mortgage that by the terms of
59
<PAGE> 61
this Mortgage shall be subject to the lien and the security interest created
hereby, shall immediately upon the acquisition thereof by Mortgagor and without
further mortgage, conveyance or assignment become subject to the lien and
security interest created by this Mortgage. Nevertheless, Mortgagor shall
execute, acknowledge, deliver and record or file, as appropriate, all and every
such further mortgages, security agreements, financing statements, assignments
and assurances as Mortgagee shall require for accomplishing the purposes of
this Mortgage.
4.25 No Representation. By accepting delivery of any item required
to be observed, performed or fulfilled or to be given to Mortgagee pursuant to
the Loan Documents, including, but not limited to, any officer's certificate,
balance sheet, statement of profit and loss or other financial statement,
survey, appraisal or insurance policy, Mortgagee shall not be deemed to have
warranted, consented to, or affirmed the sufficiency, legality, effectiveness
or legal effect of the same, or of any term, provision or condition thereof,
and such acceptance of delivery thereof shall not be or constitute any
warranty, consent or affirmation with respect thereto by Mortgagee.
4.26 Counterparts. This Mortgage may be executed in any number of
counterparts, each of which shall be effective only upon delivery and
thereafter shall be deemed an original, and all of which shall be taken to be
one and the same instrument, for the same effect as if all parties hereto had
signed the same signature page. Any signature page of this Mortgage may be
detached from any counterpart of this Mortgage without impairing the legal
effect of any signatures thereon and may be attached to another counterpart of
this Mortgage identical in form hereto but having attached to it one or more
additional signature pages.
4.27 Intentionally Omitted.
4.28 Recording and Filing. Mortgagor will cause the Loan Documents
and all amendments and supplements thereto and substitutions therefor to be
recorded, filed, re-recorded and re-filed in such manner and in such places as
Mortgagee shall reasonably request, and will pay on demand all such recording,
filing, re-recording and re-filing taxes, fees and other charges. Mortgagor
shall reimburse Mortgagee, or its servicing agent, for the costs incurred in
obtaining a tax service company to verify the status of payment of taxes and
assessments on the Mortgaged Property.
4.29 Entire Agreement and Modifications. This Mortgage and the
other Loan Documents contain the entire agreements between the parties relating
to the subject matter hereof and thereof and all prior agreements relative
hereto and thereto that are not contained herein or therein are terminated.
This Mortgage and the other Loan Documents may not be amended, revised, waived,
discharged, released or terminated orally but only by a written instrument or
instruments executed by the party against which enforcement of the
60
<PAGE> 62
amendment, revision, waiver, discharge, release or termination is asserted.
Any alleged amendment, revision, waiver, discharge, release or termination that
is not so documented shall not be effective as to any party.
4.30 Maximum Interest. The provisions of this Mortgage and of all
agreements between Mortgagor and Mortgagee, whether now existing or hereafter
arising and whether written or oral, are hereby expressly limited so that in no
contingency or event whatsoever, whether by reason of demand or acceleration of
the maturity of the Note or otherwise, shall the amount paid, or agreed to be
paid ("Interest"), to Mortgagee for the use, forbearance or retention of the
money loaned under the Note exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, performance or
fulfillment of any provision hereof or of any agreement between Mortgagor and
Mortgagee shall, at the time performance or fulfillment of such provision shall
be due, exceed the limit for Interest prescribed by law or otherwise transcend
the limit of validity prescribed by applicable law, then ipso facto the
obligation to be performed or fulfilled shall be reduced to such limit, and if,
from any circumstance whatsoever, Mortgagee shall ever receive anything of
value deemed Interest by applicable law in excess of the maximum lawful amount,
an amount equal to any excessive Interest shall be applied to the reduction of
the principal balance owing under the Note in the inverse order of its maturity
(whether or not then due) or at the option of Mortgagee be paid over to
Mortgagor, and not to the payment of Interest. All Interest (including any
amounts or payments deemed to be Interest) paid or agreed to be paid to
Mortgagee shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full period until payment in full
of the principal balance of the Note so that the Interest thereon for such full
period will not exceed the maximum amount permitted by applicable law. This
paragraph will control all agreements between Mortgagor and Mortgagee.
4.31 Interest Payable by Mortgagor. Mortgagee shall cause funds in
the Replacement Reserve to be deposited into interest bearing accounts of the
type customarily maintained by Mortgagee or its servicing agent for the
investment of similar reserves, which accounts may not yield the highest
interest rate then available. Interest payable on such amounts shall be
computed based on the daily outstanding balance in the Replacement Reserve.
Such interest shall be calculated on a simple, non-compounded interest basis
based solely on contributions made to the Replacement Reserve by Mortgagor.
All interest earned on amounts contributed to the Replacement Reserve shall be
retained by Mortgagee and accumulated for the benefit of Mortgagor and added to
the balance in the Replacement Reserve and shall be disbursed for payment of
the items for which other funds in the Replacement Reserve are to be disbursed.
4.32 Consents and Approvals. Wherever in this Mortgage Mortgagee's
consent or approval is required, if Mortgagee shall
61
<PAGE> 63
delay or refuse such consent or approval, Mortgagor in no event shall be
entitled to make, nor shall Mortgagor make, any claim, and Mortgagor hereby
waives any claim, for money damages (nor shall Mortgagor claim any money
damages by way of set-off, counterclaims or defense) based upon any claim or
assertion by Mortgagor that Mortgagee unreasonably withheld or unreasonably
delayed its consent or approval. Mortgagor's sole remedy shall be an action or
proceeding to enforce any such provision, for specific performance, injunction
or declaratory judgment, and such remedy shall be available only in those cases
in which Mortgagee has expressly agreed in writing not to unreasonably withhold
its consent or where as a matter of law Mortgagee may not unreasonably withhold
its consent. Unless this Mortgage expressly provides that Mortgagee's consent
or approval may not be unreasonably withheld or delayed, Mortgagee may withhold
or deny such consent or approval in Mortgagee's sole discretion.
4.33 Power of Attorney. Mortgagor expressly agrees that if
it disputes Mortgagee's right to exercise a power-of-attorney granted under
this Mortgage, Mortgagor shall in no event be entitled to make, nor shall
Mortgagor make, any claim, and Mortgagor hereby waives any claim, for money
damages (nor shall Mortgagor claim any money damages by way of set-off,
counterclaims or defense) based upon any claim or assertion by Mortgagor that
Mortgagee did not have the right to exercise such power-of attorney pursuant to
this Mortgage. Mortgagor's sole remedy shall be an action or proceeding for
injunction or declaratory judgment.
4.34 [Intentionally omitted.]
62
<PAGE> 64
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage on the day
and year first written above.
MORTGAGOR:
FRANK'S NURSERY AND CRAFTS, INC.
a Michigan corporation
By: Robert M. Lovejoy, Jr.
-----------------------------------
Name: Robert M. Lovejoy, Jr.
Title: Vice President
<PAGE> 65
STATE OF MICHIGAN )
) SS.:
COUNTY OF WAYNE )
The foregoing instrument was acknowledged before me this 18th day of
April, 1996, by ROBERT M. LOVEJOY, JR. the Vice President and Treasurer, of
Frank's Nursery & Crafts, Inc., a Michigan corporation, on behalf of the said
corporation.
[AFFIX SEAL] Sherry L. Rygwelski
-------------------------------
Notary Public
Wayne County, Michigan
My commission expires: 12-27-98 [NOTARY SEAL]
<PAGE> 66
EXHIBIT A
(LEGAL DESCRIPTION)
STORE #32
Situate in the State of Ohio, County of Franklin, City of Columbus,
being a part of Quarter Township 4, Township 2, Range 18, United States
Military Lands, and being all of the 2.610 acre tract as conveyed to Frank's
Nursery Sales, Inc. by deed of record in Deed book 3198, page 327, Recorder's
Office, Franklin County, Ohio and being more particularly bounded and described
as follows:
Beginning at an iron pin (found) at the northeasterly corner of the
said 2.610 acre tract, said pin being the northwesterly corner of a 1.068 acre
tract as conveyed to Samuel K. Freshman by deed of record in Official Record
5417J06, said pin being in the southerly line of Reserve "B" of SHARON WOODS
SECTION NO. 1 of record in Plat Book 40, pages 14 and 15 all of the
aforementioned references being to the Recorder's Office, Franklin county,
Ohio, and said pin being also North 87 degrees 35 minutes 30 seconds West, a
distance of 105.00 feet from an iron pin (found) at the northeasterly corner of
the said 1.068 acre tract;
Thence South 2 degrees 23 minutes 06 seconds West, a distance of 437.55
feet, along the easterly line of the said 2.610 acre tract and also along the
westerly line of the said 1.068 acre tract to a point (an existing iron pin
bears 0.22 feet North of said point) at the southeasterly corner of the 2.610
acre tract, said point being the southwesterly corner of the said 1.068 acre
tract, said point being in the northerly right-of-way line of Dublin-Granville
Road (S.R. 161) and said point being also in the northerly line of a 1.300 acre
tract (Parcel 29-WD) as conveyed to the State of Ohio by deed of record in Deed
Book 3167, page 391, Recorder's Office, Franklin County, Ohio;
Thence along the southerly line of the said 2.610 acre tract, along the
northerly right-of-way line of said Dublin-Granville Road and also along the
northerly line of the said 1.300 acre tract by the following described four (4)
courses:
(1) South 89 degrees 32 minutes 45 seconds West, a distance of 45.16
feet to a spike (set);
(2) North 87 degrees 35 minutes 30 seconds West, a distance of 100.00
feet to an iron pin (set);
(3) North 81 degrees 52 minutes 52 seconds West, a distance of 100.50
feet to a spike (set);
(4) North 87 degrees 35 minutes 30 seconds West, a distance of 14.90
feet to a spike (set) at the southwesterly corner of the said 2.610
acre tract and said spike being also the southeasterly corner of a
7.042 acre tract as conveyed to Samuel K. Freshman by deed of record
in Official Record 5417J06, Recorder's Office, Franklin county,
Ohio;
Thence North 2 degrees 23 minutes 06 seconds East, a distance of 429.80
feet, along the westerly line of the said 2.610 acre tract and also along the
easterly line of the said 7.042 acre tract to a point (an existing iron pin
bears 0.53 feet East of said point) at the northwesterly corner of the said
2.610 acre tract, said point being the northeasterly corner of the said 7.042
acre tract and said point being also in the southerly line of Lot No. 3 of said
SHARON WOODS SECTION NO. 1;
<PAGE> 67
EXHIBIT A
(LEGAL DESCRIPTION)
STORE #32
Thence South 87 degrees 35 minutes 30 seconds East, a distance of
260.00 feet, along the northerly line of the said 2.610 acre tract and also
along the southerly of Lot No. 3, 2, 1 and Reserve "B" of the said SHARON WOODS
SECTION NO. 1 to the point of beginning, containing 2.609 acres, more or less.
<PAGE> 1
EXHIBIT 4.05(c)
================================================================================
FRANK'S NURSERY AND CRAFTS, INC.,
as Mortgagor
to
FIRST UNION NATIONAL BANK OF NORTH CAROLINA,
as Mortgagee
---------------------------
FIRST AMENDMENT TO MORTGAGE AND SECURITY AGREEMENT
---------------------------
Date: May 1, 1996
PREPARED BY AND UPON RECORDATION RETURN TO:
Mitchell Fenton, Esq.
Graham & James LLP
885 Third Avenue
New York, New York 10022
================================================================================
<PAGE> 2
FIRST AMENDMENT TO MORTGAGE AND SECURITY AGREEMENT
THIS FIRST AMENDMENT TO MORTGAGE AND SECURITY AGREEMENT (this
"Mortgage Amendment") is made as of May 1, 1996 by FRANK'S NURSERY AND CRAFTS,
INC., a Michigan corporation, as Mortgagor ("Mortgagor"), whose address is 6501
East Nevada, Detroit, MI 48234-2864, to FIRST UNION NATIONAL BANK OF NORTH
CAROLINA, a national banking association, as Mortgagee ("Mortgagee"), whose
address is One First Union Center TW-8, Charlotte, North Carolina 28288.
W I T N E S S E T H:
WHEREAS, Mortgagor is the owner of those certain plot(s),
piece(s) or parcel(s) of real property described in Exhibit A annexed hereto
and made a part hereof (the "Premises");
WHEREAS, Mortgagee is the owner and holder of that certain
promissory note made by Mortgagor payable to the order of Mortgagee in the
principal face amount of SEVEN HUNDRED FORTY-ONE THOUSAND AND NO/100 DOLLARS
($741,000.00), together with interest as therein provided (the "Note"), which
Note is secured by that certain Mortgage and Security Agreement from Mortgagor
to Mortgagee dated as of April 22, 1996 (the "Original Mortgage");
WHEREAS, Mortgagor and Mortgagee desire to amend the Original
Mortgage in certain respects, as more fully set forth below.
NOW, THEREFORE, in consideration of the mutual premises herein
contained and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, Mortgagor and Mortgagee hereby
agree as follows:
1. Definitions. All capitalized terms not defined in
this Mortgage Amendment shall have their respective meanings set forth in the
Original Mortgage.
2. Replacement Reserve. The second sentence of
Section 1.8(a) is hereby deleted in its entirety and replaced with the
following:
Commencing on the first monthly payment date
under the Note and continuing thereafter on
each monthly payment date under the Note,
Mortgagor shall pay to Mortgagee,
concurrently with and in addition to the
monthly payment due under the Note and until
the Debt is fully paid and performed, a
<PAGE> 3
deposit to the Replacement Reserve in an
amount equal to $1,044.51 per month.
3. Ratification. Except as hereinabove set forth, all
terms, covenants and provisions of the Original Mortgage and the other Loan
Documents remain unaltered and in full force and effect, and Mortgagor hereby
expressly ratifies the Original Mortgage, as modified and amended herein, and
the other Loan Documents.
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage Amendment on
the day and year first written above.
MORTGAGOR:
FRANK'S NURSERY AND CRAFTS, INC. a
Michigan corporation
By: Robert M. Lovejoy, Jr. [LAW DEPT
-------------------------- SEAL]
Name: Robert M. Lovejoy, Jr.
Title: Vice President and Treasurer
<PAGE> 4
STATE OF ____________ )
) SS.:
COUNTY OF __________ )
The foregoing instrument was subscribed, sworn to and acknowledged
before me this 3rd day of May, 1996, by Robert M. Lovejoy, Jr. as Vice
President and Treasurer of FRANK'S NURSERY AND CRAFTS, INC., a Michigan
corporation, on behalf of said corporation.
My commission expires: 12-27-98
-------------------------------
[AFFIX SEAL] Sherry L. Rygwelski
-------------------------------
NOTARY PUBLIC
<PAGE> 5
EXHIBIT A
(LEGAL DESCRIPTION)
STORE #32
Situate in the State of Ohio, County of Franklin, City of Columbus,
being a part of Quarter Township 4, Township 2, Range 18, United States
Military Lands, and being all of the 2.610 acre tract as conveyed to Frank's
Nursery Sales, Inc. by deed of record in Deed book 3198, page 327, Recorder's
Office, Franklin County, Ohio and being more particularly bounded and described
as follows:
Beginning at an iron pin (found) at the northeasterly corner of the
said 2.610 acre tract, said pin being the northwesterly corner of a 1.068 acre
tract as conveyed to Samuel K. Freshman by deed of record in Official Record
5417J06, said pin being in the southerly line of Reserve "B" of SHARON WOODS
SECTION NO. 1 of record in Plat Book 40, pages 14 and 15 all of the
aforementioned references being to the Recorder's Office, Franklin county,
Ohio, and said pin being also North 87 degrees 35 minutes 30 seconds West, a
distance of 105.00 feet from an iron pin (found) at the northeasterly corner of
the said 1.068 acre tract;
Thence South 2 degrees 23 minutes 06 seconds West, a distance of 437.55
feet, along the easterly line of the said 2.610 acre tract and also along the
westerly line of the said 1.068 acre tract to a point (an existing iron pin
bears 0.22 feet North of said point) at the southeasterly corner of the 2.610
acre tract, said point being the southwesterly corner of the said 1.068 acre
tract, said point being in the northerly right-of-way line of Dublin-Granville
Road (S.R. 161) and said point being also in the northerly line of a 1.300 acre
tract (Parcel 29-WD) as conveyed to the State of Ohio by deed of record in Deed
Book 3167, page 391, Recorder's Office, Franklin County, Ohio;
Thence along the southerly line of the said 2.610 acre tract, along the
northerly right-of-way line of said Dublin-Granville Road and also along the
northerly line of the said 1.300 acre tract by the following described four (4)
courses:
(1) South 89 degrees 32 minutes 45 seconds West, a distance of 45.16
feet to a spike (set);
(2) North 87 degrees 35 minutes 30 seconds West, a distance of 100.00
feet to an iron pin (set);
(3) North 81 degrees 52 minutes 52 seconds West, a distance of 100.50
feet to a spike (set);
(4) North 87 degrees 35 minutes 30 seconds West, a distance of 14.90
feet to a spike (set) at the southwesterly corner of the said 2.610
acre tract and said spike being also the southeasterly corner of a
7.042 acre tract as conveyed to Samuel K. Freshman by deed of record
in Official Record 5417J06, Recorder's Office, Franklin county,
Ohio;
Thence North 2 degrees 23 minutes 06 seconds East, a distance of 429.80
feet, along the westerly line of the said 2.610 acre tract and also along the
easterly line of the said 7.042 acre tract to a point (an existing iron pin
bears 0.53 feet East of said point) at the northwesterly corner of the said
2.610 acre tract, said point being the northeasterly corner of the said 7.042
acre tract and said point being also in the southerly line of Lot No. 3 of said
SHARON WOODS SECTION NO. 1;
<PAGE> 6
EXHIBIT A
(LEGAL DESCRIPTION)
STORE #32
Thence South 87 degrees 35 minutes 30 seconds East, a distance of
260.00 feet, along the northerly line of the said 2.610 acre tract and also
along the southerly of Lot No. 3, 2, 1 and Reserve "B" of the said SHARON WOODS
SECTION NO. 1 to the point of beginning, containing 2.609 acres, more or less.
<PAGE> 1
EXHIBIT 4.05(d)
================================================================================
GUARANTY OF PAYMENT
GENERAL HOST CORPORATION
TO
FIRST UNION NATIONAL BANK OF NORTH CAROLINA
PREMISES: 1700 EAST DUBLIN-GRANDVILLE,
COLUMBUS, OHIO
DATED: AS OF APRIL 22, 1996
=============================================================================
THIS INSTRUMENT WAS PREPARED BY:
MITCHELL FENTON, ESQ.
GRAHAM & JAMES LLP
885 THIRD AVENUE
NEW YORK, NEW YORK 10022
<PAGE> 2
GUARANTY OF PAYMENT
THIS GUARANTY OF PAYMENT (this "Guaranty"), made as of the day of April 22,
1996 by GENERAL HOST CORPORATION, a New York corporation, having an office at
Metro Center, One Station Place, P.O. Box 10045, Stamford, CT 06904
("Guarantor") to and in favor of FIRST UNION NATIONAL BANK OF NORTH CAROLINA, a
national banking association, whose address is One First Union Center TW-8,
Charlotte, North Carolina 28288 ("Lender").
W I T N E S S E T H:
WHEREAS, simultaneously with the execution and delivery of this Guaranty,
FRANK'S NURSERY AND CRAFTS, INC., a Michigan corporation and a wholly-owned
subsidiary of Guarantor ("Borrower") has executed and delivered to Lender, among
other things, its mortgage note in the principal amount of $ 741,000.00 (the
"Note") in connection with a loan (the "Loan") made by Lender to Borrower, to be
secured by, among other things, a certain mortgage and security agreement (the
"Mortgage") dated as of even date herewith in the principal amount of the Loan,
wherein Borrower is mortgagor and Lender is mortgagee (the Note, the Mortgage,
that certain Hazardous Substances Indemnity Agreement dated as of even date
herewith from Borrower and Guarantor in favor of Lender, and all other
documents, instruments and agreements evidencing, securing or otherwise relating
to the Loan are collectively, the "Loan Documents");
WHEREAS, the Mortgage covers Borrower's entire fee estate in certain real
property, together with the improvements now or hereafter erected thereon, as
more fully described in the Mortgage and Exhibit A thereto (the "Property");
WHEREAS, as a condition to making the Loan, Lender has required that
Guarantor guaranty payment of the Loan.
NOW, THEREFORE, in consideration of the Loan and other good and valuable
consideration, the receipt and legal sufficiency of which are hereby
acknowledged, Guarantor hereby agrees as follows:
SECTION 1. TERMS OF GUARANTY
(a) Guarantor absolutely and unconditionally guarantees to Lender the
prompt payment of (i) all sums due under the Loan Documents (including any
renewals, modifications, extensions or changes thereto), and (ii) all transfer
taxes incurred upon a foreclosure sale, or the delivery of a deed in lieu of
foreclosure, of all or any portion of the Property. In addition, Guarantor
acknowledges and agrees that the guarantee set forth in this Section 1(a) shall
remain in full force and effect until such time as the Loan, including all
accrued and unpaid interest thereon, has been paid in full, notwithstanding the
acceleration or maturity of the Loan.
<PAGE> 3
(b) It is expressly understood and agreed that this Guaranty is a
continuing guarantee and that the obligations of Guarantor hereunder are and
shall be absolute under any and all circumstances, without regard to the
validity, regularity or enforceability of any of the Loan Documents. Guarantor,
by its execution hereof, acknowledges receipt of true copies of all of the Loan
Documents.
(c) The obligations, covenants, agreements and duties of Guarantor under
this Guaranty shall in no way be affected or impaired by reason of the
occurrence from time to time of any of the following with respect to the Loan
Documents or this Guaranty, or with respect to the Property, even though notice
may not have been given to, or received from, or the further consent of
Guarantor thereto may not have been obtained, and, to the extent permitted by
law, Guarantor hereby waives and agrees not to assert or take advantage of:
(i) Any right to require Lender to proceed against any other person
or to proceed against or exhaust any security held by Lender at any time or to
pursue any other remedy in Lender's power or under any other agreement before
proceeding against Guarantor hereunder;
(ii) Any defense that may arise by reason of the incapacity, lack of
authority, death or disability of any other person or persons or the failure of
Lender to file or enforce a claim against the estate (in administration,
bankruptcy or any other proceeding) of any other person or persons;
(iii) Demand, notice of demand, presentment for payment, notice of
acceptance of this Guaranty, notice of default or nonpayment, protest, notice of
protest, notice of dishonor and all other notices of any kind, or the lack of
any thereof, including, without limiting the generality of the foregoing, notice
of the existence, creation or incurring of any new or additional indebtedness or
obligation or of any action or non-action on the part of Lender, any endorser or
creditor of either Indemnitor or any other person whomsoever under this or any
other instrument in connection with any obligation or evidence of indebtedness
held by Lender;
(iv) Any defense based upon an election of remedies by Lender;
(v) Any right or claim of right to cause a marshalling of the assets
of Guarantor;
(vi) Any principle or provision of law, statutory or otherwise, which
is or might be in conflict with the terms and provisions of this Agreement;
(vii) Any lack of notice of disposition or of manner of disposition
of any collateral for the Loan;
2
<PAGE> 4
(viii) Any invalidity, irregularity or unenforceability, in whole or
in part, of any one or more of the Loan Documents;
(ix) Any lack of commercial reasonableness in dealing with the
collateral for the Loan;
(x) Any deficiencies in the collateral for the Loan or any deficiency
in the ability of Lender to collect or to obtain performance from any persons or
entities now or hereafter liable for the payment and performance of any
obligation hereby guaranteed;
(xi) Any assertion or claim that the automatic stay provided by 11
U.S.C. Section 362 (arising upon the voluntary or involuntary bankruptcy
proceeding of Borrower) or any other stay provided under any other debtor relief
law (whether statutory, common law, case law or otherwise) of any jurisdiction
whatsoever, now or hereafter in effect, which may be or become applicable, shall
operate or be interpreted to stay, interdict, condition, reduce or inhibit the
ability of Lender to enforce any of its rights, whether now or hereafter
required, which Lender may have against Guarantor or the collateral for the
Loan;
(xii) Any modifications of the Loan Documents or any obligation of
Borrower relating to the Loan by operation of law or by action of any court,
whether pursuant to the Bankruptcy Reform Act of 1978, as amended, or any other
debtor relief law (whether statutory, common law, case law or otherwise) of any
jurisdiction whatsoever, now or hereafter in effect, or otherwise;
(xiii) The waiver by Lender of the performance or observance by
Borrower of any agreement, covenant, term or condition to be performed or
observed by it;
(xiv) The extension of the time for the payment of any sums owing or
payable under the Loan Documents or the time for the performance of any other
obligation under or arising out of or on account of the Loan Documents;
(xv) The occurrence of the Maturity Date (as defined in the Note);
(xvi) The supplementing, modification or amendment (whether material
or otherwise) of any of the Loan Documents or any of the obligations of Borrower
set forth in the Loan Documents;
(xvii) Any failure, omission, delay or lack on the part of Lender or
any other person to enforce, assert or exercise any right, power or remedy
conferred on such person in or by virtue of any of the Loan Documents, or any
action on Lender's or such person's part granting indulgence or extension in any
form;
3
<PAGE> 5
(xviii) The release of any security under the Mortgage or the release,
modification, waiver or failure to enforce any other guaranty, pledge or
security device whatsoever;
(xix) The sale, transfer or conveyance of the Property or any interest
therein to any party, whether now or hereafter having or acquiring an interest
in the Property;
(xx) The conveyance to Lender of the Property by a deed in lieu of
foreclosure; or
(xxi) The release of Borrower from the performance or observance of
any of the agreements, covenants, terms or conditions contained in the Loan
Documents by operation of law.
(d) In the event that Guarantor shall advance or become obligated to pay
any sums under this Guaranty or in the event that for any reason whatsoever
Borrower or any subsequent owner of the Property is now, or shall hereafter
become, indebted to Guarantor, Guarantor agrees that (i) the amount of such sums
and of such indebtedness and all interest thereon shall at all times be
subordinate as to lien, time of payment and in all other respects to all sums,
including principal and interest and other amounts, at any time owed to Lender
under the Loan Documents and (ii) Guarantor shall not be entitled to enforce or
receive payment thereof until all such sums owed to Lender have been paid.
Nothing herein contained is intended or shall be construed to give Guarantor any
right of subrogation, contribution or reimbursement in or under the Loan
Documents or any right to participate in any way therein, or in the right, title
or interest of Lender in or to the Property, notwithstanding any payments made
by Guarantor under this Guaranty, all such rights of subrogation, contribution,
reimbursement and participation being hereby expressly waived and released.
SECTION 2. COVENANTS, WARRANTIES AND REPRESENTATIONS
(a) Guarantor hereby represents and warrants to, and covenants and agrees
with, Lender as follows, knowing that Lender is relying hereon in entering into
the Loan and accepting the Loan Documents:
(i) There is no action or proceeding pending or, to the best knowledge
of Guarantor, threatened against Guarantor before any court or administrative
agency and no event has occurred that might result in any material adverse
change in the business or condition of Guarantor or in the property of Guarantor
from the condition of Guarantor as set forth in the most recent financial
statements of Guarantor furnished to and approved by Lender.
(ii) Guarantor has filed all Federal and State income tax returns that
are required to be filed, and has paid all taxes as shown on such returns to the
extent that such taxes have become due.
4
<PAGE> 6
(iii) Guarantor is not individually or jointly party to any contract
or agreement that materially and adversely affects its business, property,
assets or financial condition. To the best knowledge of Guarantor, neither the
execution and delivery of this Guaranty nor the fulfillment of and compliance
with the terms and provisions hereof will conflict with, or result in a breach
of, any of the terms, conditions or provisions of any other agreement or
instrument to which Guarantor is now a party or by which Guarantor may be bound,
nor shall the foregoing constitute a default thereunder or result in the
creation of any lien, charge or encumbrance upon any property or assets of
Guarantor.
(iv) Guarantor shall deliver to Lender a copy of any notice of a
default by Guarantor in connection with any loan (other than the Loan) either to
Guarantor or guaranteed by Guarantor, within three (3) business days after
receipt thereof by Guarantor.
(b) Any representation, warranty, covenant, agreement, indemnity and/or
undertaking made in this Guaranty or made in any of the other Loan Documents or
in any certificate or other writing delivered in connection with the Loan shall
be deemed to have been relied upon by Lender (and any assignee or transferee of
Lender).
SECTION 3. REINSTATEMENT OF OBLIGATIONS If at any time all or any part of any
payment made by Guarantor or received by Lender from Guarantor under or with
respect to this Agreement is or must be rescinded or returned for any reason
whatsoever (including, but not limited to, the insolvency, bankruptcy or
reorganization of Guarantor), then the obligations of Guarantor hereunder
shall, to the extent of the payment rescinded or returned, be deemed to have
continued in existence, notwithstanding such previous payment made by
Guarantor, or receipt of payment by Lender, and the obligations of Guarantor
hereunder shall continue to be effective or be reinstated, as the case may be,
as to such payment, all as though such previous payment by Guarantor had never
been made.
SECTION 4. EVENTS OF DEFAULT
If any of the following events shall occur and be continuing, then an
"Event of Default" under this Guaranty shall have occurred and Lender may, at
its option, declare all sums guaranteed hereunder to be and become forthwith due
and payable, under the terms of and with the effect provided in this Guaranty,
regardless of whether (i) a default by Borrower shall have occurred under any of
the Loan Documents or (ii) Lender shall have exercised any of its rights or
remedies under any of the Loan Documents:
(a) If any representation or warranty made by Guarantor herein or in any
writing furnished in connection with or pursuant to this Guaranty shall be false
in any material respect on the date as of which made; or
5
<PAGE> 7
(b) If Guarantor defaults in the performance or observance of any
agreement, covenant, term or condition contained in this Guaranty; or
(c) In connection with any loan (other than the Loan) either to Guarantor
or guaranteed by Guarantor, if there is a default beyond any applicable notice
and/or cure period in any financial covenant made by Guarantor.
(d) If Guarantor becomes insolvent, or shall make a transfer in fraud of
creditors, or shall make an assignment for the benefit of creditors, shall file
a petition in bankruptcy, shall voluntarily be adjudicated insolvent or bankrupt
or shall admit in writing the inability to pay debts as they mature, shall
petition or apply to any tribunal for or shall consent to or shall not contest
the appointment of a receiver, trustee, custodian or similar officer for
Guarantor for a substantial part of the assets of Guarantor, or shall commence
any case, proceeding or other action under any bankruptcy, reorganization,
arrangement, readjustment or debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect; or
(e) If a petition is filed or any case, proceeding or other action is
commenced against Guarantor seeking to have an order for relief entered against
it as debtor or seeking reorganization, arrangement, adjustment, liquidation,
dissolution or composition of its debts or other relief under any law relating
to bankruptcy, insolvency, arrangement, reorganization, receivership or other
debtor relief under any law or statute of any jurisdiction, whether now or
hereafter in effect, or a court of competent jurisdiction enters an order for
relief against Guarantor, as debtor, or an order, judgment or decree is entered
appointing, with or without the consent of Guarantor, a receiver, trustee,
custodian or similar officer for Guarantor, or for any substantial part of any
of the properties of Guarantor, and if any such event shall occur, such
petition, case, proceeding, action, order, judgment or decree shall not be
dismissed within sixty (60) days after being commenced; or
(f) If any material adverse change shall occur in the financial condition
of Guarantor from the condition set forth in the most recent financial
statements of Guarantor heretofore delivered to and approved by Lender.
SECTION 5. DELIVERY OF FINANCIAL STATEMENTS Guarantor hereby agrees, as a
material inducement to Lender to make the Loan to Borrower, to furnish to
Lender promptly upon demand by Lender current and dated financial statements,
certified by or on behalf of Guarantor, detailing the assets and liabilities of
Guarantor, in form and substance acceptable to Lender. Guarantor hereby
warrants and represents unto Lender that any and all balance sheets, net worth
statements and other financial data that have heretofore been given or may
hereafter be given to Lender with respect to Guarantor
6
<PAGE> 8
did or will at the time of such delivery fairly and accurately present the
financial condition of Guarantor.
SECTION 6. MISCELLANEOUS
(a) Fully Recourse. All of the terms and provisions of this Agreement
are recourse obligations of Guarantor and not restricted by any limitation on
personal liability.
(b) No Subrogation; No Recourse Against Lender. Notwithstanding the
satisfaction by Guarantor of any liability hereunder, Guarantor shall not have
any right of subrogation, contribution, reimbursement or indemnity whatsoever or
any right of recourse to or with respect to the assets or property of Borrower
or to any collateral for the Loan. In connection with the foregoing, Guarantor
expressly waives any and all rights of subrogation to Lender against Borrower,
and Guarantor hereby waives any rights to enforce any remedy that Lender may
have against Borrower and any right to participate in any collateral for the
Loan. In addition to and without in any way limiting the foregoing, Guarantor
hereby subordinates any and all indebtedness of Borrower now or hereafter owed
to Guarantor to all indebtedness of Borrower to Lender, and agrees with Lender
that Guarantor shall not demand or accept any payment of principal or interest
from Borrower, shall not claim any offset or other reduction of Guarantor's
obligations hereunder because of any such indebtedness and shall not take any
action to obtain any of the collateral from the Loan. Further, Guarantor shall
not have any right of recourse against Lender by reason of any action Lender may
take or omit to take under the provisions of this Agreement or under the
provisions of any of the Loan Documents.
(c) Rights Cumulative; Payments. Lender's rights under this Agreement
shall be in addition to all rights of Lender under the Note, the Mortgage and
the other Loan Documents.
(d) Entire Agreement; Amendment; Severability. This Agreement contains
the entire agreement between the parties respecting the matters herein set forth
and supersedes all prior agreements, whether written or oral, between the
parties respecting such matters. Any amendments or modifications hereto, in
order to be effective, shall be in writing and executed by the parties hereto. A
determination that any provision of this Agreement is unenforceable or invalid
shall not affect the enforceability or validity of any other provision, and any
determination that the application of any provision of this Agreement to any
person or circumstance is illegal or unenforceable shall not affect the
enforceability or validity of such provision as it may apply to any other
persons or circumstances.
(e) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, EXCEPT
TO THE EXTENT THAT THE APPLICABILITY OF
7
<PAGE> 9
ANY OF SUCH LAWS MAY NOW OR HEREAFTER BE PREEMPTED BY FEDERAL LAW, IN WHICH
CASE SUCH FEDERAL LAW SHALL SO GOVERN AND BE CONTROLLING.
(f) Binding Effect; Waiver of Acceptance. This Agreement shall bind
Guarantor and the heirs, personal representatives, successors and assigns of
Guarantor and shall inure to the benefit of Lender and the officers, directors,
shareholders, agents and employees of Lender and their respective heirs,
personal representatives, successors and assigns. Notwithstanding the
foregoing, Guarantor shall not assign any of its rights or obligations under
this Agreement without the prior written consent of Lender, which consent may be
withheld by Lender in its sole discretion. Guarantor hereby waives any
acceptance of this Agreement by Lender, and this Agreement shall immediately be
binding upon Guarantor.
(g) Notice. All notices, demands, requests or other communications to be
sent by one party to the other hereunder or required by law shall be in writing
and shall be deemed to have been validly given or served by delivery of the same
in person to the intended addressee, or by depositing the same with Federal
Express or another reputable private courier service for next business day
delivery to the intended addressee at its address set forth on the first page of
this Agreement or at such other address as may be designated by such party as
herein provided, or by depositing the same in the United States mail, postage
prepaid, registered or certified mail, return receipt requested, addressed to
the intended addressee at its address set forth on the first page of this
Agreement or at such other address as may be designated by such party as herein
provided. All notices, demands and requests shall be effective upon such
personal delivery, or one (1) business day after being deposited with the
private courier service, or three (3) business days after being deposited in the
United States mail as required above. Rejection or other refusal to accept or
the inability to deliver because of changed address of which no notice was given
as herein required shall be deemed to be receipt of the notice, demand or
request sent. By giving to the other party hereto at least fifteen (15) days'
prior written notice thereof in accordance with the provisions hereof, the
parties hereto shall have the right from time to time to change their respective
addresses and each shall have the right to specify as its address any other
address within the United States of America.
(h) No Waiver; Time of Essence; Business Days. The failure of Lender
to enforce any right or remedy hereunder, or to promptly enforce any such right
or remedy, shall not constitute a waiver thereof nor give rise to any estoppel
against Lender nor excuse Guarantor from its obligations hereunder. Any waiver
of such right or remedy must be in writing and signed by Lender. This Agreement
is subject to enforcement at law or in equity, including actions for damages or
specific performance. Time is of the essence hereof. The term "business day"
as used herein shall mean a weekday, Monday through Friday, except a legal
holiday or a day
8
<PAGE> 10
on which banking institutions in New York, New York are authorized by law to be
closed.
(i) Captions for Convenience. The captions and headings of the sections
and paragraphs of this Agreement are for convenience of reference only and shall
not be construed in interpreting the provisions hereof.
(j) Attorneys' Fees. In the event it is necessary for Lender to retain
the services of an attorney or any other consultants in order to enforce this
Agreement, or any portion thereof, Guarantor agrees to pay to Lender any and all
costs and expenses, including, without limitation, reasonable attorneys' fees,
incurred by Lender as a result thereof.
(k) Successive Actions. A separate right of action hereunder shall arise
each time Lender acquires knowledge of any matter indemnified by Guarantor under
this Agreement. Separate and successive actions may be brought hereunder to
enforce any of the provisions hereof at any time and from time to time. No
action hereunder shall preclude any subsequent action, and Guarantor hereby
waives and covenants not to assert any defense in the nature of splitting of
causes of action or merger of judgments.
(l) Reliance. Lender would not make the Loan to Borrower without this
Agreement. Accordingly, Guarantor intentionally and unconditionally enters into
the covenants and agreements as set forth above and understands that, in
reliance upon and in consideration of such covenants and agreements, the Loan
shall be made and, as part and parcel thereof, specific monetary and other
obligations have been, are being and shall be entered into that would not be
made or entered into but for such reliance.
(m) SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
(1) GUARANTOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
(A) SUBMITS TO PERSONAL JURISDICTION IN THE STATE IN WHICH THE PROPERTY IS
LOCATED OVER ANY SUIT, ACTION OR PROCEEDING BY ANY PERSON ARISING FROM OR
RELATING TO THIS AGREEMENT, (B) AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING
IN THE COUNTY AND STATE, IN WHICH THE PROPERTY IS LOCATED, (C) SUBMITS TO THE
JURISDICTION OF SUCH COURTS, AND (D) TO THE FULLEST EXTENT PERMITTED BY LAW,
AGREES THAT IT SHALL NOT BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER FORUM
(BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO BRING ANY ACTION, SUIT
OR PROCEEDING IN ANY OTHER FORUM). GUARANTOR FURTHER CONSENTS AND AGREES TO
SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER LEGAL PROCESS IN ANY SUCH SUIT,
ACTION OR PROCEEDING BY REGISTERED OR CERTIFIED U.S. MAIL, POSTAGE PREPAID, TO
THE GUARANTOR AT THE ADDRESS FOR NOTICES DESCRIBED IN SECTION 6(g) HEREOF, AND
CONSENTS AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE IN EVERY RESPECT VALID
AND
9
<PAGE> 11
EFFECTIVE SERVICE (BUT NOTHING HEREIN SHALL AFFECT THE VALIDITY OR
EFFECTIVENESS OF PROCESS SERVED IN ANY OTHER MANNER PERMITTED BY LAW).
(2) GUARANTOR, TO THE FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL,
WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS
AGREEMENT OR ANY CONDUCT, ACT OR OMISSION OF LENDER OR GUARANTOR, OR ANY OF
THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR
ANY OTHER PERSONS AFFILIATED WITH LENDER OR GUARANTOR, IN EACH OR THE FOREGOING
CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.
(n) Waiver by Guarantor. Guarantor covenants and agrees that upon the
commencement of a voluntary or involuntary bankruptcy proceeding by or against
Borrower, Guarantor shall not seek a supplemental stay or otherwise seek,
pursuant to 11 U.S.C. Section 105 or any other provision of the Bankruptcy
Reform Act of 1978, as amended, or any other debtor relief law (whether
statutory, common law, case law, or otherwise) of any jurisdiction whatsoever,
now or hereafter in effect, which may be or become applicable, to stay,
interdict, condition, reduce or inhibit the ability of Lender to enforce any
rights of Lender against Guarantor by virtue of this Agreement or otherwise.
(o) Guarantor hereby agrees and acknowledges that this Guaranty is an
instrument for the payment of money.
10
<PAGE> 12
IN WITNESS WHEREOF, Guarantor has executed this Agreement as of the day and
year first written above.
GUARANTOR:
GENERAL HOST CORPORATION,
a New York corporation
By: Robert M. Lovejoy, Jr.
----------------------------
Name: Robert M. Lovejoy, Jr.
Title: Vice President & Treasurer
11
<PAGE> 1
EXHIBIT 4.06(a)
MORTGAGE-BACKED
CREDIT AGREEMENT
THIS AGREEMENT, made as of the 29th day of November, 1996 between
COMERICA BANK, a Michigan banking corporation ("Bank"), and GENERAL HOST
CORPORATION, a New York corporation ("Host"), and FRANK'S NURSERY & CRAFTS,
INC., a Michigan corporation ("Franks" called together with Host, the
"Borrowers").
WHEREAS, Borrowers have previously been party to a credit agreement
between Borrowers and Bank dated as of August 10, 1994, as amended ("Prior
Agreement") and a certain Mortgage, Deed of Trust and Security Agreement dated
as of September 1, 1988 among Borrowers, The Bank of New York, as Trustee, and
William T. Cunningham as Individual Trustee ("Master Mortgage Agreement");
WHEREAS, Borrowers have requested the Bank to provide credit
facilities for the purposes of replacing credit facilities previously provided
them under the Prior Agreement and the Master Mortgage Agreement in the form of
a facility under which they may obtain trade letters of credit from time to
time in the aggregate face amount of Forty Million Dollars ($40,000,000) and
which provides, by way of a sublimit, availability for trade letters of credit
for direct loans and advances in aggregate amount outstanding not to exceed
Twenty Five Million Dollars ($25,000,000), and, by way of a sublimit to the
availability for direct loans and advances, for the issuance of standby letters
of credit for the accounts of Borrowers in aggregate face amount of up to Ten
Million Dollars ($10,000,000); and
WHEREAS, the Bank is willing to do so, but only on the terms and
conditions of this Agreement;
NOW, THEREFORE, IT IS AGREED:
1. DEFINITIONS
For the purposes of this Agreement the following terms (when
capitalized) will have the following meanings:
1.1 "Advance" shall mean a borrowing requested by either
Borrower and made by the Bank under this Agreement, (including any refunding or
conversion of such borrowings pursuant to Section 4.2 hereof).
1.2 "Applicable Interest Rate" shall mean the
Eurodollar-based Rate or the Prime-based Rate, as selected by a Borrower from
time to time or otherwise determined pursuant to the terms and conditions of
this Agreement.
1.3 "Appraisal" shall mean, for each parcel of Real
Property: (a) until December 31, 1996, a historical appraisal (not necessarily
ordered by or certified to Bank)
- 1 -
<PAGE> 2
provided by a Borrower to Bank and accepted by Bank on an interim basis on the
Closing Date; and (b) thereafter an appraisal certified to, and otherwise
satisfactory to Bank and in conformance with title XI of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 ("FIRREA") 12 U.S.C.
3331 et seq. and the regulations promulgated pursuant thereto; provided,
however, with respect to the Real Property at 78 Campanelli Drive, Brockton,
Massachusetts, it is agreed that, until December 31, 1996, there shall be
deemed to exist an Appraisal showing a fair market value thereof of One Million
Dollars ($1,000,000).
1.4 "Authorized Officer" shall mean any officer of either
Borrower designated, in the document required pursuant to Section 6.2(b)
hereof, to execute Documents and/or to transact business under this Agreement.
1.5 "Availability" shall mean, as of any date, a dollar
amount equal to: (a) the lesser of the Maximum Amount or the Collateral Amount,
minus (b) the sum of the aggregate principal amount of all Advances then
outstanding and the aggregate face amount of all Letters of Credit then issued
and outstanding.
1.6 "Borrower(s)" shall mean either or both of Host
and/or Frank's, as the context indicates; provided, however, that wherever used
with respect to an obligation or indebtedness owed to or to be paid to Bank,
such term shall mean Host and Frank's, jointly and severally.
1.7 "Business Day" shall mean any day on which commercial
banks are open for domestic business in Detroit and (when used in connection
with any provision regarding Eurodollar-based Loans) also a day on which
commercial banks are open for international business (including dealings in
dollar deposits in the interbank market) in Detroit and London.
1.8 "Closing Date" shall mean the date, on or before
November 29, 1996, on which the conditions of Section 6.1 hereof have been
satisfied.
1.9 "Closing Fee" shall mean a non-refundable
restructuring fee in the amount of Fifty Thousand Dollars $50,000 payable by
Borrower to Bank on the Closing Date.
1.10 "Collateral Amount" shall mean, as of any date of
determination thereof, a dollar amount equal to eighty percent (80%) of the
appraised value of Real Property in the Collateral Pool, as determined by Bank
from the relevant Appraisals.
1.11 "Collateral Pool" shall mean the Real Property for
which Bank has received Mortgages/Deeds of Trust, Title Insurance, Insurance
Policies, Surveys, Appraisals, and (commencing December 31, 1996) Environmental
Reports.
1.12 "Consolidated" shall mean, when used with reference
to any financial information (or when used as a part of any defined term or
statement pertaining to any financial condition) the accounts of Host and its
Subsidiaries, determined on a consolidated basis in accordance with GAAP.
- 2 -
<PAGE> 3
1.13 "Debt to Capitalization Ratio" shall mean, as of the
date of any calculation thereof, a fraction: (i) the numerator is the sum of
Long Term Debt and current maturities of Long Term Debt; and (ii) the
denominator of which is the sum of Long Term Debt, current maturities of Long
Term Debt and Equity.
1.14 "Default" shall mean an event, occurrence or
circumstance which, with the giving of notice and/or passage of time, would
constitute an Event of Default.
1.15 "Documents" shall mean collectively, this Agreement,
the Note, any Letter of Credit Agreements, and any other documents, instruments
or agreements now or hereafter executed pursuant to or in connection with this
Agreement, the Note or any Letter of Credit Agreement.
1.16 "EBITDA" shall mean, as of the last day of any fiscal
quarter, for the four fiscal quarters immediately preceding any calculation
thereof, net income (before extraordinary items and discontinued items and the
provision for store closings and related costs shown on Host's income statement
for the period ending January 28, 1996) plus the aggregate amounts deducted in
determining net income for such period in respect of: (a) the provision for
taxes based on income; (b) interest expense; (c) depreciation and amortization;
and (d) net equity loss and write down of investment in an unconsolidated
affiliate as shown on Host's income statements for each of the four quarters
comprising the fiscal year ending January 28, 1996, all determined for Host and
its Subsidiaries, on a Consolidated basis in accordance with GAAP.
1.17 "Environmental Laws" shall mean the Relevant
Environmental Laws, as defined in the Mortgages/Deeds of Trust.
1.18 "Environmental Report" shall mean a Phase I
environmental audit and certification with respect to the relevant Real
Property: (a) which may be, until December 31, 1996, a historical environmental
audit (not necessarily addressed to Bank) provided by Borrowers to Bank on an
interim basis on the Closing Date; and (b) thereafter addressed to Bank, and
Bank's successors and assigns, in form and substance acceptable to Bank, and,
if recommended in such Phase I or otherwise determined to be reasonably
necessary by Bank upon review of such Phase I audit, a Phase II environmental
audit addressed to Bank, and Bank's successors and assigns, in form and
substance acceptable to Bank.
1.19 "ERISA" shall mean the Employee Retirement Income
Security Act of 1974, as amended, or any successor act or code.
1.20 "Equity" shall mean the total common stockholders
equity of Host and the Subsidiaries, determined on a Consolidated basis in
accordance with GAAP.
1.21 "Eurodollar-based Loan" shall mean an Advance which
bears interest at a rate based on the Eurodollar-based Rate.
1.22 "Eurodollar-based Rate" shall mean a per annum
interest rate equal to the Eurodollar Rate plus two and one-quarter percent
(2.25%).
- 3 -
<PAGE> 4
1.23 "Eurodollar Rate" shall mean:
(a) the per annum interest rate at which the
Bank's eurodollar lending office offers
deposits in eurodollars to prime banks in the
eurodollar market in an amount comparable to
the relevant Eurodollar-based Loan and for a
period equal to the Interest Period at
approximately 11:00 a.m. Detroit time two (2)
Business Days prior to the first day of such
Interest Period; divided by,
(b) a percentage (expressed as a decimal) equal
to one hundred percent (100%) minus that
percentage which is in effect on the date for
an Advance of a Eurodollar-based Loan, as
prescribed by the Board of Governors of the
Federal Reserve System (or any successor) for
determining the maximum reserve requirements
for a member bank of the Federal Reserve
System with deposits exceeding five billion
dollars in respect of "Euro-currency
Liabilities" (or in respect of any other
category of liabilities which includes
deposits by reference to which the interest
rate on Eurodollar-based Loans is determined
or any category of extensions of credit or
other assets which includes loans by a
non-United States Eurodollar Lending Office
of such a bank to United States residents).
1.24 "Event of Default" shall mean the Events of Default
specified in Section 10.1 hereof.
1.25 "Fixed Charge Coverage Ratio" shall mean, as of the
date of any calculation thereof, a ratio, the numerator of which is EBITDA and
the denominator of which is Interest Expense.
1.26 "GAAP" shall mean generally accepted accounting
principles in the United States of America consistent with those used in
preparation of the financial statements referred to in Section 7.7 hereof.
1.27 "Indebtedness" shall mean, with respect to any
Person, without duplication, (i) all indebtedness of such Person for borrowed
money, (ii) the deferred purchase price of assets or services which in
accordance with GAAP would be shown on the liability side of the balance sheet
of such Person, (iii) the face amount of all standby letters of credit issued
for the account of such Person and, without duplication, all drafts drawn upon
letters of credit of any type, (iv) all obligations of a second person secured
by any lien on any property owned by such first Person, whether or not such
obligations have been assumed by such first Person, (v) all capitalized lease
obligations of such Person, (vi) all obligations of such Person under interest
rate agreements, and (vii) all obligations which have the economic effect of a
guaranty of Indebtedness of the types described in clauses (i) through (vi)
above, regardless of characterization; provided that Indebtedness shall not
include trade payables, accrued expenses (including the reserve for store
closings provided in the income statement for Host's fiscal year
- 4 -
<PAGE> 5
ended January 28, 1996), accrued dividends, accrued income taxes, warranty
reserves and deferred income taxes, to the extent arising in the ordinary
course of business.
1.28 "Insurance Policies" shall mean with respect to any
particular Real Estate, insurance policies satisfying the provisions of Section
8.8 hereof.
1.29 "Interest Expense" shall mean, as of the last day of
any fiscal quarter, for the four fiscal quarters immediately preceding any
calculation thereof, the interest expense of Host and the Subsidiaries, as
determined on its Consolidated statement of income in accordance with GAAP.
1.30 "Interest Period" shall mean an interest period for a
Eurodollar-based Loan of one (1) month or such shorter period as Bank may offer
at the request of a Borrower, provided however, that:
(a) any Interest Period which would otherwise end
on a day which is not a Business Day shall be
extended to the next succeeding Business Day
unless the next succeeding Business Day falls
in another calendar month, in which case,
such Interest Period shall end on the
immediately preceding Business Day;
(b) when an Interest Period begins on a day which
has no numerically corresponding day in the
calendar month during which such Interest
Period is to end, it shall end on the last
Business Day of such calendar month.
1.31 "Letter(s) of Credit" shall mean any standby or trade
letters of credit: (i) issued by Bank at the request of or for the account of a
Borrower pursuant to Article 3 hereof; or (ii) previously issued by Bank
pursuant to the Prior Agreement which remain outstanding as of the Closing
Date, excluding (in each) case any banker's acceptances or credits in the
nature of acceptances which have been or hereafter are discounted and/or
accepted by Bank for or at the request of a Borrower.
1.32 "Letter of Credit Agreement" shall mean, in respect
of each Letter of Credit, the application of a Borrower requesting Bank to
issue such Letter of Credit (including the terms and conditions on the reverse
side thereof or otherwise provided therein), in form and substance acceptable
to Bank and, with respect to all Letters of Credit, that certain Continuing
Letter of Credit Agreement dated as of February 28, 1994 between Borrowers and
Bank.
1.33 "Letter of Credit Fees" shall mean the fees payable
to Bank in connection with Letters of Credit pursuant to Section 3.3 hereof.
1.34 "Letter of Credit Maximum" shall mean, as of any
date: (a) with respect to Letters of Credit generally, Forty Million Dollars
($40,000,000) minus the aggregate principal amount of outstanding Advances; and
(b) with respect to Letters of Credit which are standby letters of credit, Ten
Million Dollars ($10,000,000).
- 5 -
<PAGE> 6
1.35 "Letter of Credit Obligation" shall mean the joint
and several obligation of the Borrowers under each Letter of Credit Agreement
to reimburse Bank for each payment made by Bank under the Letter of Credit
issued pursuant to such Letter of Credit Agreement, together with all other
sums, fees, charges and amounts which may be owing under such Letter of Credit
Agreement.
1.36 "Long Term Debt" shall mean Indebtedness of Host and
the Subsidiaries having a stated maturity later than one year from the date of
calculation thereof which under GAAP would not be included as a current
liability, provided, however, obligations in connection with Letters of Credit
shall not be included in any calculation of Long Term Debt hereunder.
1.37 "Maximum Amount" shall mean Forty Million Dollars
($40,000,000) or such lesser amount to which the Maximum Amount may be reduced
pursuant to Section 4.5 or 11.4 hereof.
1.38 "Mortgage/Deed of Trust" shall mean either a mortgage
or deed of trust in form satisfactory to Bank and conforming to the
requirements of laws of the jurisdiction of the Real Estate encumbered or to be
encumbered thereby.
1.39 "Note" shall mean the promissory note made jointly
and severally by the Borrowers in the form attached as Exhibit "A" evidencing
Advances to the Borrowers.
1.40 "Pension Plans" shall mean any pension plan as
defined in Section 3(2) of ERISA (other than a Multiemployer Plan) which is or
has been maintained by or to which contributions are or have been made by Host,
any Subsidiary or any ERISA Affiliate.
1.41 "Permitted Liens" shall mean:
(a) Liens and encumbrances in favor of Bank;
(b) Liens for taxes, assessments or other
governmental charges incurred in the ordinary
course of business and for which no interest,
late charge or penalty is attaching or which
is being contested in good faith by
appropriate proceedings and, if requested by
Bank, bonded in an amount and manner
satisfactory to Bank;
(c) Liens, not delinquent, created by statute in
connection with worker's compensation,
unemployment insurance, social security and
similar statutory obligations;
(d) Liens of mechanics, materialmen, carriers,
warehousemen or other like statutory or
common law liens securing obligations
incurred in good faith in the ordinary course
of business that are not yet due and payable;
and
- 6 -
<PAGE> 7
(e) Encumbrances consisting of existing or future
zoning restrictions, existing recorded
rights-of-way, existing recorded easements,
existing recorded private restrictions or
existing or future public restrictions on the
use of Real Property, none of which
materially impairs the use of such property
in the operation of the business for which it
is used and none of which is violated in any
material respect by any existing or proposed
structure or land use.
1.42 "Prime Rate" shall mean the per annum interest rate
established by Bank as its prime rate for its borrowers as such rate may vary
from time to time, which rate is not necessarily the lowest rate on loans made
by Bank at any such time.
1.43 "Prime-based Loan" shall mean a Loan which bears
interest at the Prime Rate.
1.44 "Real Property" shall mean the real property of
Borrower described in Exhibit "B" hereto.
1.45 "Request for Loan" shall mean a request for an
Advance under the Note issued by a Borrower under this Agreement in the form
annexed hereto as Exhibit "C".
1.46 "Revolving Credit Facility Fee" shall mean the
facility fee payable to Bank pursuant to Section 2.4 hereof, in an amount equal
to five-eighths percent per annum multiplied by the Revolving Credit Maximum
from time to time in effect.
1.47 "Revolving Credit Maturity Date" shall mean June 30,
1997.
1.48 "Revolving Credit Maximum" shall mean, as of any date
Twenty Five Million Dollars ($25,000,000) or such lesser amount to which the
Revolving Credit Maximum may be reduced pursuant to Section 4.5 or 11.4 hereof.
1.49 "Survey" shall mean an as-built survey of the
relevant Real Property, prepared and certified to Bank and the provider of the
Title Insurance for the relevant Real Property by a registered (in the state
where the real estate is located) surveyor, made in accordance with the
"Minimum Standard Detail Requirements for Land Title Surveys" established by
the American Land Title Association and the American Congress on Surveying and
Mapping and conforming to all of Bank's requirements and otherwise in
accordance with any survey instructions provided by Bank's counsel.
1.50 "Subsidiaries" shall mean any other corporation,
association, joint stock company, or business trust of which more than fifty
percent (50%) of the outstanding voting stock is owned either directly or
indirectly by Host or one or more of its Subsidiaries or by Host and one or
more of its Subsidiaries.
1.51 "Tangible Net Worth" shall mean the total common
shareholder's equity of Host and the Subsidiaries, on a Consolidated basis,
together with the amounts, if any, of
- 7 -
<PAGE> 8
preferred stock which is classified as part of shareholder's equity, as
reflected on the most recent regularly prepared quarterly balance sheet of
Host, which balance sheet shall be prepared in accordance with GAAP, less: (a)
the amount of all assets classified as intangible assets (including, without
limitation, goodwill, trade-marks, trade names, patents, copyrights, franchises
and, to extent attributable to Host's 8% Convertible Unsecured Subordinated
Notes and 11.5% Senior Unsecured Notes outstanding as of the date of this
Agreement, unamortized debt discount and expenses); and (b) the aggregate
amount expended for all dividends, distributions, purchases, redemptions, other
acquisitions or retirements of capital stock subsequent to the date of such
balance sheet and up to the date of submission to Bank of the officer's
certificate for such fiscal quarter pursuant to Section 8.1(c) hereof, to the
extent not reflected on such balance sheet.
1.52 "Title Insurance" shall mean a mortgagee's policy of
title insurance issued by national title company approved by Bank, and shall
insure that Bank has a first lien mortgage encumbering marketable, fee simple
title to the property (including any appurtenant easements), free of the
possibility of any prior mechanic's or materialmen's liens, and that the
property is free and clear of all exceptions, other than those specifically
approved by Bank.
1.53 Financial Computations. Unless specifically
indicated to the contrary herein, all accounting computations and
determinations hereunder shall be calculated or determined in accordance with
GAAP.
2. THE INDEBTEDNESS: REVOLVING CREDIT
2.1 Revolving Credit Commitment. Subject to the terms
and conditions of this Agreement, the Bank agrees to lend to the Borrowers,
jointly and severally, at any time and from time to time from the Closing Date
until the Revolving Credit Maturity Date, and the Borrowers may jointly and
severally borrow, repay and reborrow sums outstanding from time to time not to
exceed the lesser of Revolving Credit Maximum or the Availability in effect on
the date for the Advance thereof. All of the Advances under this Section 2.1
shall be evidenced by the Note under which advances, repayments, and readvances
may be made, subject to the terms and conditions of this Agreement.
2.2 Type of Loan and Maturity. The Note, and all
principal and interest then outstanding thereunder, shall mature and become due
and payable in full on the Revolving Credit Maturity Date. Each Advance from
time to time outstanding hereunder shall be either a Prime-based Loan or a
Eurodollar-based Loan as either of the Borrowers may elect or as otherwise
applicable pursuant to the provisions hereof. The amount and date of each
Advance, its Applicable Interest Rate, and the amount and date of any repayment
shall be noted on Bank's records, which records will be presumed correct absent
manifest error.
2.3 Requests for Revolving Credit Loans. Either Borrower
may request an Advance by delivery to Bank of a Request for Loan executed by an
Authorized Officer and subject to the following:
- 8 -
<PAGE> 9
(a) each such Request for Loan shall set forth
the information required on the Request for
Loan form annexed hereto as Exhibit "C";
(b) each such Request for Loan shall be delivered
to Agent by 10:00 a.m. three (3) Business
Days prior to the proposed date of Advance,
except in the case of a Prime-based Loan, for
which the Request for Loan must be delivered
by 10:00 a.m. (Detroit time) on such proposed
date;
(c) the principal amount of such Advance, shall
be at least: (i) in the case of a Prime-based
Loan, One Million Dollars ($1,000,000); and
(ii) in the case of a Eurodollar-based Loan,
One Million Dollars ($1,000,000) or a greater
integral multiple of One Million Dollars
($1,000,000);
(d) the principal amount of the Advance
requested, (i) shall not exceed the
Availability, and (ii) when added to the
principal amount of all other Advances then
outstanding shall not exceed the Revolving
Credit Maximum minus the aggregate face
amount of outstanding Letters of Credit which
are standby letters of credit;
(e) each Request for Loan shall constitute a
certification by the Borrowers as of the date
thereof that all of the conditions set forth
in Section 6.2 hereof are satisfied as of the
date of such request and shall be satisfied
as of the date such Advance is requested.
2.4 Revolving Credit Facility Fee. From the Closing Date
to the Revolving Credit Maturity Date, the Borrowers jointly and severally
agree to pay to the Bank, quarterly in arrears, commencing December 31, 1996
and on the last day of each calendar quarter thereafter, and on the Revolving
Credit Maturity Date, the Revolving Credit Facility Fee.
2.5 Purpose of Revolving Credit Loans. An initial
Advance shall be made on the Note as of the Closing Date, in a principal amount
necessary (if any) to repay by replacement and renewal evidence, any
indebtedness then outstanding under the Borrowers' existing notes with Bank,
and such existing notes, and all obligations of Bank thereunder, shall be
automatically canceled and terminated. Thereafter, Advances shall be available
to and used by Borrowers for their general corporate purposes, provided,
however, that no proceeds of any Advances will be used for "buying",
"purchasing" or "carrying" any "margin stock" within the respective meanings of
those terms under Regulation U or G of the Federal Reserve Board as now or
hereafter in effect, or for any purpose which violates provisions of
regulations of the Federal Reserve Board.
3. LETTERS OF CREDIT
3.1 Letters of Credit. Subject to the terms and
conditions of this Agreement, Bank shall, at the request of a Borrower at any
time and from time to time from the Closing
- 9 -
<PAGE> 10
Date until the third (3rd) Business Day prior to the Revolving Credit Maturity
Date, issue Letters of Credit for the accounts of the Borrowers, in aggregate
amounts at any one time outstanding not to exceed the relevant Letter of Credit
Maximum. Each Letter of Credit shall provide an initial expiration date not
later than one (1) year from its date of issuance (subject to renewals) and
that it is available by drafts drawn at sight and presentation of documents.
3.2 Conditions to Issuance. No Letter of Credit shall be
issued pursuant to Section 3.1 hereof unless, as of the date the issuance of
such Letter of Credit is requested:
(a) the face amount of the Letter of Credit
requested: (i) does not exceed the
Availability and (ii) when added to the
undrawn face amount of the other outstanding
Letters of Credit will not exceed the
relevant Letter of Credit Maximum;
(b) the execution of the Letter of Credit
Agreement with respect to the Letter of
Credit requested will not violate the terms
and conditions of any contract, agreement or
other borrowing of either Borrower;
(c) the Borrowers shall have delivered to Bank,
prior to the requested date for issuance, the
Letter of Credit Agreement related thereto,
together with such other documents and
materials as may be required pursuant to the
terms thereof, and the terms of the proposed
Letter of Credit shall be satisfactory to
Bank;
(d) no order, judgment or decree of any court,
arbitrator or governmental authority shall
purport by its terms to enjoin or restrain
Bank from issuing the Letter of Credit, and
no law, rule, regulation, request or
directive (whether or not having the force of
law) of or from any governmental authority
shall prohibit or request that Bank refrain
from issuing the Letter of Credit requested
or letters of credit generally; and
(e) all of the conditions set forth in Section
6.2 hereof, and in the related Letter of
Credit Agreements, are satisfied as of the
date of such request and shall be satisfied
as of the date requested for issuance of such
Letter of Credit.
3.3 Letter of Credit Fees. Borrowers jointly and
severally agree to pay to Bank, Letter of Credit Fees: (i) upon the date of
issuance, in the case of Letters of Credit that are trade letters of credit, in
an amount equal to two and one-quarter percent (2.25%) on the face amount of
such Letter of Credit, and (ii) with respect to Letters of Credit which are
standby letters of credit, quarterly in arrears, an amount equal to two and
one-quarter percent (2.25%) per annum multiplied by the outstanding face amount
of such standby Letters of Credit outstanding during the quarterly period then
ended.
- 10 -
<PAGE> 11
3.4 Issuance Fees. In connection with the Letters of
Credit, the Borrowers will pay Bank, letter of credit issuance fees and
standard administration, payment and cancellation charges assessed by Bank, at
the times, in the amounts and on the terms customarily charged by Bank in
connection with the administration of and transactions involving its letters of
credit program.
4. INTEREST, INTEREST PERIODS, CONVERSIONS, PREPAYMENTS
4.1 Interest. Advances hereunder shall bear interest
from the date thereof on the unpaid principal balance thereof from time to time
outstanding, at the Applicable Interest Rates, as selected by a Borrower or as
otherwise applicable pursuant to the provisions of this Agreement from time to
time. With respect to Prime-based Loans, interest shall be payable quarterly
on the last Business Day of each calendar quarter, commencing on the last
Business Day of the calendar quarter during which such Advance is made, and at
maturity. With respect to Eurodollar-based Loans, interest shall be payable on
the last day of each Interest Period applicable thereto. Notwithstanding the
foregoing, in the event and so long as an Event of Default shall exist, all
principal outstanding under the Note shall bear interest, payable on demand,
from the date of such Event of Default at a rate per annum equal to:
(a) in the case of a Prime-based Loan, three
percent (3%) above the Prime-based Rate; and
(b) in the case of a Eurodollar-based Loan, three
percent (3%) above the Eurodollar-based Rate
until the end of the then current Interest
Period, at which time such Eurodollar Loans
shall be automatically converted into
Prime-based Loans and bear interest at the
rate provided for in clause (a) above.
4.2 Conversion and Renewal of Loans. Providing that no
Event of Default shall have occurred and be continuing, the Borrowers may elect
to renew or convert any Advance into another type of Advance, provided that any
conversion of a Eurodollar-based Loan shall be made only on the last Business
Day of the Interest Period applicable to such Eurodollar-based Loan. If the
Borrowers desire to renew or convert an Advance, they shall give Bank not less
than three (3) Business Days' prior notice in the manner provided in Section
2.3 hereof, specifying the date of such renewal or conversion, the Advances to
be converted and the type of Advance elected. If with respect to any
Eurodollar-based Loan outstanding at any time the Bank does not receive notice
of the election from a Borrower not less than three (3) Business Days prior to
the last day of the Interest Period therefor, such Borrower shall be deemed to
have elected to convert such Eurodollar-based Loan to a Prime-based Loan at the
end of the then current Interest Period unless such Eurodollar-based Loan is
repaid upon the last day of such Interest Period.
4.3 Prepayments. At its option and upon two (2) Business
Days' prior written, telephonic or telegraphic notice to the Bank, the Borrower
may prepay advances in whole at any time or in part from time to time, without
premium or penalty but with accrued interest on the principal being prepaid to
the date of such prepayment, provided that: (a) each partial
- 11 -
<PAGE> 12
prepayment shall be in an amount not less than Five Hundred Thousand Dollars
($500,000) or greater integral multiple of One Hundred Thousand Dollars
($100,000); and (b) in the case of a Eurodollar-based Loan such prepayment may
only be on the last Business Day of the Interest Period with respect thereto,
or together with such additional amounts required with respect thereto pursuant
to Section 5.1 hereof.
4.4 Payment Procedure.
(a) All payments of principal of, or interest on
the Note, or of Revolving Credit Facility
Fees, or of Letter of Credit Obligations or
Letter of Credit Fees, shall be: (i) made
without setoff, deduction or counterclaim on
the date specified for payment under this
Agreement not later than 11:00 a.m. (Eastern
Standard Time) in immediately available funds
by Borrowers to Bank; and (ii) calculated on
the basis of a 360 day year for the actual
number of days elapsed.
(b) Whenever any payment to be made shall
otherwise be due on a day which is not a
Business Day, such payment shall be made
(except as specifically indicated to the
contrary herein) on the next succeeding
Business Day and such extension of time shall
be included in computing interest, if any, in
connection with such payment.
(c) Borrowers hereby irrevocably authorize and
direct Bank to debit their demand deposit
accounts with Bank and apply the proceeds of
such debit toward satisfaction of their
payment obligations under subsection (a)
above as and when such payment obligations
fall due.
4.5 Reductions or Terminations of Commitment. Upon at
least five (5) Business Days prior written notice to Bank, the Borrowers may
permanently reduce the Maximum Amount and/or the Revolving Credit Maximum in
whole or part, provided that:
(a) each partial reduction of the Maximum Amount
and/or the Revolving Credit Maximum shall be
in an amount equal to One Million Dollars
($1,000,000) or an integral multiple thereof;
(b) each reduction of the Revolving Credit
Maximum shall be accompanied by payment of
the Revolving Credit Facility Fee accrued on
the amount of the Revolving Credit Maximum so
reduced through the date of such reduction;
(c) in the case of a reduction of the Revolving
Credit Maximum: (i) Borrowers shall prepay
Advances in the amount by which the Advances
then outstanding plus the outstanding face
amounts of
- 12 -
<PAGE> 13
Letters of Credit which are standby letters
of credit would exceed the Revolving Credit
Maximum (as so reduced) together with
interest thereon to the date of prepayment
and any additional amount required therewith
pursuant to Section 5.1 hereof; and (ii) the
Revolving Credit Maximum as so reduced shall
not exceed the outstanding face amounts of
Letters of Credit which are standby letters
of credit; and
(d) in the case of reductions of the Maximum
Amount, the Maximum Amount as so reduced
shall not exceed the outstanding face amounts
of all Letters of Credit.
5. SPECIAL PROVISIONS FOR LOANS
5.1 Reimbursement of Prepayment Costs. As to any
Eurodollar-based Loan, if any prepayment thereof shall occur on any day other
than the last day of an Interest Period (whether pursuant to this Article, or
by acceleration, or otherwise), or if an Applicable Interest Rate shall be
changed during any Interest Period pursuant to this Article, the Borrowers
jointly and severally agree to reimburse Bank on demand for any costs incurred
by Bank as a result of the timing thereof including but not limited to any net
costs incurred in liquidating or employing deposits from third parties, upon
Bank's delivery to Borrowers of a certificate setting forth in reasonable
detail the basis for determining such costs, which certificate shall be
conclusively presumed correct save for manifest error.
5.2 Eurodollar Lending Office. For any Advance for which
the Applicable Interest Rate is the Eurodollar-based Rate, if Bank shall
designate a eurodollar lending office which maintains books separate from those
of the rest of Bank, Bank shall have the option of maintaining and carrying the
relevant advance on the books of such office.
5.3 Circumstances Affecting Eurodollar-based
Availability. If Bank determines that, by reason of circumstances affecting
the foreign exchange and interbank markets generally, deposits in eurodollars
in the applicable amounts are not being offered to Bank for an Interest Period,
then Bank shall forthwith give notice thereof to the Borrowers. Thereafter,
the obligation of Bank to make Eurodollar-based Loans, and the right of
Borrowers to convert an Advance to or refund an Advance as a Eurodollar-based
Loan shall be suspended until the Bank notifies Borrowers that such
circumstance no longer exists.
5.4 Laws Affecting Eurodollar-based Loan Availability.
If, after the date hereof, the introduction of, or any change in, any
applicable law, rule or regulation or in the interpretation or administration
thereof by any governmental authority charged with the interpretation or
administration thereof, or compliance by Bank (or its eurodollar lending
offices) with any request or directive (whether or not having the force of law)
of any such authority, shall make it unlawful or impossible for Bank to honor
its obligations hereunder to make or maintain any Advance with interest at the
Eurodollar-based Rate, Bank shall forthwith give notice thereof to Borrowers.
Thereafter: (a) the obligations to make Eurodollar-based Loans and the right of
Borrowers to convert an Advance or refund an Advance as a Eurodollar-based Loan
- 13 -
<PAGE> 14
shall be suspended; and (b) if Bank may not lawfully continue to maintain a
Eurodollar-based Loan to the end of the then current Interest Period, the
Prime-based Rate shall be the Applicable Interest Rate for such
Eurodollar-based Loans for the remainder of such Interest Period.
5.5 Increased Costs. In the event that any change after
the date hereof in applicable law, treaty or governmental regulation, or in the
interpretation or application thereof, or compliance by Bank with any request
or directive (whether or not having the force of law) from any central bank or
other financial, monetary or other authority:
(a) shall subject Bank (or its eurodollar lending
office) to any tax, duty or other charge with
respect to any Advance or shall change the
basis of taxation of payments to Bank (or its
eurodollar lending office) of the principal
of or interest on any Advance or any other
amounts due under this Agreement (except for
changes in the rate of tax on the overall net
income or gross receipts of Bank or its
eurodollar lending office imposed by the
jurisdiction in which Bank's principal
executive office or eurodollar lending office
is located); or
(b) shall impose, modify or deem applicable any
reserve (including, without limitation, any
imposed by the Board of Governors of the
Federal Reserve System but excluding with
respect to any Eurodollar-based Loan any such
requirement included in an applicable
Eurodollar Reserve Requirement), special
deposit, or similar requirement against
assets of, deposits with or for the account
of, or credit extended by Bank (or its
eurodollar lending offices) or shall impose
on Bank (or its eurodollar lending offices)
or the foreign exchange and interbank markets
or other condition affecting any Advance or
any commitment of Bank under this Agreement;
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any Advance or its commitments hereunder or to
reduce the amount or rate of return on any sum received or receivable by Bank
under this Agreement, or under the Note, or under any Letter of Credit
Agreement, then Bank may promptly notify Borrower of such fact and demand
compensation therefor and, Borrowers jointly and severally agree to pay to Bank
such additional amount or amounts as will compensate Bank for such increased
costs or reduced return within thirty (30) days of such notice; provided,
however: (i) that Borrowers shall not be obligated to reimburse Bank for
increased costs accruing or suffered earlier than five (5) Business Days prior
to Bank's notification to Borrower of the fact or expectation of such increased
costs; and (ii) to the extent doing so would eliminate or decrease Borrowers'
liability for increased costs hereunder, and to the extent that doing so would
not otherwise be disadvantageous to Bank, Bank will attempt to designate a
eurodollar lending office for which the tax, duty, reserve, deposit
requirement, or other circumstance giving rise to Bank's demand for increased
compensation, is not applicable. A certificate of the Bank demanding such
compensation setting forth in reasonable detail the basis for determining such
additional amount
- 14 -
<PAGE> 15
or amounts necessary to compensate shall be conclusively presumed to be correct
save for manifest error.
6. CONDITIONS
6.1 Conditions Precedent To Initial Loans and Closing
Date.
The right of Borrowers to request the initial Advance
and Letters of Credit pursuant to this Agreement are subject to, and the
Closing Date of this Agreement shall be the date of, Borrowers' satisfaction of
the following conditions:
(a) Execution of Note and This Agreement.
Borrowers shall have executed and delivered
to Bank, the Note and this Agreement
(including all schedules, exhibits,
certificates, opinions, financial statements
and other documents to be delivered pursuant
hereto) and the Note, the Documents and this
Agreement shall be in full force and effect.
(b) Closing Fee. Borrowers shall have paid the
Closing Fee to Bank.
(c) No Default. No Default or Event of Default
shall have occurred and be continuing.
6.2 Conditions Precedent to All Loans. The obligation of
Bank to make Advances (including the initial Advance hereunder) and to issue
any Letter of Credit, shall be subject to the satisfaction of the following
conditions:
(a) Effectiveness. This Agreement shall have
become effective as provided in Section 6.1
above.
(b) Corporate Authority. Bank shall have
received: (i) certified copies of resolutions
of the Board of Directors or Executive
Committee of each of the Borrowers evidencing
approval of the borrowing hereunder and
execution and delivery of the Documents; (ii)
certified copies of each of the Borrower's
Certificates of Incorporation and Bylaws;
(iii) certificates of good standing from the
state of each of the Borrowers jurisdiction
of incorporation, and from each state in
which any Real Property is located; and (iv)
incumbency certificates for each of the
Borrowers.
(c) Collateral Documentation. Borrowers shall
have delivered to Bank, or caused to be
delivered to Bank: (i) executed
Mortgages/Deeds of Trust covering all of the
Real Property; (ii) Title Insurance,
Insurance Policies, Surveys, and Appraisals
for all Real Property to be included in the
Collateral Pool, and
- 15 -
<PAGE> 16
(iii) at all times after December 31, 1996,
Environmental Reports for all Real Property
to be included in the Collateral Pool.
(d) Collateral Amount. The Collateral Amount
shall be not less than the Maximum Amount
then in effect.
(e) No Default; Representations and Warranties.
At the time of the making of such Advance, or
the issuance of such Letter of Credit, and
after giving effect thereto: (i) there shall
exist no Default or Event of Default; and
(ii) all representations and warranties
contained herein or in the other Documents
shall be true and correct in all material
respects, unless such representation and
warranty expressly indicates that it is being
made as of any other specific date.
(f) Opinions of Counsel. Legal opinions from
Borrower's legal counsel covering such
matters and otherwise in form and content
satisfactory to Bank.
(g) Enforceability of Documents. Both before and
after such Advance, the obligations of the
Borrowers in the Documents shall be valid,
binding and enforceable.
(h) Guaranty. On or before December 6, 1996,
Borrowers shall have caused to be delivered
to Bank, in form and content satisfactory to
Bank and supported by appropriate authorizing
resolutions, a joint and several guaranty
agreement of General Host Holding Corp., AMS
Industries, Inc., AMS Salt Industries, Inc.,
Bay Resources, Inc. and Nursery Distributors,
Inc., guarantying to Bank the payment and
performance of Borrowers' indebtedness and
obligations hereunder.
7. REPRESENTATIONS AND WARRANTIES
In order to induce Bank to enter into this Agreement and to
make Advances and issue Letters of Credit hereunder, the Borrowers represent
and warrant to Bank:
7.1 Corporate Status. Each of the Borrowers is a duly
organized and validly existing corporation in good standing under the laws of
the jurisdiction of its organization; has the corporate or other organizational
power and authority and has obtained all requisite governmental licenses,
authorizations, consents and approvals necessary to own and operate its
property and assets and to transact the business in which it is engaged and
presently proposes to engage, is duly qualified and is authorized to do
business in, and is in good standing in, all jurisdictions where by virtue of
the nature of its activities or extent of its properties it is required to be
so qualified.
- 16 -
<PAGE> 17
7.2 Corporate Power and Authority; Business. Each of the
Borrowers has the corporate power and authority to execute, deliver and carry
out the terms and provisions of the Documents and have taken all necessary
corporate action to authorize the execution, delivery and performance of the
Documents to which they are parties. Each of them has duly executed and
delivered each Document and each such Document constitutes the legal, valid and
binding obligations, enforceable in accordance with its terms, except as such
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws relating to or limiting creditors' rights generally
or by equitable principles relating to enforceability, good faith and fair
dealing.
7.3 No Violation. Neither the execution, delivery or
performance by the Borrowers of the Documents, nor compliance with the terms
and provisions thereof, nor the consummation of the transactions contemplated
therein will result in a contravention of any applicable provision of any law,
statute, rule, regulation, order, writ, injunction or decree of any court or
governmental instrumentality, or conflict or be inconsistent with or result in
any breach of any of the terms, covenants, conditions or provisions of, or
constitute a default under, or result in the creation or imposition of any Lien
upon any of the property or assets of either of them pursuant to the terms of,
any indenture, mortgage, deed of trust, material agreement or other instruments
to which any of them are parties.
7.4 Litigation. There are no actions, judgments, suits
or proceedings pending or threatened with respect to either of the Borrowers
that are likely to have a material adverse effect on the businesses or
financial condition of either of them.
7.5 Governmental Approvals, etc. No order, consent,
approval, license, authorization, or validation of, or filing, recording or
registration with, or exemption by, any third party or any foreign or domestic
governmental or public body or authority, or by any subdivision thereof, is
required to authorize or is required in connection with the execution, delivery
and performance of any Document or the transactions contemplated therein or the
legality, validity, binding effect or enforceability of any Document.
7.6 True and Complete Disclosure. All factual
information (taken as a whole) heretofore or contemporaneously furnished by or
on behalf of the Borrowers in writing to Bank for purposes of or in connection
with this Agreement or any transaction contemplated herein is, and all other
such factual information (taken as a whole) hereafter furnished to Bank will
be, true and accurate in all material respects on the date as of which such
information is dated or certified and not incomplete by omitting to state any
material fact necessary to make such information not misleading.
7.7 Financial Statements. The Company has heretofore
delivered to Bank the Consolidated balance sheet of Host and Consolidated
statements of operations, stockholders' equity and cash flow for the fiscal
year ended January 28, 1996 and the quarter ended August 11, 1996. All the
financial statements referred to in the preceding sentence were prepared in
accordance with GAAP, and fairly present in all material respects the
consolidated financial position of the Company and the results of its
operations and cash flows for the periods
- 17 -
<PAGE> 18
covered thereby (subject, in the case of the quarterly statement mentioned
above, to normal year end adjustments).
7.8 Tax Returns and Payments. The Borrowers and the
Subsidiaries have each filed all tax returns required to be filed by them and
have paid all material taxes and assessments payable by it which have become
due, other than those not yet delinquent and except for those contested in good
faith and for which adequate reserves have been established to the extent
required by GAAP.
7.9 ERISA. No events including, without limitation, any
"Reportable Event" or "Prohibited Transaction," as defined in ERISA, have
occurred in connection with any Pension Plan of either Borrower which might
reasonably be expected to constitute grounds for termination of such Pension
Plan or for the appointment of a trustee or administer of any such Pension
Plan, and such Pension Plan meets the minimum funding Standards of ERISA.
7.10 Subsidiaries. Host's only Subsidiaries as of the
Closing Date are listed on Exhibit "D" hereto and all of the outstanding
capital stock of such Subsidiaries are validly issued, fully paid and
nonassessable and owned beneficially and of record by Host or its immediate
parent, as shown on Exhibit "D".
7.11 Compliance with Laws, etc. The Borrowers are each in
compliance with all laws and regulations, including without limitation
Environmental Laws, in all jurisdictions in which they are presently doing
business.
7.12 Properties. The Borrowers have good and marketable
title to and beneficial ownership of all their respective material properties
owned by them, as reflected in the balance sheet for Host referred to in
Section 7.7 above, and hold all material licenses, certificates of occupancy or
operation and similar certificates and clearances of municipal and other
authorities necessary to own and operate their respective properties in the
manner and for the purposes currently operated by such party.
7.13 Environmental Protection. Except as disclosed on
Schedule 7.13 hereto:
(a) Borrowers and the Subsidiaries have all
material permits, licenses and other
authorizations which are required with
respect to the operation of their businesses
under any Environmental Law and each such
authorization is in full force and effect.
(b) Borrowers and the Subsidiaries are in
material compliance with the restrictions,
conditions, standards, prohibitions,
requirements, obligations, schedules and
timetables contained in any Environmental
Laws applicable to them and their assets,
operations and properties (including, without
limitation, compliance with standards,
schedules and timetables therein), including
without limitation those arising under the
Resource Conservation and Recovery Act of
1976, as amended, the Comprehensive
- 18 -
<PAGE> 19
Environmental Response, Compensation and
Liability Act of 1980, as amended by the
Superfund Amendments and Reauthorization Act
of 1986 ("CERCLA"), the Federal Water
Pollution Control Act, the Federal Clean Air
Act, and the Toxic Substances Control Act.
(c) There is no civil, criminal or administrative
action, suit, demand, claim, hearing, notice
of violation, investigation, proceeding,
notice or demand letter or request for
information pending or, to the knowledge of
Borrowers or any Subsidiary, threatened
against Borrowers or any Subsidiary under any
Environmental Law.
(d) Neither Borrowers nor any Subsidiary has
received notice that it has been identified
as a potentially responsible party under
CERCLA or any comparable state law nor has
Borrowers or any Subsidiary received any
notification that any hazardous substances or
any pollutant or contaminant, as defined in
CERCLA and its implementing regulations, or
any toxic substance, hazardous waste,
hazardous constituents, hazardous materials,
asbestos or asbestos containing materials,
petroleum, including crude oil and any
fractions thereof, or other wastes,
chemicals, substances or materials regulated
by any Environmental Laws (collectively
"Hazardous Materials") that it or any of
their respective predecessors in interest has
used, generated, stored, tested, handled,
transported or disposed of, has been found at
any site at which any governmental agency or
private party is conducting a remedial
investigation or other action pursuant to any
Environmental Law.
(e) To the best knowledge of Borrowers there have
been no releases (i.e., any past or present
releasing, spilling, leaking, pumping,
pouring, emitting, emptying, discharging,
injecting, escaping, leaching, disposing or
dumping) of Hazardous Materials by Borrowers
or any Subsidiary on, upon, into or from any
of the real properties owned or operated by
them at any time. To the best knowledge of
Borrowers there has been no such releases on,
upon, under or into any such real property or
in the vicinity of any of such real property
that, through soil, surface water or
groundwater migration or contamination, may
be located on, in or under such real
properties.
(f) To the best knowledge of Borrowers, there is
no friable asbestos in, on, or at the
respective real properties or any facility or
equipment of Borrowers or any Subsidiary.
- 19 -
<PAGE> 20
(g) To the best knowledge of Borrowers, no real
properties owned or operated by the Borrowers
or any Subsidiary is: (i) listed or proposed
for listing on the National Priorities List
under CERCLA; or (ii) listed in the
Comprehensive Environmental Response,
Compensation, Liability Information System
List promulgated pursuant to CERCLA, or on
any comparable list maintained by any
governmental authority.
(h) To the best of Borrower's knowledge, there
are no past or present events, conditions,
circumstances, activities, practices,
incidents, actions or plans which may
interfere with or prevent compliance by
Borrowers or any Subsidiary with any
Environmental Law, or which may give rise to
any common law or legal liability, including,
without limitation, liability under CERCLA or
similar state, local or foreign laws, or
otherwise form the basis of any claim,
action, demand, suit, proceeding, hearing or
notice of violation, study or investigation,
based on or related to the manufacture,
processing, distribution, use, generation,
treatment, storage, disposal, transport,
shipping or handling, or the emission,
discharge, release or threatened release into
the environment, of any pollutant,
contaminant, chemical or industrial, toxic or
hazardous substance or waste.
8. AFFIRMATIVE COVENANTS
Borrowers covenant and agree that for so long as this
Agreement is in effect and until the Advances together with interest, fees and
all other obligations incurred hereunder or under the Documents are paid in
full, and thereafter so long as any Letters of Credit or Letter of Credit
Obligations shall be outstanding:
8.1 Reporting Requirements Covenants. Borrowers will
furnish to Bank:
(a) as soon as available and in any event within
one hundred twenty (120) days after the close
of each fiscal year of Host, the Consolidated
balance sheets of Host and the Subsidiaries
as at the end of such fiscal year and the
related Consolidated statements of
operations, stockholders equity and cash
flows for such fiscal year, setting forth
comparative figures for the preceding fiscal
year, audited by independent certified public
accountants of recognized national standing
acceptable to Bank;
(b) as soon as available and in any event within
ninety (90) days after the end of each fiscal
quarter of Host, and within forty five (45)
days after the end of each month, the
Consolidated balance sheet of Host and its
Subsidiaries as of the end of such quarterly
or monthly period and the related
Consolidated statements of
- 20 -
<PAGE> 21
operations and of stockholders' equity and
cash flows for the relevant period ended and
for the elapsed period of the fiscal year
ended with the last day of such period
certified by the chief financial officer of
Host;
(c) at the time of the delivery of the financial
statements provided for in Subsections 8.1(a)
and (b), a certificate of the chief financial
officer, controller, chief accounting officer
or other authorized officer of Host to the
effect that no Default or Event of Default
exists, or, if any Default or Event of
Default does exist, specifying the nature and
extent thereof, which certificate shall be
accompanied by a compliance certificate in a
form acceptable to Bank setting forth the
calculations required to establish whether
Host and the Subsidiaries were in compliance
with the covenants in this Agreement as at
the end of such fiscal period or year, as the
case may be;
(d) promptly upon any officer of a Borrower
obtaining knowledge of any condition or event
which constitutes a Default or Event of
Default, an officers' certificate specifying
the nature and period of existence of any
such condition or event, or specifying the
nature of such claimed Default or Event of
Default, and explaining the action Borrowers
have taken or proposes to take with respect
thereto; and
(e) with reasonable promptness, such other
material information and data with respect to
Borrowers or any Subsidiary, as from time to
time may be reasonably requested by Bank.
8.2 Books, Records and Inspections. Borrowers will, and
will cause each Subsidiary to, keep true books of records and accounts of all
their business transactions in accordance with GAAP and will, and will cause
each Subsidiary to, permit, upon reasonable prior notice by Bank, officers and
designated representatives of Bank to visit and inspect their properties or
assets, and to examine books of account, and to discuss their respective
affairs, finances and accounts with its and their officers and independent
accountants (in the presence of such officers), all at such reasonable times
and intervals as the Bank may request.
8.3 Maintenance of Property. Borrowers will exercise
commercially reasonable efforts to maintain or cause to be maintained in good
repair, working order and condition (subject to normal wear and tear) all Real
Property and from time to time will make or cause to be made all appropriate
repairs, renewals and replacements thereof and will maintain and renew as
necessary all material licenses, permits and other clearances necessary to use
and occupy such Real Properties.
8.4 Payment of Taxes. Borrowers will pay and discharge,
and will cause each Subsidiary to pay and discharge, all material taxes,
assessments and governmental charges or
- 21 -
<PAGE> 22
levies imposed upon it or upon its income or profits, or upon any properties
belonging to it, prior to the date on which material penalties attach thereto,
and all lawful claims which, if unpaid, might become a lien or charge upon any
properties of Borrowers or any Subsidiary or cause a failure or forfeiture of
title thereto, except to the extent such taxes, assessments and charges are
being contested in good faith and adequate reserves therefore have been
established to the extent required by GAAP.
8.5 Compliance with Statutes, etc. Borrowers will, and
will cause each Subsidiary to, comply with all applicable statutes, regulations
and orders of, and all applicable restrictions imposed by, all governmental
bodies, domestic or foreign, in respect of the conduct of its business and the
ownership of its property.
8.6 ERISA. Borrowers will each comply with all
requirements imposed by ERISA including, but not limited to, the minimum
funding requirements of the Pension Plans.
8.7 Environmental Events.
(a) The Borrowers will promptly give notice to
Bank upon becoming aware of any of the
following which could reasonably be expected
to result in any material liability under any
Environmental Law: (i) of any material
violation by a Borrower or any Subsidiary of
any Environmental Law; (ii) of any inquiry,
proceeding, investigation or other action,
including a request for information or a
notice of potential environmental liability
from any foreign, federal, state or local
environmental agency or board; or (iii) of
the discovery of the release of any Hazardous
Material at, on, under or from any of the
real properties owned or operated by a
Borrower or any Subsidiary or any facility or
equipment thereat in excess of reportable or
allowable standards or levels under any
Environmental Law, or in a manner and/or
amount.
(b) In the event of the presence of any Hazardous
Material on any of the real properties owned
or operated by a Borrower or any Subsidiary
which is in violation of, or which could
reasonably be expected to result in liability
under, any Environmental Law, take all
necessary steps to initiate and expeditiously
complete all remedial, corrective and other
action to mitigate and eliminate any such
adverse effect.
8.8 Insurance. Borrowers shall maintain in effect
general liability insurance of the types and in amounts customarily maintained
similar companies and property insurance on an "all risks" basis with a
replacement cost endorsement, covering Real Property against loss by fire,
flood (if in a flood zone), earthquakes (if in an earthquake zone), boiler and
machinery, and such other hazards, casualties and contingencies as are normally
and usually covered by extended coverage policies in effect in the locality
where the Real Property is situated and such other risks as may be specified by
Bank, from time to time, with St. Paul Fire and Marine
- 22 -
<PAGE> 23
Insurance Company and Federal Insurance Company or such other insurers as may
be acceptable to Bank, in no event less than the full replacement cost of the
buildings, structures and personalty located at or on the relevant Real
Property. All of such policies shall contain the standard mortgagee
endorsement, shall provide that loss proceeds shall be payable to Bank as
mortgagee, and shall be issued by insurers authorized to do business in the
state in which the Real Property is located. Each policy shall also include a
provision obligating the insurance company to give Bank thirty (30) days prior
written notice of cancellation, amendment or modification. If Borrowers fail
to maintain the Insurance Policies, Bank shall have the option to do so, and
Borrowers agree to repay Bank all amounts so expended by Bank upon demand, with
interest at the Applicable Interest Rate then in effect. Borrower hereby
appoints Bank or any employee or agent of Bank as Borrowers' attorney-in-fact,
which appointment is coupled with an interest and irrevocable, and authorizes
Bank or any employee or agent of Bank, on behalf of Borrowers, to adjust and
compromise any loss with respect to casualties to Real Property greater than
Fifty Thousand Dollars ($50,000) under said insurance and to endorse any check
or draft payable to Borrower in connection therewith.
9. NEGATIVE COVENANTS
Borrowers hereby covenant and agree that so long as this
Agreement is in effect and until the Advances together with interest, fees and
all other obligations incurred hereunder or under the Documents are paid in
full and thereafter so long as any Letter of Credit or Letter of Credit
Obligation shall be outstanding:
9.1 Changes in Business. Borrowers will not, and will
not permit any Subsidiary to, materially alter the character of its primary
businesses.
9.2 Indebtedness. Borrowers will not, and will not
permit any Subsidiary to, contract, create, incur, assume or suffer to exist
any Indebtedness, except:
(a) pursuant to this Agreement;
(b) existing Indebtedness described on Schedule
9.2(b) hereof and any refinancings thereof;
(c) purchase money Indebtedness incurred to
financing the cost of acquisitions of fixed
assets not to exceed Fifteen Million Dollars
($15,000,000) at any time outstanding;
(d) unsecured Indebtedness not to exceed Ten
Million Dollars ($10,000,000) in aggregate
amount;
(e) intercompany Indebtedness of Host or a
wholly-owned Subsidiary to Host or a
wholly-owned Subsidiary; and
(f) mortgage financing secured by the properties
listed on Schedule 9.2(f) hereof.
- 23 -
<PAGE> 24
9.3 Liens. Borrowers will not, and will not permit any
Subsidiary to, create, incur, assume or suffer to exist any lien or encumbrance
upon or with respect to any of their respective properties or assets, whether
now owned or hereafter acquired, or sell any such property or assets subject to
an understanding or agreement, contingent or otherwise, to repurchase such
property or assets or assign any right to receive income, or file or permit the
filing of any financing statement under the UCC or any other similar notice of
lien under any similar recording or notice statute, except:
(a) Permitted Liens;
(b) liens on the assets presently securing
Indebtedness permitted under Section 9.2(b)
hereof, as security for any such present or
future indebtedness;
(c) purchase money security interests securing
Indebtedness permitted under Section 9.2(c)
hereof;
(d) liens upon Real Property released pursuant to
Section 11.4 hereof from the Mortgage/Deed of
Trust granted to Bank, for the purpose of a
refinancing of such Real Property; and
(e) liens on properties described on Schedule
9.2(f) securing indebtedness permitted under
Section 9.2(f) hereof.
9.4 Financial Covenants. Borrowers will not permit:
(a) the Fixed Charge Coverage Ratio, as of the
last day of any fiscal quarter, to be less
than 1.5 to 1.0.
(b) the Debt to Capitalization Ratio, as of the
last day of any fiscal quarter, to be greater
than seventy five percent (75%).
(c) Tangible Net Worth, as of the last day of any
fiscal quarter, to be less than Eighty
Million Dollars ($80,000,000).
(d) EBITDA, as of the last day of any fiscal
quarter, to be less than Thirty Million
Dollars ($30,000,000).
9.5 ERISA. Borrowers will not, and will not permit any
Subsidiary or ERISA Affiliate to:
(a) engage in any transaction in connection with
which any of them could be subject to either
a tax imposed by Section 4975(a) of the Code
or the corresponding civil penalty assessed
pursuant to Section 502(i) of ERISA;
- 24 -
<PAGE> 25
(b) permit to exist any accumulated funding
deficiency, for which a waiver has not been
obtained from the Internal Revenue Service,
with respect to any Pension Plan;
(c) permit to exist any failure to make
contributions or any unfunded benefits
liability which creates, or with the passage
of time would create, a statutory lien or
requirement to provide security under ERISA
or the Code in favor of the PBGC or any
Pension Plan, Multiemployer Plan or other
entity;
(d) permit the sum of the amount of unfunded
benefit liabilities (determined in accordance
with Statement of Financial Accounting
Standards No. 35) under all Title IV Plans
(excluding each Title IV Plan with an amount
of unfunded benefit liabilities of zero or
less) to exceed One Million Dollars
($1,000,000) for a period in excess of twelve
(12) months; or
(e) fail to make any payment to any Multiemployer
Plan that any of them may be required to make
under such Multiemployer Plan, any agreement
relating to such Multiemployer Plan, or any
law pertaining thereto.
9.6 Merger/Consolidations/Disposal of Assets. Borrowers
shall not and shall not permit any Subsidiary to:
(a) merge or consolidate with any Person except
for a merger or consolidation of a Subsidiary
with or into another Subsidiary; or
(b) sell or dispose of any assets or properties
other than: (i) sales of inventory in the
ordinary course of business; (ii) other sales
or dispositions in any instance involving the
disposal of an asset or assets with a fair
market value not greater than Twenty Five
Thousand Dollars ($25,000); (iii) sales or
dispositions involving an asset or assets
with fair market values in excess of Twenty
Five Thousand Dollars ($25,000) occurring
during any period of twelve (12) consecutive
months commencing after the date of this
Agreement, involving properties with
aggregate fair market value not in excess of
Five Million Dollars ($5,000,000), and (iv)
sales of the properties listed on Schedule
9.2(f) hereof.
9.7 Contingent Obligations. Borrowers will not, and will
not permit any Subsidiary to, directly or indirectly, create or become liable
with respect to any obligation of another Person except: (a) guaranties
resulting from endorsement of negotiable instruments for collection in the
ordinary course of business; and (b) Borrowers' guaranties of Indebtedness of
one another.
- 25 -
<PAGE> 26
9.8 Loans and Advances. Borrowers will not, and will not
permit any Subsidiary to, make loans or advances to or investments in any
Person, other than: (a) to a Person which is a wholly-owned Subsidiary; and (b)
to officers and key employees of a Borrower for the purpose financing purchases
of capital stock of General Host Corporation, in aggregate amount of any time
outstanding not to exceed Five Million Dollars ($5,000,000).
9.9 Dividends. Borrowers will not, and will not permit
any Subsidiary to declare or pay any dividend or distribution on their capital
stock, or purchase redeem or retire their outstanding capital stock.
10. DEFAULTS
10.1 Events of Default. Any of the following events is an
"Event of Default":
(a) non-payment, when due, of the principal or
interest under the Note, in accordance with
the terms hereof and thereof;
(b) default in the payment of any Letter of
Credit Obligation to be paid hereunder or
under any Letter of Credit Agreement, or any
other amount due and payable under this
Agreement or any other Document, and
continuation of such default for one (1)
Business Day after notice thereof to a
Borrower from Bank;
(c) default is made in the due observance or
performance of any terms, covenant or
agreement contained in Sections 8.1 or 8.8 or
Sections 9.1 through 9.9 of this Agreement;
(d) default is made in the due observance or
performance of any other term, covenant or
agreement contained in this Agreement or any
other Document and such default continues
unremedied for a period of thirty (30) days,
or the repudiation or purported revocation by
a Borrower of any of their respective
covenants or obligations under any Document
to which they are party;
(e) any representation or warranty made by a
Borrower herein or in any instrument
submitted pursuant hereto or by any other
party to the Documents proves to have been
untrue in any material respect when made or
deemed made;
(f) default in the payment of any other
obligation of Borrowers or either of them,
for borrowed money having a principal amount
in excess of Five Million Dollars
($5,000,000) in aggregate or in the
observance or performance of any term,
covenant or condition in any agreement or
instrument evidencing, securing or relating
to such indebtedness, and such default shall
be continued for a period
- 26 -
<PAGE> 27
sufficient to permit acceleration of the
indebtedness prior to its expressed maturity;
(g) the rendering of any judgments for the
payment of money in excess of One Million
Dollars ($1,000,000) in the aggregate against
Borrower or any Subsidiaries, and such
judgments shall remain unpaid, unvacated, or
unstayed by appeal or otherwise on or before
three (3) Business Days prior to the earliest
date on which proceedings for the enforcement
thereof may be instituted under the
applicable rules or statutes of the
jurisdiction in which said judgments are
rendered;
(h) the occurrence of any "reportable event", as
defined in ERISA, which is determined by the
Pension Benefit Guaranty Corporation to
constitute grounds for termination of any
Pension Plan maintained by or on behalf of
such Person for the benefit of any of its
employees or for the appointment by the
appropriate United States District Court of a
trustee to administer such Pension Plan and
such reportable event is not corrected and
such determination is not revoked within
thirty (30) days after notice thereof has
been given to the plan administrator or such
Person; or the institution of proceedings by
the Pension Benefit Guaranty Corporation to
terminate any such Pension Plan or to appoint
a trustee to administer such Pension Plan; or
the appointment of a trustee by the
appropriate United States District Court to
administer any such Pension Plan or either
Borrower or any Subsidiary or any ERISA
Affiliate shall become liable to the PBGC or
any other party under Section 4062, 4063 or
4064 of ERISA with respect to any Pension
Plan or to any multiemployer plan under
Section 4021 et seq. of ERISA;
(i) if either Borrower or any Subsidiary shall
fail to pay its debts generally as such debts
become due in the ordinary course of
business;
(j) if a creditors' committee shall have been
appointed for the business of either Borrower
or any Subsidiary, or if any of them shall
have made a general assignment for the
benefit of creditors or shall have been
adjudicated bankrupt, or shall have filed a
voluntary petition in bankruptcy or for
reorganization or to effect a plan or
arrangement with creditors; or shall file an
answer to a creditor's petition or other
petition filed against it, admitting the
material allegations thereof for an
adjudication in bankruptcy or for
reorganization; or shall have a creditor's
petition or other petition filed against it
and such petition is not dismissed within
thirty (30) days of such filing; or shall
have applied for or permitted the
- 27 -
<PAGE> 28
appointment of a receiver or trustee or
custodian for any of its property or assets;
or such receiver, trustee or custodian shall
have been appointed for any of its property
or assets or if an order shall be entered
approving any petition for reorganization of
either Borrower or any Subsidiary.
10.2 Exercise of Remedies. If an Event of Default has
occurred and is continuing hereunder:
(a) Bank's commitment to make Advances, and the
commitment to issue Letters of Credit
hereunder, shall immediately and
automatically terminate;
(b) Bank may, (i) declare the entire unpaid
balance of the indebtedness hereunder,
including the Note, immediately due and
payable, without presentment, notice or
demand, all of which are hereby expressly
waived by Borrowers and/or (ii) require the
payment by Borrowers, into a restricted
demand deposit account with Bank, of an
amount equal to the undrawn face amount of
any outstanding Letters of Credit as security
for Letter of Credit Obligations then
existing or thereafter arising;
(c) immediately and automatically upon the
occurrence of any Event of Default specified
in Subsection 10.1(j) above, and
notwithstanding the lack of any declaration
by Bank under preceding clause (b), the
entire unpaid principal of the Advances and
other indebtedness hereunder, including the
Note, shall become automatically due and
payable and Borrowers shall immediately and
automatically be required to pay an amount
equal to the undrawn face amount of any
outstanding Letters of Credit into a
restricted demand deposit account with Bank;
and
(d) Bank may collect and apply the proceeds of
any deposits of, or credit owing, either
Borrower toward satisfaction of the
Borrowers' liabilities and obligations to
Bank hereunder, and may exercise any other
remedy permitted by this Agreement, the
Documents or law.
11. MISCELLANEOUS
11.1 Law of Michigan; Submission to Jurisdiction. This
Agreement, the Note and Documents (other than the Mortgages/Deeds of Trust
encumbering Real Property situated outside of the State of Michigan) have been
delivered at Detroit, Michigan, and shall be governed by and construed and
enforced in accordance with the laws of the State of Michigan. Whenever
possible each provision of this Agreement shall be interpreted in such manner
as to be effective and valid under applicable law, but if any provision of this
Agreement shall be
- 28 -
<PAGE> 29
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Agreement.
Any legal action or proceeding with respect to this
Agreement or any other Document may be brought in the courts of the State of
Michigan or of the United States District Court for the Eastern District of
Michigan, and, by execution and delivery of this Agreement, each party hereto
hereby irrevocably accepts for itself and in respect of its property, generally
and unconditionally, the non- exclusive jurisdiction of the aforesaid courts.
Borrowers further irrevocably consent to the service of process out of any of
the aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to its address
for notices pursuant to Section 11.3 hereof, such service to become effective
three (3) Business Days after such mailing. Nothing herein shall affect the
right Bank to serve process in any other manner permitted by law.
Borrowers hereby irrevocably waives any objection
which it may now or hereafter have to the laying of venue of any proceedings
arising out of or in connection with this Agreement or any Document brought in
the courts referred to above and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or proceeding
brought in any such court has been brought in an inconvenient forum.
11.2 Costs and Expenses. Borrowers jointly and severally
agree to pay all reasonable costs and expenses, including, by way of
description and not limitation, outside attorney fees and out-of-pocket
expenses, incurred by Bank in connection with the negotiation, documentation,
preparation and closing on the transactions contemplated hereunder and in
connection with any exercise or enforcement of its rights and prerogatives
hereunder and under the Documents. All costs, including attorney fees,
incurred by Bank in revising, protecting, exercising or enforcing any of its
rights hereunder and under the Documents, or otherwise incurred by Bank in
connection with an Event of Default or incurred by Bank in connection with the
enforcement hereof, including by way of description and not limitation, such
charges in any court or bankruptcy proceedings or arising out of any claim or
action by any person against Bank which would not have been asserted were it
not for Bank's relationship with Borrower hereunder or under the Documents,
shall also be paid by Borrower.
11.3 Notices. Except as otherwise provided herein, all
notices hereunder shall be sufficient if made in writing and delivered to the
mailing and delivery address of the respective parties indicated on the
signature pages to this Agreement, or transmitted to the facsimile or telex
numbers set forth on their respective signature pages to this Agreement. All
such notices shall be deemed received (i) two (2) Business Days after deposit
thereof in the mails, if given by mail, (ii) one (1) Business Day after deposit
with express courier service, or (iii) if by facsimile or telex transmission,
the Business Day of transmission if transmitted during customary business hours
of the addressee and, if not transmitted during such business hours, the
following Business Day, provided, however, that notices to the Agent shall not
be effective until actual receipt thereof.
- 29 -
<PAGE> 30
11.4 Release of Real Property. Bank shall release from
its Mortgage any Real Property upon Borrowers' sale or refinancing thereof,
provided that: (i) no Event of Default exists hereunder; (ii) upon such release
the Collateral Amount for Real Property remaining in the Collateral Pool will
be not less than the Maximum Amount then in effect, and (iii) Borrowers shall
apply contemporaneously with such release, reduce the Maximum Amount in
accordance with Section 4.5 hereof in an amount equal to the net proceeds of
such sale or refinancing, or such lesser amount as Bank shall approve in
writing.
11.5 Insurance and Condemnation Proceeds. In the event that,
at the time that any insured casualty to any of the Real Property occurs or any
of the Real Property is taken or by eminent domain, or at the time of payment
of proceeds or compensation with respect to any such event, if (i) there shall
then exist a Default or Event of Default, or (ii) if such Real Property was
previously included in the Collateral Pool, the Collateral Amount reduced by an
amount equal to eighty percent (80%) of the appraised value of such Real
Property does not exceed the Maximum Amount then in effect, then Bank shall be
entitled to apply the proceeds of such casualty or taking, in its discretion,
to reduction of Indebtedness of Borrowers to Bank and the Maximum Amount shall
automatically be reduced by an amount equal to the greater of the proceeds of
such casualty or taking or the portion of the Collateral Amount previously
attributable to the affected Real Property. In the event that neither of the
circumstances described in clauses (i) or (ii) above exist either at the time
of the relevant casualty or taking, or at the time of payment of proceeds with
respect thereto, then Borrowers shall be entitled to receive such proceeds free
of any Lien in favor of Bank and, thereafter, the affected Real Property shall
not be included in the Collateral Pool.
11.6 Successors and Assigns. This Agreement shall be
binding upon and shall inure to the benefit of Borrowers and Bank and their
respective successors and assigns, provided that the foregoing shall not
authorize any assignment by Borrowers of any of their rights or duties
hereunder.
11.7 Indulgence. No delay or failure of Bank in
exercising any right, power or privilege hereunder shall affect such right,
power or privilege nor shall any single or partial exercise thereof preclude
any further exercise thereof, nor the exercise of any other right, power or
privilege. The rights of Bank hereunder are cumulative and are not exclusive
of any rights or remedies which Bank would otherwise have.
11.8 Counterparts. This Agreement may be executed in
several counterparts, and each executed copy shall constitute an original
instrument, but such counterparts shall together constitute but one and the
same instrument.
11.9 Jury Waiver. Each of the parties to this agreement
hereby irrevocably waives all right to a trial by jury in any action,
proceeding or counterclaim arising out of or relating to this Agreement, the
Documents or the transactions contemplated hereby or thereby.
- 30 -
<PAGE> 31
WITNESS the due execution hereof as of the day and year first above
written.
GENERAL HOST CORPORATION COMERICA BANK
By: Robert M. Lovejoy, Jr. By: Chris Georvassilis
---------------------------------- --------------------------
Robert M. Lovejoy, Jr. Chris Georvassilis
Its: Vice President Its: Vice President
1 Station Place 500 Woodward Avenue, M.C. 3280
Stamford, Connecticut 06902 Detroit, Michigan 48226
Telephone: (203) 357-9900 Telephone: (313) 222-6239
Telefax: (203) 357-0148 Telefax: (313) 222-3330
FRANK'S NURSERY & CRAFTS, INC.
By: Robert M. Lovejoy, Jr.
----------------------------------
Robert M. Lovejoy, Jr.
Its: Vice President
6501 East Nevada
Detroit, Michigan 48234
Telephone: (313) 366-8400
Telefax: (313) 564-2084
- 31 -
<PAGE> 32
EXHIBIT "A"
MORTGAGE-BACKED NOTE
$25,000,000.00 Detroit, Michigan
November ______, 1996
FOR VALUE RECEIVED, General Host Corporation, a New York corporation,
and Franks Nursery & Crafts, Inc., a Michigan corporation, jointly and
severally ("Borrowers"), promise to pay to Comerica Bank, a Michigan banking
corporation, in lawful money of the United States of America in immediately
available funds, the principal sum of Twenty Five Million Dollars ($25,000,000)
or so much of said sum as has been advanced and outstanding hereunder pursuant
to that certain Mortgage-Backed Credit Agreement of even date herewith between
the Borrowers and Bank ("Agreement") on the Revolving Credit Maturity Date.
Capitalized terms used herein and not defined to the contrary have the
meanings given them in the Agreement.
Interest shall accrue on the unpaid principal balance of this Note from
time to time outstanding at the Applicable Interest Rates, as selected by the
Borrowers or as otherwise applicable pursuant to the provisions of the
Agreement; provided, however, that in the event and so long as an Event of
Default shall exist, interest shall accrue at the per annum rate equal to: (i)
in the case of a Prime-based Loan, 3% above the Prime-based Rate; and (ii) in
the case of a Eurodollar-based Loan, three percent (3%) above the
Eurodollar-based Rate until the end of the then current Interest Period, at
which time such Eurodollar Loans shall be automatically converted into
Prime-based Loans and bear interest at the rate provided for in clause (i)
above.
Interest shall be payable: (i) with respect to Prime-based Loans,
quarterly on the last Business Day of each calendar quarter; (ii) with respect
to Eurodollar-based Loans, on the last day of each Interest Period applicable
thereto. In computation of interest effect shall be given to any change in the
Prime-based Rate resulting from a change in the Prime Rate on the date of such
change in the Prime Rate.
This Note is a note under which advances, repayments and readvances may
be made from time to time, in accordance with the terms and conditions of the
Agreement, and may be accelerated or matured pursuant to the terms of the
Agreement, to which reference is hereby made.
All borrowings evidenced by this Note and all payments and prepayments
of the principal hereof and interest hereon and the respective dates thereof
shall be endorsed by the holder hereof on the schedule attached hereto and made
a part hereof, or on a continuation thereof which shall be attached hereto and
made a part hereof, or other-wise recorded by such holder in its internal
records; provided, however, that the failure of the holder hereof to make such
a notation or any error in such a notation shall not affect the obligations of
the Borrowers under this Note.
<PAGE> 33
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan.
Borrowers acknowledge and agree that their obligations hereunder and
under the Agreement are joint and several obligations and may be enforced
against either or both of them severally, or both of them jointly,
notwithstanding the fact that an advance may be requested by, and the proceeds
thereof utilized by, either of the Borrowers. The Borrowers further hereby
waive presentment for payment, demand, protest and notice of protest and notice
of dishonor and nonpayment of this Note and agree that no obligation hereunder
shall be discharged by reason of any extension, indulgence, release or
forbearance granted by any holder of this Note to any party now or hereafter
liable hereon or any present or subsequent owner of any property, real or
personal, which is now or hereafter security for this Note. Any transferees
of, or endorser, guarantor or surety paying this Note in full shall succeed to
all rights of Bank, and Bank shall be under no further responsibility for the
exercise thereof or the loan evidenced hereby.
Nothing herein shall limit any right granted Bank by any other
instrument or by law.
GENERAL HOST CORPORATION
By: ______________________________
Its: _____________________________
FRANKS NURSERY & CRAFTS, INC.
By: ______________________________
Its: _____________________________
-2-
<PAGE> 34
TRANSACTIONS
ON
REVOLVING CREDIT NOTE
Amount of Outstanding
Type of Amount of Principal or Principal
Loan Made Loan Made Interest Paid Balance Notation
Date This Date This Date This Date This Date Made By
- ---- --------- --------- --------- --------- -------
- 3 -
<PAGE> 35
EXHIBIT "B"
TRANCHE ONE REAL ESTATE
Store 5 25488 Michigan Avenue, Dearborn Heights, MI 48125
Store 23 5580 West State Street, Saginaw, MI 48603
Store 26 7141 E. Broad, Columbus, OH 43213
Store 27 5500 West Broad Street, Columbus, OH 43228
Store 28 6303 S. Anthony, Fort Wayne, IN 46816
Store 30 47340 Van Dyke, Utica, MI 48317
Store 45 7940 Penn Avenue S., Bloomington, MN 55431
Store 58 3333 Refugee Road, Columbus, OH 43232
Store 81 3001 28th Street S.W., Grandville, MI 49418
Store 86 8032 KEN-18 Burlington Park, Florence, KY 41042
Store 94 6142 Telegraph, Toledo, OH 43612
Store 102 10901 Bustleton, Philadelphia, PA 19116
Store 105 110 W. Lincoln Highway, Exton, PA 19341
Store 111 5501 49th St.N., St. Petersburg, FL 33709
Store 112 255 89th Avenue, Blaine, MN 55434
Store 113 4720 U.S. 19, New Port Richie, FL 34652
Store 118 4366 Pierson Road, Flint, MI 48504
Store 119 12756 Walshingham Road, Largo, FL 34644
Store 120 15910 Mapledale Boulevard, Tampa, FL 33624
Store 151 2295 10 Mile Road, Warren, MI 48091
Store 164 2997 E. Wilder Road, Bay City, MI 48076
Store 178 2685 Tittabawassee Road, Saginaw, MI 48604
Store 179 4532 Woodville Road, Northwood, OH 43619
Store 188 448 N. Lexington Parkwaym, St. Paul, MN 55140
Store 189 1210 N. Byrne, Toledo, OH 43607
Store 199 1238 Upper Val. Pike Road, Springfield, OH 45505
Store 202 3365 Highland Avenue, Cincinnati, OH 45213
Store 213 4902 Cortez Road, Bradenton, FL 34210
Store 240 7325 Old Troy Pike, Huber Heights, OH 45424
Store 259 5225 Grape Road, Mishawaka, IN 46545
Store 266 10808 Montgomery Road, Cincinnati, OH 45242
Store 645 447 Winthrop Street, Tauton, MA 02780
Store 648 78 Campanelli Drive, Brockton, MA 02401
Store 649 310 Russell St. (Rte. 9), Hadley, MA 01035
Store 652 840 Boston Road (Rte. 20), Springfield, MA 01119
TRANCHE TWO REAL ESTATE
Store 15 2170 Dix Road, Lincoln Park, MI 48146
Store 29 1133 Coliseum Blvd., Fort Wayne, IN 46805
Store 85 325 Mall Drive, Portgage, MI 49002
<PAGE> 36
Store 93 5737 S. Pennsylvania, Lansing, MI 48911
Store 104 10550 Reisterstown Road, Owings Mills, MD 21117
Store 110 4315 E. Bay Drive, Clearwater, FL 34624
Store 117 6401 W. Waters Avenue, Tampa, FL 33634
Store 134 15031 Manchester Road, Ballwin, MO
Store 141 7456 South State Road, Bedford Park, IL 60638
Store 181 3530 Mona Kai Drive, Norton Shores, MI 49441
Store 272 223 E. Main Street, Westfield, MA 01085
Store 286 2145 Highway 35, Sea Girt, NJ 08750
Store 605 210 Monmouth Road, W. Long Branch, NJ 07764
Store 622 945 North Main Street, Milford, CT 06460
Store 624 840 Route 46, Kenvil, NJ 07847
Store 625 2931 Highway 35, Hazlet, NJ 07730
Store 638 4250 Route 9 South, Howell, NJ 07731
<PAGE> 37
EXHIBIT "C"
REQUEST FOR LOAN
A. REQUEST
The undersigned authorized officer of __________________(1), pursuant to
the terms of that certain Mortaged-Backed Credit Agreement dated November 27,
1996 ("Agreement") among Frank's Nursery & Crafts, Inc., General Host
Corporation and Comerica Bank ("Bank") hereby requests an Advance on
________________, 199___(2) in the amount of ___________________ Dollars
($____________)(3).
The Applicable Interest Rate for the Advance shall be _________________
(4).
B. APPLICATION OF PROCEEDS
1. the proceeds of this Advance shall be:
(a) applied to convert or renew the following outstanding
Advance:
Last Day of
Type of Advance Interest Period Principal Amount
- --------------- --------------- ----------------
(b) deposited in the undersigned's account number
________________________ with __________________.
C. CERTIFICATION
The undersigned hereby certifies that all the conditions set forth in
the Agreement for the Advance requested hereby are satisfied and shall remain
satisfied as of the date for the Advance requested hereby.
___________________________
(1)Insert "General Host Corporation" or "Franks Nursery & Craft, Inc.", as
applicable.
(2)Insert date for Advance, which must be at least three (3) Business Days
after request, if request is for a Eurodollar Loan.
(3)Insert amount, which must be: (i) not less than $1,000,000, if a
Prime-based Loan; and (ii) a multiple of $1,000,000, if a Eurodollar-based
Loan.
(4)Insert "Prime-based Rate" or "Eurodollar-based Rate", as applicable.
<PAGE> 38
D. DEFINED TERMS
Capitalized terms used herein and not defined to the contrary have the
meanings given them in the Agreement.
Dated this _____ day of ________________, 199___.
______________________________________
By:___________________________________
Its:__________________________________
-2-
<PAGE> 39
EXHIBIT "D"
GENERAL HOST CORPORATION AND SUBSIDIARIES
General Host Corporation
Frank's Nursery & Crafts, Inc.
Nursery Distributors, Inc.
General Host Holding Corporation
AMS Industries, Inc.
AMS Salt Industries, Inc.
Bay Resources, Inc.
SNG Acquisition Company, Inc.
<PAGE> 40
SCHEDULE 7.13
The capitalized terms that are used (but not defined) in this Schedule
7.13 are used with the meanings given to them in the foregoing Mortgage-Backed
Credit Agreement ("the Credit Agreement") among Comerica Bank, General Host
Corporation and Frank's Nursery & Crafts, Inc.
NYDEC ORDER ON CONSENT - As reported on Schedule 7.13 to the Prior
Agreement, Frank's entered into an Order on Consent with the New York
Department of Environmental Conservation on May 11, 1994. The $100,000 fine
referred to in the Order on Consent has been paid, and the Order on Consent
remains in effect.
LITTLE GENERAL STORES - Host remains contractually liable for
environmental liabilities resulting from the operation of its former Little
General Stores Division. Host expects to receive reimbursement of a
substantial part of its costs from state-funded programs.
SOLVENTS RECOVERY SERVICE ("SRS") SITE, SOUTHINGTON, CT - This is a
federal superfund case in Connecticut that involves shipments of waste from a
former Host subsidiary, Allied Leather Corporation ("Allied"), to the SRS site.
However, in 1978, Allied and all of its subsidiaries (including Allied Kid
Corporation ("Kid")) were purchased, and their liabilities were assumed, by
Feuer Leather Corporation ("Feuer"). Host believes that any liabilities
resulting from the acts of Allied are the responsibility of Feuer.
OLD SOUTHINGTON LANDFILL SITE, SOUTHINGTON, CT - This is a federal
superfund case in Connecticut that involves the alleged trans-shipment of waste
from the SRS Site to the Old Southington Landfill Site. There are no
allegations involving Host other than a general allegation that the waste of
dozens of companies were shipped from the SRS Site for ultimate disposal at the
Old Southington Landfill Site. As with the SRS Site, Host believes that
Allied's responsibility (if any) for the trans-shipments has been assumed by
Feuer.
KRAMER LANDFILL & BUZBY LANDFILL - These are federal superfund sites in
New Jersey. In each case, Host is a third-party defendant to claims of numerous
parties who were the major contributors to the landfills. However, Host's only
connection to these landfills is alleged shipments of waste to the sites by
Kid. As with the SRS Site and the Old Southington Landfill Site, Host believes
that Kid's responsibility (if any) for the shipments to these sites has been
assumed by Feuer.
MATTERS DISCLOSED IN ENVIRONMENTAL REPORTS - Other matters that may be
within the scope of Section 7.13 of the Credit Agreement and this Schedule 7.13
are, or will be, disclosed in the Environmental Reports.
<PAGE> 41
SCHEDULE 9.2(b)
SCHEDULE OF INDEBTEDNESS
(Amounts are in thousands)
<TABLE>
<CAPTION>
TOTAL
-----
<S> <C>
SENIOR DEBT:
Comerica Bank $10,000
11 1/2% Senior Notes due 78,000
February 15, 2002
Metlife Capital Mortgage Financing due 10,290
September 1, 2005
Midland Loan Services Mortgage Financing due 676
April 1, 2006
Midland Loan Services Mortgage Financing due 2,535
November 1, 2005
Midland Loan Services Mortgage Financing due 16,465
February 1, 2006
Peoples Bank Mortgage Financing due 4,816
February 1, 2001
First Union National Bank Mortgage Financing due 3,762
May 1, 2006
First Union National Bank Mortgage Financing due 653
May 1, 2006
N.A.D. Realty Co. due August 17, 1999 560
Capital Leases 12,707
Standby Letters of Credit 8,102
SUBORDINATED DEBT:
8% Convertible Subordinated Notes due 65,000
February 15, 2002
</TABLE>
<PAGE> 42
SCHEDULE 9.3(b)
SCHEDULE OF LIENS
Blanket liens on real estate, fixtures and equipment on the following
stores:
<TABLE>
<CAPTION>
YEAR YEAR
STORE OPENED STATE STORE OPENED STATE
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
25 1969 Grand Rapids 156 1987 Michigan City
32 1971 Columbus 163 1986 Crystal Lake
33 1971 Grand Rapids 167 1986 Schaumburg
34 1971 Okemos 168 1986 Battle Creek
35 1972 Roseville 205 1987 Louisville
65 1981 Flint 208 1988 Louisville
80 1981 Canton Twp. 214 1988 Franklin
87 1981 Evergreen Pk. 219 1988 Columbus
88 1981 Waukegan 244 1990 Eden Prairie
90 1982 Merrillville 245 1990 Eagan
92 1982 Clinton Twp. 265 1992 St. Charles
98 1983 St. Charles 267 1992 South Bend
99 1984 Brookhaven 277 1993 Bloomfield
100 1984 Joliet 623 1985 Staten Island
101 1984 Deptford 626 1985 Bricktown
103 1983 Coon Rapids 628 1986 Bridgewater
106 1985 Libertyville 631 1985 Branford
107 1985 Naperville 632 1985 Vernon
135 1986 Bridgeton 633 1985 Southington
139 1986 St. Charles 636 1986 Farmington
140 1986 Lake Zurich 639 1987 Kingston
142 1986 Cincinnati 643 1987 East Hartford
- -----------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 43
WITNESS the due execution hereof as of the day and year first above
written.
GENERAL HOST CORPORATION COMERICA BANK
By: Robert M. Lovejoy, Jr. By: Chris Georvassilis
-------------------------- ----------------------------
Robert M. Lovejoy, Jr. Chris Georvassilis
Its: Vice President Its: Vice President
1 Station Place 500 Woodward Avenue, M.C. 3280
Stamford, Connecticut 06902 Detroit, Michigan 48226
Telephone: (203) 357-9900 Telephone: (313) 222-6239
Telefax: (203) 357-0148 Telefax: (313) 222-3330
FRANK'S NURSERY & CRAFTS, INC.
By: Robert M. Lovejoy, Jr.
--------------------------
Robert M. Lovejoy, Jr.
Its: Vice President
6501 East Nevada
Detroit, Michigan 48234
Telephone: (313) 366-8400
Telefax: (313) 564-2084
-31-
<PAGE> 44
SCHEDULE 9.2(f)
STORE # ADDRESS
610 715 Dobbs Ferry Road, White Plains, NY 10607
601 1081 East Jericho Turnpike, Huntington, NY 11743
644 1121-23 Union Avenue, Newburgh, NY 12550
646 49 Palomba Drive, Enfield, CT 06082
6400
6399
6401
6501 East Nevada, Detroit, Michigan
West side of Filler Ave, 200 Ft. S. of E. Nevada, Detroit,
Michigan
<PAGE> 1
EXHIBIT 4.06 (b)
MORTGAGE-BACKED NOTE
$25,000,000.00 Detroit, Michigan
November 29, 1996
FOR VALUE RECEIVED, General Host Corporation, a New York corporation, and
Franks Nursery & Crafts, Inc., a Michigan corporation, jointly and severally
("Borrowers"), promise to pay to Comerica Bank, a Michigan banking corporation,
in lawful money of the United States of America in immediately available funds,
the principal sum of Twenty Five Million Dollars ($25,000,000) or so much of
said sum as has been advanced and outstanding hereunder pursuant to that certain
Mortgage-Backed Credit Agreement of even date herewith between the Borrowers and
Bank ("Agreement") on the Revolving Credit Maturity Date.
Capitalized terms used herein and not defined to the contrary have the
meanings given them in the Agreement.
Interest shall accrue on the unpaid principal balance of this Note from
time to time outstanding at the Applicable Interest Rates, as selected by the
Borrowers or as otherwise applicable pursuant to the provisions of the
Agreement; provided, however, that in the event and so long as an Event of
Default shall exist, interest shall accrue at the per annum rate equal to: (i)
in the case of a Prime-based Loan, 3% above the Prime-based Rate; and (ii) in
the case of a Eurodollar-based Loan, three percent (3%) above the
Eurodollar-based Rate until the end of the then current Interest Period, at
which time such Eurodollar Loans shall be automatically converted into
Prime-based Loans and bear interest at the rate provided for in clause (i)
above.
Interest shall be payable: (i) with respect to Prime-based Loans, quarterly
on the last Business Day of each calendar quarter; (ii) with respect to
Eurodollar-based Loans, on the last day of each Interest Period applicable
thereto. In computation of interest effect shall be given to any change in the
Prime-based Rate resulting from a change in the Prime Rate on the date of such
change in the Prime Rate.
This Note is a note under which advances, repayments and readvances may be
made from time to time, in accordance with the terms and conditions of the
Agreement, and may be accelerated or matured pursuant to the terms of the
Agreement, to which reference is hereby made.
All borrowings evidenced by this Note and all payments and prepayments of
the principal hereof and interest hereon and the respective dates thereof shall
be endorsed by the holder hereof on the schedule attached hereto and made a part
hereof, or on a continuation thereof which shall be attached hereto and made a
part hereof, or otherwise recorded by such holder in its internal records;
provided, however, that the failure of the holder hereof to make such a notation
or any error in such a notation shall not affect the obligations of the
Borrowers under this Note.
<PAGE> 2
This Note shall be interpreted and the rights of the parties hereunder
shall be determined under the laws of, and enforceable in, the State of
Michigan.
Borrowers acknowledge and agree that their obligations hereunder and under
the Agreement are joint and several obligations and may be enforced against
either or both of them severally, or both of them jointly, notwithstanding the
fact that an advance may be requested by, and the proceeds thereof utilized by,
either of the Borrowers. The Borrowers further hereby waive presentment for
payment, demand, protest and notice of protest and notice of dishonor and
nonpayment of this Note and agree that no obligation hereunder shall be
discharged by reason of any extension, indulgence, release or forbearance
granted by any holder of this Note to any party now or hereafter liable hereon
or any present or subsequent owner of any property, real or personal, which is
now or hereafter security for this Note. Any transferees of, or endorser,
guarantor or surety paying this Note in full shall succeed to all rights of
Bank, and Bank shall be under no further responsibility for the exercise thereof
or the loan evidenced hereby.
Nothing herein shall limit any right granted Bank by any other instrument
or by law.
GENERAL HOST CORPORATION
By: Robert M. Lovejoy Jr.
-------------------------------
Its: Vice President
------------------------------
FRANKS NURSERY & CRAFTS, INC.
By: Robert M. Lovejoy Jr.
------------------------------
Its: Vice President
------------------------------
- 2 -
<PAGE> 3
TRANSACTIONS
ON
REVOLVING CREDIT NOTE
<TABLE>
Amount of Outstanding
Type of Amount of Principal or Principal
Loan Made Loan Made Interest Paid Balance Notation
Date This Date This Date This Date This Date Made By
- ---- --------- --------- --------- --------- -------
<S> <C> <C> <C> <C> <C>
</TABLE>
- 3 -
<PAGE> 1
EXHIBIT 4.06(c)
GUARANTY
The undersigned, for value received, jointly and severally, unconditionally
and absolutely, guarantee by way of a continuing guaranty to Comerica Bank
("Bank"), a Michigan banking corporation of One Detroit Center, Detroit,
Michigan 48226 and to Bank's successors and assigns, payment when due, whether
by stated maturity, demand, acceleration or otherwise, of all existing and
future indebtedness to the Bank of GENERAL HOST CORPORATION, a New York
corporation, and FRANK'S NURSERY & CRAFTS, INC., a Michigan corporation, and
also of any successor in interest of either, including without limit any
debtor-in-possession or trustee in bankruptcy which succeeds to the interests of
either (jointly and severally "Borrower"), however this indebtedness has been or
may be incurred or evidenced and including, without limitation, all of the
indebtedness and obligations of Borrower under that certain Mortgaged-Backed
Credit Agreement dated November 29, 1996, and/or the Note and the other
Documents (each as defined in such Credit Agreement) and all extensions,
renewals and/or amendments or restatements of any of the foregoing (the
"Indebtedness").
The Indebtedness guaranteed includes: (a) any and all of the
above-described Indebtedness for which Borrower would otherwise be liable to
Bank were it not for the invalidity, irregularity or unenforceability of them by
reason of any bankruptcy, insolvency or other law or order of any kind, or for
any other reason, including without limit liability for interest and attorney
fees on, or in connection with, any of the Indebtedness from and after the
filing by or against Borrower of a bankruptcy petition; (b) any and all
amendments, modifications, renewals and/or extensions of any of the above,
including without limit amendments, modifications, renewals and/or extensions
which are evidenced by new or additional instruments, documents or agreements;
and (c) all costs of collecting Indebtedness, including without limit reasonable
attorney fees.
The undersigned waive notice of acceptance of this Guaranty and
presentment, demand, protest, notice of protest, dishonor, notice of dishonor,
notice of default, notice of intent to accelerate or demand payment of any
Indebtedness, and diligence in collecting any Indebtedness, and agree that Bank
may modify the terms of any Indebtedness, compromise, extend, increase,
accelerate, renew or forbear to enforce payment of any or all Indebtedness, or
permit Borrower to incur additional Indebtedness, all without notice to the
undersigned and without affecting in any manner the unconditional obligation of
the undersigned under this Guaranty. The undersigned further waive any and all
other notices to which the undersigned might otherwise be entitled. The
undersigned acknowledge and agree that the liabilities created by this Guaranty
are direct and are not conditioned upon pursuit by Bank of any remedy Bank may
have against Borrower or any other person or any security. No invalidity,
irregularity or unenforceability of any part or all of the Indebtedness or any
documents evidencing the same, by reason of any bankruptcy, insolvency or other
law or order of any kind or for any other reason, and no defense or setoff
available at any time to Borrower, shall impair, affect or be a defense or
setoff to the obligations of the undersigned under this Guaranty.
The undersigned deliver this Guaranty based solely on the undersigneds'
independent investigation of the financial condition of Borrower and are not
relying on any information
- 1 -
<PAGE> 2
furnished by Bank. The undersigned assume full responsibility for obtaining
any further information concerning Borrower's financial condition, the status
of the Indebtedness or any other matter which the undersigned may deem
necessary or appropriate from time to time. The undersigned waive any duty on
the part of Bank, and agree that it is not relying upon nor expecting Bank to
disclose to the undersigned any fact now or later known by Bank, whether
relating to the operations or condition of Borrower, the existence, liabilities
or financial condition of any co-guarantor of the Indebtedness, the occurrence
of any default with respect to the Indebtedness, or otherwise, notwithstanding
any effect these facts may have upon the undersigneds' risks under this
Guaranty or the undersigneds' rights against Borrower. The undersigned
knowingly accept the full range of risk encompassed in this Guaranty, which
risk includes without limit the possibility that Borrower may incur
Indebtedness to Bank after the financial condition of Borrower, or its ability
to pay its debts as they mature, has deteriorated.
The undersigned represent and warrant that: (a) Bank has made no
representation to the undersigned as to the creditworthiness of Borrower; and
(b) the undersigned have established adequate means of obtaining from the
Borrower on a continuing basis financial and other information pertaining to
Borrower's financial condition. The undersigned agree to keep adequately
informed of any facts, events or circumstances which might in any way affect the
risks of the undersigned under this Guaranty.
The undersigned grant to Bank security interests in and the right of setoff
as to any and all property of the undersigned now or later in the possession of
Bank. The undersigned subordinate any claim of any nature that the undersigned
now or later has against the Borrower to and in favor of all Indebtedness and
agree not to accept payment or satisfaction of any claim that the undersigned
now or later may have against Borrower without the prior written consent of Bank
in the event and so long as any default exists with respect to Indebtedness.
Upon an event of default with respect to the Indebtedness, and the giving of any
required notice and expiration of any applicable cure period, should any
payment, distribution, security, or proceeds, be received by the undersigned
upon or with respect to any claim that the undersigned now or may later have
against Borrower, the undersigned shall immediately deliver the same to the Bank
in the form received (except for endorsement or assignment by the undersigned
where required by the Bank) for application on the Indebtedness, whether matured
or unmatured, and until delivered the same shall be held in trust by the
undersigned as the property of the Bank. The undersigned further assign to the
Bank as collateral for the obligations of the undersigned under this Guaranty
all claims of any nature that the undersigned now or later has against the
Borrower with full right on the part of the Bank, in its own name or in the name
of the undersigned, upon an event of default with respect to the Indebtedness,
and the giving of any required notice and expiration of any applicable cure
period, to collect and enforce these claims.
The undersigned agree that no security now or later held by Bank for
payment of any Indebtedness, whether from Borrower, any guarantor, or otherwise,
and whether in the nature of a security interest, pledge, lien, assignment,
setoff, suretyship, guaranty, indemnity, insurance or otherwise, shall affect in
any manner the unconditional obligation of the undersigned under this Guaranty,
and Bank, in its sole discretion, without notice to the undersigned, may
release, exchange, enforce and otherwise deal with any security without
affecting in any manner the unconditional obligation of the undersigned under
this Guaranty. The undersigned acknowledge
- 2 -
<PAGE> 3
and agrees that Bank has no obligation to acquire or perfect any lien on or
security interest in any assets, whether realty or personalty, to secure
payment of the Indebtedness, and the undersigned is not relying upon any assets
in which Bank has or may have a lien or security interest for payment of the
Indebtedness.
The undersigned acknowledge that the effectiveness of this Guaranty is not
conditioned on any or all of the Indebtedness being guaranteed by anyone else.
Until the Indebtedness is irrevocably paid in full, the undersigned waive
any and all rights to be subrogated to the position of the Bank or to have the
benefit of any lien, security interest or other guaranty now or later held by
the Bank for the Indebtedness or to enforce any remedy which the Bank now or
later has against the Borrower or any other person. Until the Indebtedness is
irrevocably paid in full, the undersigned shall have no right of reimbursement,
indemnity, contribution or other right of recourse to or with respect to the
Borrower or any other person. The undersigned agree to indemnify and hold Bank
harmless from and against any and all claims, actions, damages, costs and
expenses, including without limit reasonable attorneys' fees, incurred by Bank
in connection with the exercise of any right of subrogation, contribution,
indemnification or recourse with respect to this Guaranty by any of the
undersigned. The Bank has no duty to enforce or protect any rights which the
undersigned may have against the Borrower or any other person and the
undersigned assumes full responsibility for enforcing and protecting these
rights.
The undersigned may terminate their respective obligations under this
Guaranty as to future Indebtedness (except as provided below) by (and only by)
delivering written notice of termination to an officer of the Bank and receiving
from an officer of the Bank written acknowledgement of delivery; provided, the
termination shall not be effective until the opening of business on the
forty-fifth (45th) day following written acknowledgement of delivery. Any
termination shall not affect in any way the unconditional obligations of the
undersigned as to any Indebtedness existing at the effective date of termination
or any Indebtedness created after that pursuant to any commitment or agreement
of the Bank or any Borrower loan with the Bank existing at the effective date of
termination (whether advances or readvances by the Bank are optional or
obligatory), or any modifications, extensions or renewals of any such
Indebtedness, whether in whole or in part, and as to all of this Indebtedness
and modifications, extensions or renewals of it, this Guaranty shall continue
effective until the same shall have been fully paid. The undersigned shall
indemnify the Bank against all claims, damages, costs and expenses, including
without limit reasonable attorney fees, incurred by the Bank in connection with
any suit, claim or action against the Bank arising out of any modification or
termination of a Borrower loan or any refusal by the Bank to extend additional
credit arising, in either event, in connection with the termination of this
Guaranty.
Notwithstanding any prior revocation, termination, surrender or discharge
of this Guaranty (or of any lien, pledge or security interest securing this
Guaranty) in whole or in part, the effectiveness of this Guaranty, and of all
liens, pledges and security interests securing this Guaranty, shall
automatically continue or be reinstated, as the case may be, in the event that
any payment received or credit given by the Bank in respect of the Indebtedness
is returned, disgorged or rescinded as a preference, impermissible setoff,
fraudulent conveyance, diversion
- 3 -
<PAGE> 4
of trust funds, or otherwise under any applicable state or federal law,
including, without limitation, laws pertaining to bankruptcy or insolvency, in
which case this Guaranty, and all liens, pledges and security interests
securing this Guaranty, shall be enforceable against the undersigned as if the
returned, disgorged or rescinded payment or credit had not been received or
given by the Bank, and whether or not the Bank relied upon this payment or
credit or changed its position as a consequence of it. In the event of
continuation or reinstatement of this Guaranty and the liens, pledges and
security interests securing it, the undersigned agrees upon demand by the Bank
to execute and deliver to the Bank those documents which the Bank determines
are appropriate to further evidence (in the public records or otherwise) this
continuation or reinstatement, although the failure of the undersigned to do so
shall not affect in any way the reinstatement of continuation. If the
undersigned do not execute and deliver to the Bank upon demand such documents,
the Bank and each Bank officer is irrevocably appointed (which appointment is
coupled with an interest) the true and lawful attorney of the undersigned (with
full power of substitution) to execute and deliver such documents in the name
and on behalf of the undersigned.
The undersigned waive any right to require the Bank to: (a) proceed against
any person, including without limit the Borrower; (b) proceed against or exhaust
any security held from the Borrower or any other person; (c) give notice of the
terms, time and place of any public or private sale of personal property
security held from the Borrower or any other person, or otherwise comply with
the provisions of Section 9-504 of the Michigan or other applicable Uniform
Commercial Code or with any provision of the Personal Property Security Act; (d)
pursue any other remedy in the Bank's power; or (e) make any presentments or
demands for performance, or give any notices of nonperformance, protests,
notices of protest, or notices of dishonor in connection with any obligations or
evidences of Indebtedness held by the Bank as security, in connection with any
other obligations or evidences of indebtedness which constitute in whole or in
part Indebtedness, or in connection with the creation of new or additional
Indebtedness.
The undersigned authorize Bank, either before or after termination of this
Guaranty, without notice to or demand on the undersigned and without affecting
the undersigneds' liability under this Guaranty, from time to time to: (a) apply
any security and direct the order or manner of sale of it, including without
limit, a nonjudicial sale permitted by the terms of the controlling security
agreement, mortgage or deed of trust, as Bank in its discretion may determine;
(b) release or substitute any one or more of the endorsers or any other
guarantors of the Indebtedness; and (c) apply payments received by the Bank from
the Borrower to any indebtedness of the Borrower to the Bank, in such order as
the Bank shall determine in its sole discretion, whether or not this
indebtedness is covered by this Guaranty, and the undersigned waives any
provision of law regarding application of payments which specifies otherwise.
The Bank may without notice assign this Guaranty in whole or in part. Upon the
Bank's request, the undersigned agrees to provide to the Bank copies of the
undersigned's financial statements.
The undersigned waive any defense based upon or arising by reason of (a)
any disability or other defense of Borrower or any other person; (b) the
cessation or limitation from any cause whatsoever, other than final and
irrevocable payment in full, of the Indebtedness; (c) any lack of authority of
any officer, director, partner, agent or any other person acting or purporting
to
- 4 -
<PAGE> 5
act on behalf of Borrower which is a corporation, partnership or other type of
entity, or any defect in the formation of Borrower; (d) the application by
Borrower of the proceeds of any Indebtedness for purposes other than the
purposes represented by Borrower to Bank or intended or understood by Bank or
the undersigned; (e) any act or omission by Bank which directly or indirectly
results in or aids the discharge of Borrower or any Indebtedness by operation
of law or otherwise; or (f) any modification of the Indebtedness, in any form
whatsoever including without limit any modification made after effective
termination, and including without limit the renewal, extension, acceleration
or other change in time for payment of the Indebtedness, or other change in the
terms of any Indebtedness, including without limit increase or decrease of the
interest rate. The undersigned waive any defense they may have based upon any
election of remedies by Bank which destroys the undersigneds' subrogation
rights or undersigneds' right to proceed against Borrower for reimbursement,
including without limit any loss of rights the undersigned may suffer by reason
of any rights, powers or remedies of Borrower in connection with any anti-
deficiency, appraisement or valuation laws or any other laws limiting,
qualifying or discharging any Indebtedness.
The undersigned acknowledge that Bank has the right to sell, assign,
transfer, negotiate, or grant participations in all or any part of the
Indebtedness and any related obligations, including without limit this Guaranty.
In connection with that right, the Bank may disclose any documents and
information which the Bank now or later acquire relating to the undersigned and
this Guaranty, whether furnished by the Borrower, the undersigned or otherwise.
The undersigned further agree that Bank may disclose these documents and
information to Borrower.
The obligation under this Guaranty shall include any and all interest on
all Indebtedness and any and all costs and expenses of any kind, including
without limit reasonable attorney fees, incurred by Bank at any time for any
reason in enforcing any of the duties and obligations of the undersigned under
this Guaranty or otherwise incurred by Bank in any way connected with this
Guaranty, the Indebtedness or any other guaranty of the Indebtedness (including
without limit reasonable attorney fees and other expenses incurred in any suit
involving the conduct of the Borrower or the undersigned). All of these costs
and expenses shall be payable immediately by the undersigned when incurred by
Bank, upon demand, and until paid shall bear interest at the highest per annum
rate applicable to any of the Indebtedness, but not in excess of the maximum
rate permitted by law. Any reference in this Guaranty to attorney fees shall be
deemed a reference to fees, charges, costs and expenses of both inhouse and
outside counsel and paralegals, whether or not a suit or action is instituted,
and to court costs if a suit or action is instituted, and whether attorney fees
or court costs are incurred at the trial court level, on appeal, in a
bankruptcy, administrative or probate proceeding or otherwise.
The undersigned unconditionally and irrevocably waive each and every
defense and setoff of any nature which, under principles of guaranty or
otherwise, would operate to impair or diminish in any way the obligation of the
undersigned under this Guaranty, and acknowledge that each such waiver is by
this reference incorporated into each security agreement, collateral assignment,
pledge and/or other document from the undersigned now or later securing this
Guaranty and/or the Indebtedness, and acknowledge that as of the date of this
Guaranty no such defense or setoff exists. The undersigned acknowledge that the
effectiveness of this Guaranty is subject to no conditions of any kind.
- 5 -
<PAGE> 6
This Guaranty shall remain effective with respect to successive
transactions which shall continue the Indebtedness until this Guaranty is
terminated in the manner and to the extent provided above.
The obligation of the undersigned under this Guaranty is joint and several
and may be enforced against any one or more of them severally and/or jointly in
Bank's sole discretion.
The undersigned warrant and agree that each of the waivers set forth above
are made with the undersigneds' full knowledge of their significance and
consequences, and that under the circumstances, the waivers are reasonable and
not contrary to public policy or law. If any of these waivers are determined to
be contrary to any applicable law or public policy, these waivers shall be
effective to the extent permitted by law.
This Guaranty constitutes the entire agreement of the undersigned and Bank
with respect to the subject matter of this Guaranty. No waiver, consent,
modification or change of the terms of this Guaranty shall bind any of the
undersigned or Bank unless in writing and signed by the waiving party or an
authorized officer of the waiving party, and then this waiver, consent,
modification or change shall be effective only in the specific instance and for
the specific purpose given. This Guaranty shall inure to the benefit of Bank
and its successors and assigns. This Guaranty shall be binding on the
undersigned and the undersigned's successors and assigns including, without
limit, any debtor in possession or trustee in bankruptcy for any of the
undersigned. If any provision of this Guaranty is unenforceable in whole or in
part for any reason, the remaining provisions shall continue to be effective.
THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF MICHIGAN.
THE UNDERSIGNED AND BANK ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY, AFTER CONSULTING
WITH COUNSEL OF THEIR CHOICE, KNOWINGLY AND VOLUNTARILY WAIVES ANY RIGHT TO
TRIAL BY JURY IN THE EVENT OF LITIGATION REGARDING THE PERFORMANCE OR
ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS GUARANTY OR THE INDEBTEDNESS.
- 6 -
<PAGE> 7
Dated and delivered as of GENERAL HOST HOLDING CORP.
December 3, 1996, at Detroit,
Michigan
By: Robert M. Lovejoy Jr.
------------------------
Its: Vice President
------------------------
AMS INDUSTRIES, INC.
By: Robert M. Lovejoy Jr.
-------------------------
Its: Vice President
------------------------
AMS SALT INDUSTRIES, INC.
By: Robert M. Lovejoy Jr.
-------------------------
Its: Vice President
------------------------
BAY RESOURCES, INC.
By: Robert M. Lovejoy Jr.
-----------------------
Its: Vice President
-----------------------
NURSERY DISTRIBUTORS, INC.
By: Robert M. Lovejoy Jr.
----------------------
Its: Vice President
----------------------
- 7 -
<PAGE> 8
GENERAL HOST HOLDING CORP.,
AMS INDUSTRIES, INC.,
AMS SALT INDUSTRIES, INC.,
BAY RESOURCES, INC. and
NURSERY DISTRIBUTORS, INC.
CERTIFICATE OF THE SECRETARY
I, J. THEODORE EVERINGHAM, hereby certify that (a) I am the duly
elected and incumbent Secretary of each of the above-named corporations, (b)
the following resolution was adopted by the Board of Directors of each such
corporation as of November 29, 1996, by unanimous written consent of the
members thereof without a meeting, in accordance with such corporation's bylaws
and applicable law, and (c) on the date of this certificate, each such
resolution remains in full force and effect:
RESOLVED that (A) this corporation shall guaranty the full and timely
performance when due of the obligations of General Host Corporation and
Frank's Nursery & Crafts, Inc. (together, "the Borrowers") under the
Mortgage-Backed Credit agreement dated as of November 29, 1996, between
Comerica Bank ("the Bank") and the Borrowers and (B) Robert M. Lovejoy,
Jr., Vice President and Treasurer of this corporation, and each other
Vice President of this corporation (each an "Authorized Officer") are
severally authorized on behalf of this corporation to execute and
deliver a guaranty agreement in favor of the Bank in such form as the
Authorized Officer executing the same on behalf of this corporation shall
approve, such approval to be conclusively evidenced by such Authorized
Officer's signature on such document.
DATED: November 29, 1996
J. Theodore Everingham
---------------------------------------
J. Theodore Everingham, Secretary
<PAGE> 1
EXHIBIT 4.06(d)
MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT
OF RENTS AND LEASES, FIXTURE FILING AND FINANCING STATEMENT
THIS MORTGAGE, SECURITY AGREEMENT, ASSIGNMENT OF RENTS AND LEASES,
FIXTURE FILING AND FINANCING STATEMENT ("Mortgage") is made and granted this
29th day of November, 1996, by FRANK'S NURSERY & CRAFTS, INC., a Michigan
corporation, whose address is 6501 East Nevada, Detroit, Michigan 48234
("Mortgagor"), to COMERICA BANK, a Michigan banking corporation, whose address
is Comerica Tower at Detroit Center, 500 Woodward Avenue, Detroit, Michigan
48226 ("Mortgagee").
Mortgagor is or may become indebted to Mortgagee in the amount of
FORTY MILLION DOLLARS ($40,000,000) pursuant to that certain Mortgage-Backed
Credit Agreement of even date herewith between Mortgagor and General Host
Corporation (the "Borrowers") and Mortgagee (the "Loan Agreement") and a
Promissory Note executed or to be executed pursuant to the Loan Agreement the
("Note") and the other Documents (as defined in the Loan Agreement).
THIS MORTGAGE SECURES FUTURE ADVANCES AND IS A FUTURE ADVANCE MORTGAGE
UNDER ACT 348 OF THE PUBLIC ACTS OF 1990 (MCLA 565.901 ET SEQ). THE MAXIMUM
PRINCIPAL AMOUNT EXCLUDING PROTECTIVE ADVANCES, THAT MAY BE SECURED BY THIS
MORTGAGE IS FORTY MILLION DOLLARS ($40,000,000).
GRANTING CLAUSE
In order to secure payment of the Indebtedness (hereinafter defined),
the performance of the covenants, terms and conditions hereof and of any of the
Documents, Mortgagor does MORTGAGE AND WARRANT to Mortgagee, subject only to the
Permitted Encumbrances (hereinafter defined), real estate owned by Mortgagor
situated in Wayne County, Michigan described more particularly on Exhibit A
attached hereto;
Together with all buildings and improvements now or hereafter existing
upon the real estate or any part thereof, and all heretofore or hereafter
vacated alleys, streets and sidewalks abutting the real estate and all
easements, licenses, rights-of-way and privileges benefitting the real estate
or in anywise appertaining thereto, if any, and together with all Fixtures
(hereinafter defined); and
Together with all of the rents, profits and leases of the Premises
(hereinafter defined) and all of the tenements, hereditaments, and
appurtenances thereto belonging or in anywise appertaining and any and all
reversions and remainders, and all of the estate, right, title, interest,
property, claim and demand whatsoever of Mortgagor in and to the Premises and
any part thereof; and
- 1 -
<PAGE> 2
Mortgagor grants to Mortgagee a security interest in all of the
Fixtures, but if the same be deemed to be part of the real estate then
Mortgagor mortgages and warrants such Fixtures to Mortgagee. Mortgagor grants
to Mortgagee a security interest in the Accounts and Specific Intangibles (all
hereinafter defined), and all proceeds of the foregoing.
DEFINITIONS
FOR THE PURPOSE OF THIS MORTGAGE UNLESS THE CONTEXT SHALL OTHERWISE REQUIRE:
A. "ACCOUNTS" are any right to payment in which Mortgagor has an
interest arising out of ownership, of the Premises and include all rents,
profits and income of the Premises (to the extent the same are or may hereafter
be subject to the Uniform Commercial Code as adopted in the jurisdiction where
the Premises are situated) and all accounts receivable which are any part of or
arise from such rents, profits and income which otherwise relate in any way to
the Premises.
B. "ASBESTOS" shall have the meanings provided under the Relevant
Environmental Laws, and shall include, but not be limited to, asbestos fibers
and friable asbestos which represents a health risk, as such terms are defined
under the Relevant Environmental Laws.
C. "EVENT OF DEFAULT" shall have the meaning set forth in
paragraph 11.
D. "FIXTURES" are all goods and equipment which are or hereafter
become fixtures and are located upon or within the Premises or are now or
hereafter attached to the Premises or Fixtures, including, but not limited to,
any and all partitions, dynamos, screens, awnings, motors, engines, boilers,
furnaces, pipes, plumbing, cleaning, call and sprinkler systems, fire
extinguishing apparatus and equipment, water tanks, heating, ventilating,
air-conditioning and air-handling equipment, built-in refrigerated rooms, gas
and electric machinery, elevators and elevator equipment and appurtenances and
equipment, permanently affixed to the real estate and all replacements thereof
and all proceeds of such Fixtures.
E. "SPECIFIC INTANGIBLES" are any and all of the right, title and
interest of Mortgagor in and to (i) all insurance policies and the proceeds
thereof or claims paid or to be paid thereunder relating in any manner to the
Premises or to the rents thereof, and any return of premiums, and (ii) any
awards or settlements of an eminent domain proceeding involving a taking of the
Premises or any part thereof or any awards or settlements made in an eminent
domain proceeding arising out of any claim of diminution in value of the
Premises, (iii) any damage awards or settlements arising out of or connected
with any lease or the breach of any lease or any damages to the Premises or to
Mortgagor's interest therein.
F. "HAZARDOUS WASTES" shall mean any of the following as defined
by the Relevant Environmental Laws: solid wastes; toxic or hazardous
substances, wastes, or contaminants (including, but not limited to,
polychlorinated biphenyls ("PCB's"), and urea formaldehyde foam insulation);
and discharges of sewage or effluent.
- 2 -
<PAGE> 3
G. Any reference to "INDEBTEDNESS" means the principal, interest,
fees and all other sums from time to time owing by the Borrowers under the Loan
Agreement or other Documents or evidenced by the Note and all renewals,
extensions and modifications thereof, and all other amounts at any time due or
to become due under the Documents, and all sums, with interest thereon,
advanced to protect the security of this Mortgage, and all other indebtedness
and liabilities of Mortgagor or any guarantor to Mortgagee, whether direct or
indirect, absolute or contingent, due or to become due, now existing or
hereafter arising and howsoever evidenced.
H. "PERMITTED ENCUMBRANCES" are the Permitted Liens (defined in
the Loan Agreement) and the encumbrances (if any) set forth on Exhibit B
attached hereto.
I. Any reference to "PREMISES" shall be deemed to apply without
limitation to all of the above described real estate, and to all buildings and
improvements now or hereafter located thereon, and to all heretofore or
hereafter vacated alleys, streets and sidewalks, easements, licenses,
privileges, right-of-ways, reversions, remainders and all rights, titles,
interests, property, claims and demands of Mortgagor therein and to the rents,
profits, income and leases of the Premises and to the Fixtures.
J. "RELEVANT ENVIRONMENTAL LAWS" shall mean all applicable
federal, state and local laws, rules, regulations, orders, judicial
determinations, and decisions or determinations by any judicial, legislative or
executive body of any governmental or quasi-governmental entity, whether in the
past, the present or the future, with respect to: (A) the installation,
existence, or removal of, or exposure to, Asbestos on the Premises; (B) the
existence on, discharge from, or removal from the Premises of Hazardous Wastes;
and (C) the effects on the environment of the Premises or of any activity now,
previously, or hereafter conducted on the Premises. The Relevant Environmental
Laws shall include, but not be limited to, the following: (1) the
Comprehensive Environmental Response, Compensation, and Liability Act, 42
U.S.C. Sections 9601 et seq.; the Superfund Amendments and Reauthorization
Act, Public Law 99-499, 100 Stat. 1613; the Resource Conservation and Recovery
Act, 42 U.S.C. Sections 6901 et seq.; the National Environmental Policy Act, 42
U.S.C. Section 4321; the Safe Drinking Water Act, 42 U.S.C. Sections 300F et
seq.; the Toxic Substances Control Act, 15 U.S.C. Section 2601; the Hazardous
Materials Transportation Act, 49 U.S.C. Section 1801; the Federal Water
Pollution Control Act, 33 U.S.C. Sections 1251 et seq.; the Clean Air Act, 42
U.S.C. Sections 7401 et seq.; and the regulations promulgated in connection
therewith; (2) Environmental Protection Agency regulations pertaining to
Asbestos (including 40 C.F.R. Part 61, Subpart M); Occupational Safety and
Health Administration regulations pertaining to Asbestos (including 29 C.F.R.
Sections 1910.1001 and 1926.58); as each may now or hereafter be amended; and
(3) any state and local laws and regulations pertaining to Hazardous Wastes
and/or Asbestos.
MORTGAGOR DOES HEREBY COVENANT AS FOLLOWS:
1. PAYMENT OF INDEBTEDNESS. Mortgagor shall pay the Indebtedness
according to the terms of the Loan Agreement, the Note, and the other Documents
and shall perform all the terms, covenants and conditions hereof and of each of
the Documents.
- 3 -
<PAGE> 4
2. TITLE. At the time of the execution and delivery of this
Mortgage, Mortgagor is well and truly seized of the Premises in fee simple,
free of all liens, encumbrances and easements whatsoever, whether prior or
subordinate hereto, except Permitted Encumbrances.
Mortgagor shall forever warrant and defend the Premises against any
and all claims whatsoever, including all security interests. Except and to the
extent of the Permitted Encumbrances, the lien created hereby is and shall be
kept a first lien upon the Premises and the security interests created hereby
shall be kept as first security interests in and upon the Fixtures, Accounts
and Specific Intangibles and every part thereof. Mortgagor shall pay when due
all amounts which might become a lien upon the Premises prior to this Mortgage.
Mortgagor shall not grant or suffer a security interest in any of the Fixtures,
Accounts or Specific Intangibles prior to the security interest granted to
Mortgagee. Mortgagor, upon Mortgagee's request, shall execute all other
instruments necessary to confirm or protect the lien of this Mortgage and the
security interests granted herein including, without limitation, security
agreements, financing statements and renewals thereof.
3. TAXES. Except as specifically provided to the contrary in the
Loan Agreement, Mortgagor shall pay forthwith prior to the imposition of any
penalty or interest all taxes and assessments that may be levied upon the
Premises and shall promptly deliver to Mortgagee receipts showing payment
thereof. Mortgagor shall pay when due all taxes and assessments that may be
levied upon or on account of this Mortgage or the Indebtedness secured hereby
or upon the interest or estate in the Premises created or represented by this
Mortgage, whether levied against Mortgagor or otherwise. If at any time
internal revenue stamps are required to be affixed to this Mortgage or any
other Document, Mortgagor shall pay for the same with any interest or penalties
imposed in connection therewith. In the event that payment by Mortgagor, even
if voluntarily made, of any tax referred to in this paragraph would be contrary
to public policy or would result in the payment of interest in excess of the
rate permitted by law, then Mortgagor shall have no obligation to pay the
portion of such tax which would result in the violation of public policy or the
payment of such excess interest; provided, however, in any such event, at any
time after the enactment of the law providing for such tax, Mortgagee, at its
election, may declare the entire principal balance of the Indebtedness secured
hereby, together with interest thereon, to be due and payable immediately.
4. WASTE, ALTERATIONS, COMPLIANCE WITH LAW. Mortgagor shall
abstain from and shall not suffer the commission of waste on the Premises and
shall keep the same in good repair (reasonable wear and tear excepted) and
shall make replacements thereto as and when the same become necessary.
Mortgagor shall promptly notify Mortgagee, in writing, of the occurrence of any
material loss or damage to the Premises. Mortgagor shall not materially alter
the Premises or Fixtures, or remove the Fixtures from the Premises, or permit
any tenant or other person to do so, without the prior written consent of
Mortgagee which consent shall not be unreasonably withheld; provided, however,
Mortgagor may replace any Fixtures which require replacement in the exercise of
Mortgagor's business judgment, with Fixtures of like or better quality than
those replaced. Mortgagor shall not permit any portion of the Premises to be
used for any unlawful purpose. Mortgagor shall comply in all material respects
with all laws, ordinances, regulations and orders of all public authorities
having jurisdiction thereof and all covenants, conditions and restrictions
relating to the Premises or the use, occupancy and
- 4 -
<PAGE> 5
maintenance thereof. Mortgagor shall permit Mortgagee at any time, and from
time to time, to enter the Premises for the purpose of inspecting the same
during normal business hours.
5. HAZARDOUS WASTES.
A. Representations and Warranties. Except as specifically
described in the Loan Agreement, the Mortgagor represents, warrants to the best
of its knowledge and covenants to the Mortgagee as follows:
(i) At all times since the vesting of title to the
Premises in the Mortgagor and (to the best of Mortgagor's knowledge)
at all times prior to the vesting of title to the Premises in the
Mortgagor, there are no and have been no violations of the Relevant
Environmental Laws respecting the Premises and no consent orders have
been entered with respect thereto.
(ii) At all times since the vesting of title to the
Premises in the Mortgagor and (to the best of Mortgagor's knowledge)
at all times prior to the vesting of title to the Premises in the
Mortgagor, there are no and have been no Hazardous Wastes or Asbestos
either at, upon, under or within, or discharged or emitted at or from,
the Premises, including, but not limited to, the air, soil, surface,
and ground water; no Hazardous Wastes or Asbestos have flowed, blown
or otherwise become present at the Premises from neighboring land; and
no Hazardous Wastes or Asbestos have been removed from the Premises
other than those Hazardous Wastes which are necessary and commercially
reasonable for the conduct of the Mortgagor's business operated on the
Premises and which Hazardous Wastes have been, at all times prior to
the date hereof, and at all times hereafter shall be, handled and
disposed of in compliance with all Relevant Environmental Laws and
industry standards and in a commercially reasonable manner by the
Mortgagor other than inventory sold in the ordinary course of
Borrower's business.
(iii) The Premises will not be used for the purpose of
storing Hazardous Wastes other than inventory sold in the ordinary
course of Borrower's business, and no such storage or use will
otherwise be allowed on the Premises which will cause or increase the
likelihood of causing the release of Hazardous Wastes onto the
Premises.
(iv) No Authorized Officer of Mortgagor is aware of any
claims or litigation, and has not received any communication from any
person (including any governmental authority), concerning the presence
or possible presence of Hazardous Wastes or Asbestos at the Premises
or concerning any violation or alleged violation of the Relevant
Environmental Laws respecting the Premises. The Mortgagor shall
promptly notify the Mortgagee of any such claims and shall furnish
Mortgagee with a copy of any such communications received by
Mortgagor.
(v) The Mortgagor shall notify Mortgagee promptly and in
reasonable detail in the event that the Mortgagor becomes aware of or
suspects the presence of Hazardous Wastes (other than those Hazardous
Wastes which are necessary and commercially
- 5 -
<PAGE> 6
reasonable for the conduct of the Mortgagor's business operated on the
Premises and which Hazardous Wastes have been, at all times
prior to the date hereof, and at all times hereafter shall be, handled
and disposed of in compliance with all Relevant Environmental Laws and
industry standards and in a commercially reasonable manner by the
Mortgagor) or Asbestos or a violation of the Relevant Environmental
Laws at the Premises.
(vi) The Mortgagor shall ensure that the Premises complies
and continues to comply in all material respects with the Relevant
Environmental Laws.
(vii) If the Premises are used or maintained so as to
subject the Mortgagor, the Mortgagee or the user of the Premises to a
claim of violation of the Relevant Environmental Laws (unless
contested in good faith by appropriate proceedings), the Mortgagor
shall immediately remedy and fully cure any conditions arising
therefrom, at its own cost and expense.
B. Mortgagor's Obligations. At its sole cost and expense, the
Mortgagor shall:
(i) Pay immediately when due the cost of compliance with
the Relevant Environmental Laws.
(ii) Keep the Premises free of any lien imposed pursuant
to the Relevant Environmental Laws.
C. Mortgagee's Options. In the event that the Mortgagor fails to
comply with the requirements of this paragraph 5, after notice to the
Mortgagor, Mortgagee may, but shall not be obligated to, exercise its right to
do one or more of the following: (i) declare that such failure constitutes an
Event of Default under paragraph 11 herein; and/or (ii) take any and all
actions, at the Mortgagor's expense, that Mortgagee deems necessary or
desirable to cure said failure of compliance.
All costs incurred pursuant to this paragraph 5 shall become
immediately due and payable with interest thereon at the rate at which interest
accrues in the Note on amounts after the same become due, and the amount
thereof, including any such interest, shall, if incurred prior to the
foreclosure of this Mortgage or the delivery of a deed in lieu of foreclosure,
be added to the Indebtedness and shall be secured by this Mortgage and each
other Document granting Mortgage collateral or security for Indebtedness.
D. Indemnity. Mortgagee shall not be liable for and the
Mortgagor shall immediately pay to Mortgagee when incurred and shall indemnify,
defend and hold Mortgagee harmless from and against, all loss, cost, liability,
damage and expense (including, but not limited to, reasonable attorneys' fees
and costs incurred in the investigation, defense and settlement of claims) that
the Mortgagee may suffer or incur (as holder of this Mortgage, as mortgagee in
possession or as successor in interest to the Mortgagor as owner of the
Premises by virtue of foreclosure or acceptance of a deed in lieu of
foreclosure) as a result of or in connection in any way with any of the
Relevant Environmental Laws (including the assertion that any lien existing
- 6 -
<PAGE> 7
pursuant to the Relevant Environmental Laws takes priority over the lien of
this Mortgage), any environmental assessment or study from time to time
undertaken or requested by the Mortgagor or Mortgagee pursuant to paragraph 5
hereof, or breach of any covenant or undertaking by the Mortgagor herein;
provided, however, the Mortgagor shall have no obligation hereunder to the
Mortgagee with respect to indemnified liabilities arising solely from the gross
negligence or willful misconduct of the Mortgagee. Any environmental audit
conducted at the Mortgagee's request shall not be deemed a waiver or
relinquishment of the Mortgagee's right to rely on the covenants,
representations, warranties or agreements made herein and in any other
Document, or to receive the protection and indemnity outlined above. If at any
time the Mortgagee reasonably believes that any Relevant Environmental Law has
been or is being violated, the Mortgagee shall have the right to cause an
environmental audit to be conducted at Mortgagor's sole expense or to require
Mortgagor, at Mortgagor's expense, to have an environmental audit done and to
furnish evidence satisfactory to the Mortgagee that no such violation has
occurred.
E. Survival. The provisions of this paragraph 5 shall survive
the foreclosure of this Mortgage, the delivery of a deed in lieu of
foreclosure, and the payment of the Indebtedness.
6. INSURANCE. Mortgagor shall maintain the insurance required
under the Loan Agreement.
7. ESCROWS FOR TAXES AND INSURANCE. Immediately upon the
occurrence and during the continuance of an Event of Default, upon Mortgagees
demand therefor, Mortgagor shall pay to Mortgagee monthly, at the times
provided in the Note for payment of principal and/or interest, installments for
the purpose of paying taxes, assessments and insurance premiums. The amount of
the installments to be paid may change from time to time as taxes, assessments
and insurance premiums change. To determine the monthly installment, the
amount and due date of each separate tax, assessment and insurance premium are
first determined. The amount of the monthly installment is calculated by
dividing each separate tax, assessment and insurance premium by twelve (12) and
adding the resulting figures. The installments will be so timed as to assure to
Mortgagee that it will have sufficient funds to pay each respective tax,
assessment or insurance premium one month before the due date. Additionally,
upon Mortgagee's demand for such installments, Mortgagor will deposit with
Mortgagee a sufficient sum for each tax, assessment or insurance premium,
computed independently as set forth above, which, when added to the
installments that come due before the next due date for such tax, assessment or
premium, will give Mortgagee sufficient funds to pay the same one month before
the due date. All amounts paid to Mortgagee hereunder will be held by
Mortgagee as additional security for the Indebtedness and may be commingled by
Mortgagee with any other funds. Mortgagor shall not be entitled to receive
interest on account of any sums held hereunder. Nothing contained herein shall
in any manner limit the obligation of Mortgagor to pay taxes and assessments;
provided, however, if no Event of Default has occurred hereunder nor any act
occurred which with the giving of notice or passage of time or both would
constitute an Event of Default hereunder and provided Mortgagor delivers to
Mortgagee at least thirty (30) days before the same become due all invoices,
bills and statements respecting the foregoing items, the payments made under
this paragraph shall be applied by Mortgagee for the purposes for which they
are made. In addition to the escrows for taxes and insurance, Mortgagor shall
deposit with Mortgagee, in Mortgagor's account all security deposits relating
to the Premises which shall be
- 7 -
<PAGE> 8
returned as and when tenants are entitled thereto. Upon and during the
continuance of an Event of Default by Mortgagor, Mortgagee may, at its option,
but without obligation on its part so to do, apply all amounts held (other than
security deposits which shall be held for the purpose intended) toward the
payment of taxes, assessments and insurance premiums and/or toward the payment
of any amounts payable by Mortgagor to Mortgagee under this Mortgage and/or
toward the payment of the Indebtedness or any portion thereof, whether or not
the same is then due and payable.
8. PERFORMANCE BY MORTGAGEE. If an Event of Default shall occur
with respect to the obligations of Mortgagor in the payment of any taxes or
assessments or in making repairs or replacements or in procuring and
maintaining insurance and paying the premiums therefor, or in keeping or
performing any other covenant, term or condition hereof, Mortgagee may, at its
option and without any obligation on its part so to do, pay the taxes and
assessments, make such repairs and replacements, effect such insurance, pay the
premiums, and perform any other covenant, term or condition of Mortgagor
herein. All amounts expended by Mortgagee hereunder shall be secured hereby
and shall be due and payable by Mortgagor to Mortgagee forthwith on demand,
with interest thereon at the rate at which interest accrues in the Note on
amounts after the same become due.
9. STATUTORY WASTE. Nonpayment of any taxes or assessments
levied or assessed upon the Premises, except to the extent being contested by an
appropriate proceedings being diligently pursued by Mortgagor, or nonpayment of
any insurance premium upon any insurance policy relating to the Premises, or any
part thereof, shall constitute waste, and shall entitle Mortgagee to exercise
the remedies afforded by Section 600.2927 of the Michigan Revised Judicature Act
of 1961, as now or hereafter amended, and by any other statute or law now or
hereafter in effect. Mortgagor hereby consents to the appointment of a receiver
should Mortgagee elect such remedy.
10. PAYMENT OF MORTGAGEE COSTS. In the event that Mortgagee is
made a party to any suit or proceedings instituted after the date hereof by
reason of the interest of Mortgagee in the Premises, or if Mortgagee is
required to arbitrate or negotiate any claim asserted against it by reason of
its interest in the Premises, whether or not such claim results in a suit or
proceeding, Mortgagor shall reimburse Mortgagee for all costs and expenses,
including reasonable attorneys' fees. All amounts incurred by Mortgagee
hereunder shall be secured hereby and shall be due and payable by Mortgagor to
Mortgagee forthwith on demand, with interest thereon at the rate at which
interest accrues on the Note on amounts after the same become due. Wherever in
this Mortgage or in any other Document an obligation is imposed upon Mortgagor
to pay the reasonable attorney's fees of Mortgagee, such fees shall be deemed
to include all reasonable fees incurred, whether such fees are incurred in
consulting an outside or in-house attorney or in a proceeding of any kind and
if in a proceeding, whether at the trial or appellate stages.
11. DEFAULT AND REMEDIES.
A. It shall be an Event of Default hereunder if there occurs any
"Event of Default" as defined in the Loan Agreement.
- 8 -
<PAGE> 9
B. Mortgagee may at any time after the occurrence and during the
continuance of any Event of Default (i) without further notice, declare the
Indebtedness, including the then applicable prepayment premium, if any, to be
due and payable immediately; (ii) exercise any and all other rights and
remedies provided by this Mortgage or the Note or any other Document, or by
law, including appointment of a receiver to which appointment Mortgagor
consents. Mortgagor acknowledges that the commencement of foreclosure
proceedings shall be deemed acceleration. Mortgagee shall have the right from
time to time to sue for any sums whether interest, damages for failure to pay
principal or any installment thereof, taxes, installments of principal, or any
other sums required to be paid under the terms of this Mortgage, as the same
become due, without regard to whether or not the principal sum secured or any
other sums evidenced by the Note or secured by this Mortgage shall be due, and
without prejudice to the right of Mortgagee thereafter to bring an action of
foreclosure, or any other action, for a default or defaults by the Mortgagor
existing at the time such earlier action was commenced. Any payment made in
accordance with the terms of this Mortgage by any person at any time liable for
the payment of the whole or any part of the sums now or hereafter secured by
this Mortgage, or by any subsequent owner of the Premises, or by any other
person whose interest in the Premises might be prejudiced in the event of a
failure to make such payment, or by any stockholder, officer or director of a
corporation which at any time may be liable for such payment or may own or have
such an interest in the Premises, shall be deemed, as between the Mortgagee and
all persons who at any time may be liable as aforesaid or may own the Premises,
to have been made on behalf of all such persons.
C. Any failure by the Mortgagee to insist upon the strict
performance by the Mortgagor of any of the terms and provisions hereof shall
not be deemed to be a waiver of any of the terms and provisions hereof, and the
Mortgagee, notwithstanding any such failure, shall have the right thereafter to
insist upon the strict performance by the Mortgagor of any and all of the terms
and provisions of this Mortgage to be performed by the Mortgagor.
D. Neither the Mortgagor nor any other person now or hereafter
obligated for the payment of the whole or any part of the Indebtedness shall be
relieved of such obligation by reason of the failure of the Mortgagee to comply
with any request of the Mortgagor or of any other person so obligated to take
action to foreclose this Mortgage or otherwise enforce any of the provisions of
this Mortgage or of any obligations secured by this Mortgage, or by reason of
the release, regardless of consideration, of the whole or any part of the
security held for the Indebtedness, or by reason of any agreement or
stipulation between any subsequent owner or owners of the Premises and the
Mortgagee extending the time of payment or modifying the terms of the Documents
without first having obtained the consent of the Mortgagor or such other
person. In the latter event, the Mortgagor and all such other persons shall
continue to be liable to make such payments according to the terms of any such
agreement of extension or modification unless expressly released and discharged
in writing by the Mortgagee.
E. Regardless of consideration, and without the necessity for any
notice to or consent by the holder of any subordinate lien on the Premises, the
Mortgagee may release the obligation of anyone at any time liable for any of
the Indebtedness or any part of the security held for the Indebtedness and may
extend the time of payment or otherwise modify the terms of the Documents
without, as to the security or the remainder thereof, in anywise impairing or
- 9 -
<PAGE> 10
affecting the lien of this Mortgage or the priority of such lien, as security
for the payment of the Indebtedness as it may be so extended or modified, over
any subordinate lien. Mortgagee may resort for the payment of the Indebtedness
to any other security therefor held by the Mortgagee in such order and manner
as the Mortgagee may elect.
12. POWER OF SALE. Upon and during the continuance of an Event of
Default, power is granted to Mortgagee to sell the Premises or any part thereof
at public auction, and to convey same to the purchaser after notice as required
by the statutes of the State of Michigan for foreclosure of mortgages by
advertisement being Sections 600.3201 et seq., Michigan Compiled Laws, as
amended. Upon and during the continuance of an Event of Default, Mortgagee
shall have the remedies of a secured party under the Michigan Uniform
Commercial Code, including without limitation, the right to notify account
debtors and to collect or compromise or sue for collection of all or any
Accounts or and Specific Intangibles by any lawful means. For the purpose of
taking possession of the Fixtures, Mortgagee may enter upon any premises on
which the Fixtures or any part thereof may be situated and hold the Fixtures
upon the Premises (without charge to Mortgagee), or dispose of the Fixtures or
Goods on the Premises, or remove the same to such other place as Mortgagee shall
determine. Upon demand by Mortgagee, Mortgagor shall assemble the Fixtures and
make them available to Mortgagee at the Premises. Any requirement of notice
under the Uniform Commercial Code shall be met if such notice is mailed to
Mortgagor, postage prepaid, at least ten (10) days before the event with respect
to which notice is required. Mortgagee shall be entitled to recover all
expenses incurred by Mortgagee in retaking, holding, preparing for sale, selling
and collecting the Fixtures, Accounts and Specific Intangibles, together with
reasonable attorney's fees and other expenses incurred by Mortgagee in
protecting and enforcing its rights and remedies with respect to the Indebtness,
the Fixtures, Accounts and Specific Intangibles.
WARNING - THIS PARAGRAPH 12. CONTAINS A WAIVER OF IMPORTANT LEGAL RIGHTS.
This Mortgage contains a power of sale which permits the Mortgagee to
cause the Premises to be sold upon an Event of Default. The Mortgagee may
elect to cause the Premises to be sold by advertisement rather than pursuant to
court action, and Mortgagor hereby voluntarily and knowingly waives any right
Mortgagor may have by virtue of any applicable constitutional provision or
statute to any notice or court hearing prior to the exercise of the power of
sale, except as may be expressly required by the Michigan statute governing
foreclosures by advertisement. In addition, Mortgagor, to the extent permitted
by law, hereby knowingly and voluntarily waives any right Mortgagor may have to
remain in possession of the Premises or to collect any rents or income
therefrom during the pendency of any foreclosure proceedings and during any
applicable redemption period. Also, paragraph 17 entitles the Mortgagee to
require immediate payment of the balance of the Indebtedness in full if the
Premises are sold or otherwise transferred without the prior written consent of
Mortgagee. By execution of this Mortgage, the Mortgagor represents and
acknowledges that the meaning and consequences of this paragraph have been
discussed as fully as desired by the Mortgagor with the Mortgagor's legal
counsel.
- 10 -
<PAGE> 11
13. DISTRIBUTION UPON SALE. Upon a foreclosure sale of the
Premises or any part thereof, the proceeds of such sale shall, subject to
applicable law, be applied in such order as Mortgagee elects:
(a) To the payment of all costs of the suit or foreclosure,
including reasonable attorneys' fees and the cost of title
searches and abstracts;
(b) To the payment of all other expenses of Mortgagee, including
all monies expended by Mortgagee and all other amounts payable
by Mortgagor to Mortgagee hereunder, with interest thereon;
(c) To the payment of all other Indebtedness including the
interest thereon;
(d) To the payment of the surplus, if any, to Mortgagor or to
whomsoever shall be entitled thereto.
14. SALE IN PARCELS. Upon any foreclosure sale of the Premises,
the same may be sold either as a whole or in parcels, as Mortgagee may elect
and, if in parcels, the same may be divided as Mortgagee may elect and, at the
election of Mortgagee, may be offered first in parcels, in any manner or order
as Mortgagee may elect in its sole discretion, and then as a whole, any law,
statutory or otherwise, to the contrary notwithstanding, and Mortgagor hereby
waives the right to require any such sale to be made in parcels or the right to
select such parcels.
15. EMINENT DOMAIN. In the event there is a proceeding relating
to the Premises or any part thereof under the power of eminent domain, the
entire award rendered in such proceeding or any settlement of such proceeding
shall be paid to Mortgagee to be applied in accordance with the Loan Agreement.
16. ASSIGNMENT OF LEASES AND RENTS. A. As additional security
for the payment of the Indebtedness and the performance of the covenants, terms
and conditions contained herein and in any other Document, Mortgagor does
hereby assign, mortgage and warrant to Mortgagee, all rents, income and profits
of the Premises and all present and future leases pertaining thereto and all
guarantees of the tenant's obligations thereunder, together with the right in
the Mortgagee to enforce the leases, to take possession of the Premises and
every part thereof, and to collect the rents and profits and to apply the same,
as hereinafter provided. Notwithstanding this assignment, until an Event of
Default occurs, Mortgagor shall have the right to collect the rents, profit and
income of the Premises.
B. Mortgagor shall not, without the prior written consent of
Mortgagee, accept any prepaid rent under any lease of the Premises except for
the then current month and security deposits; nor shall Mortgagor enter into
any new lease of the Premises or any part thereof except in accordance with a
form of lease approved in advance by Mortgagee. Mortgagor shall not take or
suffer any actions which would effectuate a merger of a lease with a fee so as
to terminate the lessee's obligations. Any act in violation of this paragraph
16 B shall be void and of no effect.
- 11 -
<PAGE> 12
C. Mortgagor shall perform all of the obligations of the lessor
under all leases of the Premises or any part thereof in accordance with the
terms and provisions thereof and shall not suffer or permit any impairment of
the security thereof. Mortgagor shall manage the Premises and every part
thereof in accordance with sound business practices. Mortgagor shall promptly
take such actions as are reasonable and prudent to enforce the lessee's
obligations under any lease. Mortgagee shall have no obligations,
responsibility or liability of lessor under any lease assigned hereby, and
shall have no obligation to account for any security deposit unless the same
has been actually deposited with Mortgagee.
D. Mortgagor shall deliver to Mortgagee within ten (10) days
after written request from Mortgagee a statement in writing setting forth the
names of the tenants of the Premises, the expiration dates of the leases, and
the amounts of rents and any other sums due thereunder, and together therewith
shall furnish to Mortgagee copies of all such leases. Mortgagor shall, upon
written request, execute and deliver to Mortgagee such other and further
documents as may be reasonably appropriate to confirm the assignment of rents,
profits, and leases made hereby.
E. Upon an Event of Default, Mortgagee may, pursuant to the
assignment herein contained, and in addition to exercising any and all other
rights and remedies provided by this Mortgage or by law, including the
appointment of a receiver (to which appointment Mortgagor consents), or by any
other Document, with or without foreclosure or entry upon the Premises, demand,
collect, sue for, receive, compromise, and compound all rents, income and
arrears of rent as may then or thereafter be due and owing from the tenants,
occupiers, lessees or assignees of any lessees of the Premises and Mortgagor
hereby authorizes and directs the tenants, occupiers, lessees or assignees of
any lessees of the Premises to make payment to Mortgagee of rent and any other
sums then due and to become due under the leases upon receipt of written demand
therefor by Mortgagee, without liability for the determination of Mortgagee's
rights thereto. In such event, Mortgagee shall have the power, either directly
or through a rental agent selected by Mortgagee, to operate, maintain and
repair the Premises, and to amend any lease and to exercise any and all rights
of Mortgagor with respect to any lease; and out of the rents and income thus
received, after the payment of all costs and expenses of Mortgagee, to retain
all sums then or thereafter due hereunder, and also a commission of six percent
(6%) upon all such rents and income thus collected as compensation for its
services in making such collections. The rights and powers of Mortgagee
hereunder shall continue and remain in full force and effect until all amounts
due Mortgagee hereunder, including any deficiency resulting from foreclosure
sale, are paid in full, and shall continue after commencement of foreclosure
and after foreclosure sale and until expiration of any applicable period of
redemption, notwithstanding the sale of the Premises to a purchaser other than
Mortgagee. Mortgagee shall not be liable to Mortgagor or anyone claiming under
or through Mortgagor by reason of anything done or left undone by Mortgagee
hereunder, except for damage resulting from gross negligence or willful
misconduct of Mortgagee.
F. Mortgagor covenants, represents and warrants to Mortgagee that
Mortgagor has not executed any prior assignment of the leases of the Premises,
or of the rents, profits and income of the Premises except to Mortgagee and
Mortgagor covenants it will not hereafter execute any such assignment until
such time as all Indebtedness secured hereby is fully paid and satisfied.
- 12 -
<PAGE> 13
G. Mortgagor agrees that no holder of any subordinate lien shall
have any right to terminate any lease of any portion of the Premises whether or
not such lease is subordinate to this Mortgage.
17. TRANSFER OF MORTGAGOR'S INTEREST. Except to the extent
provided in the Loan Agreement, it shall be an Event of Default hereunder if,
without Mortgagee's prior written consent, Mortgagor shall at any time cease to
be the holder of the entire record title to and beneficial interest in the
Premises or any part thereof, whether by sale or any other means whatsoever, or
any lien or encumbrance is placed upon the Premises, even if inferior hereto,
or Mortgagor executes any contract of sale or transfers possession of the
Premises or any part thereof or assigns the right to receive the rents.
18. SECURITY AGREEMENT/FINANCING STATEMENT. This Mortgage is a
mortgage, security agreement, fixture filing and financing statement under the
Uniform Commercial Code. This instrument is also to be indexed in the index of
fixture filings and financing statements. This instrument covers goods which
are or are to become fixtures on the Premises. The names of the debtor and the
secured party, the mailing address of the secured party from which information
concerning this security interest may be obtained, the mailing address of the
debtor and a statement indicating the types, or describing the items, of
collateral, are as described herein, in compliance with the requirements of the
Uniform Commercial Code. The Mortgagor's taxpayer identification number is
36-156137. A copy of this Mortgage may be filed as a financing statement.
19. CUMULATIVE REMEDIES. Each and every one of the rights,
remedies and benefits provided to Mortgagee herein or in any other Document
shall be separate, distinct and cumulative and shall not be exclusive of any
other of said rights, remedies or benefits, or of any other rights, remedies or
benefits allowed by law. Any waiver by Mortgagee of any default shall not
constitute a waiver of any similar or other default. No act of the Mortgagee
shall be construed as an election to proceed under any one provision herein to
the exclusion of any other provision.
20. BINDING EFFECT. All of the covenants and conditions hereof
shall run with the land and shall be binding upon the successors and assigns of
Mortgagor, and shall inure to the benefit of the successors and assigns of
Mortgagee. Any reference herein to "Mortgagee" and "Mortgagor" shall include
the successors and assigns of each.
21. SEVERABILITY. The invalidity of any of the covenants, phrases
or clauses in this Mortgage shall not affect the remaining portions hereof, and
this Mortgage shall be construed as if such invalid covenant, phrase or clause
had not been contained herein.
22. JOINT AND SEVERAL LIABILITY. If Mortgagor consists of more
than one party, the term "Mortgagor" shall include all such parties and they
shall be jointly and severally liable under any and all obligations, covenants
and agreements of the Mortgagor contained herein.
23. MORTGAGOR'S CERTIFICATE. Mortgagor, upon Mortgagee's request,
shall certify, by a writing duly acknowledged, to the Mortgagee or to any
proposed assignee of this Mortgage,
- 13 -
<PAGE> 14
the amount of the Indebtedness then owing and whether any offsets,
counterclaims or defenses exist against the Indebtedness, within ten (10) days
after the request is made.
24. NOTICE. Any notice hereunder shall be sufficient if made in
writing and delivered to Mortgagor by mail to Frank's Nursery & Crafts, Inc.,
6501 East Nevada, Detroit, Michigan 48234 and shall be deemed made and
delivered two (2) business day after deposit thereof in the mails, postage
paid.
25. EFFECT OF HEADINGS. The headings of each paragraph are
descriptive only and have no legal effect.
26. GOVERNING LAW. This Mortgage shall be governed by and
construed and interpreted in accordance with the laws of the State of Michigan.
27. RELEASE. Upon payment in full of the obligations and
liabilities under the Loan Agreement and the Documents (defined therein) and,
if later, the date of all of Mortgagee's commitments to lend thereunder are
terminated, Mortgagee shall provide Mortgagor with a discharge and release
hereof in recordable form.
[SIGNATURES ON NEXT PAGE]
- 14 -
<PAGE> 15
In the Presence of: FRANK'S NURSERY & CRAFTS, INC.
[SIG] By: Robert M. Lovejoy Jr.
- ------------------------------- --------------------------------
[SIG] Robert M. Lovejoy Jr.
- ------------------------------- Its: Vice-President
STATE OF MICHIGAN )
: ss.
COUNTY OF Wayne )
The foregoing instrument was acknowledged before me this 29th day of
November 1996, by Robert M. Lovejoy Jr., as Vice-President of FRANK'S NURSERY &
CRAFTS, INC., a Michigan corporation, on behalf of said corporation.
Caryl A. Logan
-------------------------------
Notary Public, ______________ County, Michigan
My Commission Expires: ____________________
Drafted by and when recorded return to:
David K. McLeod, Esq.
Miller, Canfield, Paddock and Stone
150 West Jefferson, Suite 2500
Detroit, Michigan 48226
- 15 -
<PAGE> 16
EXHIBIT "A"
LEGAL DESCRIPTION
Lots 27 through 52 and the East 5 feet of Lot 53, of VOLK'S DEARBORN
HILLS ANNEX SUBDIVISION of part of the southwest 1/4 of Section 20, and
part of the Northwest 1/4 of Section 29, Town 2 South, Range 10 East, Village
of Inkster, Wayne County, Michigan, as recorded in liber 72, pages 14 and 15 of
Plats, Wayne County Records
<PAGE> 17
EXHIBIT B
---------
PERMITTED ENCUMBRANCES
----------------------
Covenants, conditions and restrictions and other provisions but omitting
restrictions, if any, based on race, color, religion, sex, handicap, familial
status or national origin as contained in instrument recorded in liber 10507,
page 330, Register No. D475023, Wayne County Records.
<PAGE> 18
[LOGO]
ISSUED BY
COMMONWEALTH LAND TITLE INSURANCE COMPANY COMMITMENT FOR TITLE INSURANCE
- --------------------------------------------------------------------------------
COMMONWEALTH 96-09-0224 Dearborn Heights, MI
Wayne County
Store #5 Frank's Nursery
COMMONWEALTH LAND TITLE INSURANCE COMPANY, a Pennsylvania Corporation,
hereby agrees to issue a policy of title insurance as herein before set forth
upon satisfactory compliance with the requirements herein set forth and upon
payment of the prescribed premium. If any requirement is not satisfied, the
title policy will be issued subject to the exceptions which would otherwise be
eliminated by compliance with such requirement. The policy will also contain
exceptions as to matters affecting the title to subject property which may
arise after the date hereof and which have not been eliminated to our
satisfaction. all policies are subject to the printed conditions contained in
the policy form. Owners' and Mortgage Policies With Exceptions will be issued
with standard exceptions as shown herein.
If, at the time the final policy is issued, the estate or interest of
the insured in the real estate described herein is created or evidenced by
instruments any one of which has not been recorded in the office of the
Register of Deeds of the county in which the land is located, the policy to be
issued will contain a clause providing that there shall be no liability
thereunder to the extent that loss or damage arises from the failure to record
the instrument or instruments necessary to evidence such estate or interest.
PROVISIONS APPLICABLE TO ALL COMMITMENTS:
This Commitment is delivered and accepted upon the understanding that
the party to be insured has no personal knowledge or intimation of any defect,
objection, lien or encumbrance affecting subject property other than those set
forth herein and in the title insurance application. Failure to disclose such
information shall render this Commitment and any policy issued pursuant
thereto, null and void as to such defect, objection, lien or encumbrance.
Unless otherwise stated, building and use restrictions are not accompanied by a
right of reverter.
All clauses, if any which indicate any preference, limitation or
discrimination based on race, color, religion or national origin are omitted
from all building and use restrictions, if any shown herein.
This Commitment shall not be valid or binding until is countersigned by
an authorized signatory on page one.
IN WITNESS WHEREOF, COMMONWEALTH LAND TITLE INSURANCE COMPANY has
caused its corporate name and seal to be hereunto affixed by its duly
authorized officers as of the date shown on page one.
COMMONWEALTH LAND TITLE INSURANCE COMPANY
[COMMONWEALTH LAND TITLE INSURANCE COMPANY SEAL]
Attest: James J. D. Lynch Jr. By: [SIG]
Secretary President
Form 2074-1 (Michigan)
<PAGE> 19
Prepared by:
Commonwealth Land Title Ins. Company
900 Wilshire Drive 16801 Newburgh Rd., Ste 102
Suite 305 Livonia, Michigan 48154
Troy, Michigan 48084 (313)462-1165
(810)362-1311 (Troy)
(810)334-3300 (Pontiac)
(313)965-1173 (Detroit) File No. E053383
COMMITMENT FOR TITLE INSURANCE
EFFECTIVE DATE: November 29, 1996 NTS No. 96-09-0224
This commitment is valid and binding for a period of only 90 days from
effective date hereof.
FORM OF POLICY TO BE ISSUED:
A.L.T.A. OWNERS POLICY Amount $ .00
PROPOSED INSURED:
A.L.T.A. LOAN POLICY Amount $ 1,200,000.
(Without Exceptions)
INSURED:
COMERICA BANK
DESCRIPTION OF REAL ESTATE
The Land referred to in this Commitment is located in the City of Dearborn
Heights, Wayne County, Michigan, and described as follows:
SEE ATTACHED RIDER
Tax I.D. No. 036-02-0027-000.
Tax I.D. No. 036-02-0049-000.
Tax I.D. No. 036-02-0053-001.
OWNER, ENCUMBRANCES, EXCEPTIONS TO TITLE, UNPAID TAXES
AND REQUIREMENTS FOR ISSUANCE OF POLICY
1. Owner: Frank's Nursery & Crafts, Inc., a Michigan Corporation
Commitment (MI)
Form 2074-8
<PAGE> 20
"RIDER"
INCLUDED IN AND FORMING PART OF THE COMMONWEALTH LAND TITLE INSURANCE
COMPANY FILE NO. E053383.
DESCRIPTION OF REAL ESTATE
Lots 27 through 52 and the East 5 feet of Lot 53, of VOLK'S DEARBORN
HILLS ANNEX SUBDIVISION of part of the Southwest 1/4 of Section 20, and
part of the Northwest 1/4 of Section 29, Town 2 South, Range 10 East,
Village of Inkster, Wayne County, Michigan, as recorded in liber 72,
pages 14 and 15 of Plats, Wayne County Records
<PAGE> 21
RIDER ATTACHED TO AND MADE PART OF COMMITMENT NO. E053383
REQUIREMENT: RECORD DISCHARGE.
6. Covenants, conditions and restrictions and other provisions but
omitting restrictions, if any, based on race, color, religion, sex,
handicap, familial status or national origin as contained in
instrument recorded in liber 10507, page 330, Register No. D475023,
Wayne County Records.
"NOTE:" Item (d) under Standard Exceptions of commitment jacket is
hereby amended to read as follows:
(d) Restrictions and Easements and Claims of Easement not shown on
record.
10. Liens for any tax and/or assessment which become due and payable on or
after the effective date of this Commitment.
"NOTE": ALL OF THE ABOVE ITEMS WILL BE SHOWN ON FINAL POLICY UNLESS ELIMINATED
TO OUR SATISFACTION.
Countersigned by: [SIG]
-----------------------------
Authorized Officer or Agent
"NOTE:" This Commitment consists of 5 pages. Please call if all pages are
not included.
11. Encroachment of adjoining roof onto subject property to the extent of
1.8 foot and encroachment of concrete walk into public alley to the
extent of 5.8 feet as disclosed by survey prepared by MH Consulting
Service Inc. dated September 15, 1995, updated November 21, 1996 and
identified as Job No. 95-799.
<PAGE> 22
REQUIREMENTS FOR ISSUANCE OF MORTGAGE POLICIES
1. ALL MORTGAGE POLICIES
(a) Estoppel certificate on form provided by this Company and signed by
or on behalf of all mortgagors.
2. ALTA MORTGAGE POLICIES WITHOUT EXCEPTIONS
(a) Proper sworn statements and waivers showing payments or release of
lien rights covering improvements made on subject land in the last
90 days or satisfactory proof that no improvements have been made
within the last 90 days.
(b) Satisfactory survey by an approved surveyor showing no variation
in location or dimensions, encroachments, or adverse rights, and
such evidence of possession as may be required.
STANDARD EXCEPTIONS
Owners Policies
Exceptions (a), (b) and (c) under "Mortgagee Policies with Exceptions".
(d) Restrictions and Easements and Claims of Easement now shown of record.
(e) Taxes or special assessments which are not shown as existing liens by the
public records.
(f) Rights of Dower, homestead or other marital rights of the spouse, if any,
of any individual insured.
(g) Existing water, mineral, oil and exploitation rights which are not of
record.
REQUIREMENTS: 1) If this commitment contains specific requirements please
notify us when they have been complied with, and the
policy will be issued subject to the requirements below.
2) All of these items or matters shown in this Commitment will
be shown on the final policy unless eliminated to our
satisfaction.
NOTE: VALID ONLY WHEN COUNTERSIGNED BY A DULY AUTHORIZED OFFICER OR AGENT.
B-2074-1 (12-88)
<PAGE> 23
[LOGO]
COMMITMENT FOR TITLE INSURANCE (MICHIGAN)
ISSUED BY
COMMONWEALTH LAND TITLE INSURANCE COMPANY
[LOGO] COMMONWEALTH
TITLE INSURANCE SINCE 1876
HOME OFFICE
1700 MARKET STREET | PHILADELPHIA, PA 19103
<PAGE> 1
EXHIBIT 10.03(a)
FRANK'S NURSERY & CRAFTS, INC.
EXECUTIVE
COMPENSATION PROGRAM
FISCAL 1997
[FRANK'S NURSERY & CRAFTS LOGO]
<PAGE> 2
FRANK'S NURSERY & CRAFTS, INC.
EXECUTIVE COMPENSATION PROGRAM
<TABLE>
<S> <C>
I. ELIGIBILITY AND PARTICIPATION
Individuals eligible to participate are the following: PLAN ENTRY APPROVAL
GROUP 1: Senior Executive Board of General Host
Executive Vice President Chairman/President
Vice President, Distribution
Vice President, Marketing & Strategic Planning
Vice President, Merchandising-Crafts
Vice President, Merchandising-Lawn & Garden
Vice President, Stores
GROUP 2 Line Executives Chairman/President
Asst. Vice Pres., Hardlines
Asst. Vice Pres., Information Services
Asst. Vice Pres., Operations Administration & Temporary Retail
Asst. Vice Pres., Real Estate
GROUP 3 Staff Executives Chairman/President
Assistant Controllers
Assistant Treasurer
Asst. Vice Pres., Facilities Management
Asst. Vice Pres., Inventory Management
Controller
Corporate Attorney
Director, Advertising
Director, Benefits
Director, Employee Relations
Director, I.S. Applications
Director, Loss Prevention
Director, Planning & Analysis
Director, Real Estate
Director, Taxes
Director, Transportation
Real Estate Attorney
</TABLE>
The basis of participation (Group and effective date) for individuals who
are permitted to enter the Program during the year will be determined at
the time of entry by the Chairman.
- Page 1 -
<PAGE> 3
IIA. PROGRAM DESIGN - GROUP 1 PARTICIPANTS
The Program is designed to pay a bonus that ranges up to 48% of base
salary. The amount of the bonus award will be based on the achievement of
Frank's Nursery & Crafts Operating Income Objectives and achievement of
Business Objectives.
1) ACHIEVEMENT OF OPERATING INCOME OBJECTIVES
Participants can earn bonuses ranging up to 25% of base salary,
based on the relationship between reported operating income and
the operating income objectives established by the Chairman. See
Appendix A. Operating income objectives will be set for the 3%,
20% and 25% payment levels; (percentage achievement for operating
income levels between the objectives established for the 3% and
20% levels, and the 20% and 25% levels, will be interpolated to
the nearest percent). Reported operating income will, in all
cases, be computed (1) before interest expense, (2) before
provisions for federal and state income taxes, and (3) after
provisions for payment of bonuses to the participants payable
under this or any other incentive program covering employees not
included in this program, and (4) will be adjusted to reflect any
variance for the year between actual and budgeted interest expense
(both inter-Company interest and outside interest expense).
In determining the extent to which an individual has met his
profit objectives, the Chairman will have the discretion to reduce
reported operating profit appropriately, for purposes of the
Program, where reported profits were achieved by actions
significantly at variance with planned profit achievement and which
actions did not receive prior review and approval of the Chairman.
In addition, at the discretion of the Chairman, reported operating
profit for the performance year will be increased or decreased by
an amount equal to 20% of the difference between the assets
employed in the business at the beginning and end of the current
performance year.
2) ACHIEVEMENT OF BUSINESS OBJECTIVES
Up to 10% of base salary will be paid for the achievement of
specific objectives. Operating profit levels will be established
for each participant below which no bonus will be paid for
specific objective achievement.
The specific objectives will be developed between the participant
and his immediate superior, and approved by the Chairman.
Objectives shall not be more than five (preferably four) specific
items; these items will have a weighed value approved by the
Chairman and recorded by the Program Administrator.
Within two weeks following the close of the year, each
participant, in conjunction with the Program Administrator, is to
submit a written summary of his degree of accomplishment of his
specific objectives. This statement together with a recommended
award shall then be submitted to the Chairman.
During the year, revisions to objectives, where warranted, are to
be submitted to the President and approved by the Chairman as
deemed appropriate.
3) ACHIEVEMENT OF CORPORATE TARGET
When the General Host Corporate Target is achieved, any bonus
otherwise earned pursuant to the above Operating Income and
Business Objectives shall be increased by 20%. The Corporate
Target will be computed after provision for bonus payments under
this program.
- Page 2 -
<PAGE> 4
At the beginning of each year, the Chief Executive Officer
determines the Corporate Target (expressed as an Earnings Per
Share objective), subject to the approval of the Compensation
Committee of the Board of Directors. The Corporate Target will be
recorded with the Administrator along with the Operating Income
Objectives and Business Objectives of each participant.
IIB. PROGRAM DESIGN - GROUP 2 PARTICIPANTS
The Program is designed to pay a bonus that ranges up to a maximum
of 48% of base salary. The amount of the bonus award will be based
on the achievement of Frank's Nursery & Crafts Operating Income
Objectives and achievement of Business Objectives.
1) ACHIEVEMENT OF OPERATING INCOME
Participants can earn bonuses ranging up to 15% of base salary,
based on the relationship between reported operating income and
the operating income objectives established by the Chairman. Profit
objectives will be set for the 3%, 10% and 15% payment levels;
(percentage achievement for profits between objectives
established for the 3% and 10% levels, and the 10% and 15% levels,
will be interpolated to the nearest percent). Reported profits
will, in all cases, be computed after provisions for payments of
bonuses under this Program and under any other bonus program in
effect for Home Office employees.
For purposes of this paragraph, provisions will be made for payment
of bonuses pursuant to Paragraph IIA (1) and (2), before
determining the extent to which the Corporate Target has been
achieved.
2) ACHIEVEMENT OF BUSINESS OBJECTIVES
Up to a maximum of 25% of base salary will be paid for the
achievement of specific objectives (see Paragraph IIA (2)
regarding establishment of specific objectives). Any bonus payable
under this paragraph is also subject to the following limitations:
(1) if less than 75% of the Corporate Target Result is achieved,
any bonus otherwise earned is reduced by 50%; (2) the Chairman
will establish a profit objective level below which no bonus will
be paid.
3) ACHIEVEMENT OF CORPORATE TARGET
When the General Host Corporate Target is achieved, any bonus
otherwise earned pursuant to the above Operating Income and
Business Objectives shall be increased by 20%. The Corporate
Target Result will be computed after provision for bonus payments
under this program.
At the beginning of each year, the Chief Executive Officer
determines the Corporate Target (expressed as an Earnings Per
Share objective), subject to the approval of the Compensation
Committee of the Board of Directors. The Corporate Target will be
recorded with the Administrator along with the Operating Income
Objectives and Business Objectives of each participant.
- Page 3 -
<PAGE> 5
IIC. PROGRAM DESIGN - GROUP 3 PARTICIPANTS
The Program is designed to pay a bonus that ranges up to a maximum of 36%
of base salary. The amount of the bonus award will be based on the
achievement of Frank's Nursery & Crafts Operating Income Objectives and
achievement of Business Objectives.
1) ACHIEVEMENT OF OPERATING INCOME OBJECTIVES
Participants can earn bonuses ranging up to 15% of base salary,
based on the relationship between reported operating income and the
operating income objectives established by the Chairman. Profit
objectives will be set for the 3%, 10% and 15% payment levels;
(percentage achievement for profits between objectives
established for the 3% and 10% levels, and the 10% and 15% levels,
will be interpolated to the nearest percent). Reported profits
will, in all cases, be computed after provisions for payments of
bonuses under this Program and under any other bonus program in
effect for Home Office employees.
For purposes of this paragraph, provisions will be made for payment
of bonuses pursuant to Paragraph IIA (1) and (2), before
determining the extent to which the Corporate Target has been
attained.
2) ACHIEVEMENT OF BUSINESS OBJECTIVES
Up to a maximum of 15% of base salary will be paid for the
achievement of specific objectives (see Paragraph IIA (2)
regarding establishment of specific objectives). Any bonus payable
under this paragraph is also subject to the following limitations:
(1) if less than 75% of the Corporate Target is achieved, any
bonus otherwise earned is reduced by 50%; (2) the Chairman will
establish a profit objective level below which no bonus will be
paid.
3) ACHIEVEMENT OF CORPORATE TARGET
When the General Host Corporate Target is achieved, any bonus
otherwise earned pursuant to the above Operating Income and
Business Objectives shall be increased by 20%. The Corporate
Target Result will be computed after provision for bonus payments
under this program.
At the beginning of each year, the Chief Executive Officer
determines the Corporate Target (expressed as an Earnings Per
Share objective), subject to the approval of the Compensation
Committee of the Board of Directors. The Corporate Target will be
recorded with the Administrator along with the Operating Income
Objectives and Business Objectives of each participant.
- Page 4 -
<PAGE> 6
III. GENERAL PROGRAM CONTROLS
1. No awards will be paid with respect to achievement of specific
objectives in a year when dividends (cash or common stock in lieu
of cash) on General Host's Common Stock are not paid. If a
dividend is paid for a portion of the year, any specific objective
achievement bonus otherwise earned will be pro-rated.
2. Any bonus otherwise payable under this Program will be
reduced proportionately to the extent necessary, if any, to prevent
the Corporation from reporting a loss for the fiscal year in
question.
3. Anything herein to the contrary notwithstanding, no bonus
will be paid to any individual whose overall performance during the
year, in the judgement and discretion of his supervisor, and the
Chairman of the Board, was unsatisfactory.
4. In the event that profit targets are not attained, the
President will have the discretion to recommend the payment of a
reasonable and appropriate bonus for performance that was
otherwise outstanding.
IV. ADMINISTRATION
1. Individual awards will be computed on base salary as of
February 1 of the current fiscal year.
2. The Program must be approved by the Compensation Committee
and the Board of Directors. The Chairman's objectives and the
Corporate Target result must also be approved by the Compensation
Committee of the Board of Directors.
3. The President and Vice President, Human Resources will be the
Administrators of the Program. In concert with the Chairman, they
will prepare a report for the Compensation Committee by the end of
February of each year, documenting last year's results and listing
the current year's:
a) Program Participants
b) Operating Income Objectives
c) Specific Business Objectives for Each Participant
d) Corporate Target
e) Bonus Possibilities for Each Participant
4. The Chairman will have full and final discretion to determine
the amount of bonus, if any, to be paid to any participant who
dies, retires or is disabled during the year, or whose
responsibilities are changed during the year, subject to the
approval of the Board of Directors. Participants whose employment
is terminated for any other reason up to and including the date the
awards are distributed (check date) will be ineligible for any
award.
5. In the event there is any dispute as to the amount of any
bonus payable under this Program, the Compensation Committee will
have full and final discretion to resolve the matter as it deems
equitable and appropriate.
6. All bonuses payable under this Program will be payable within
a reasonable time after audited financial statements for the
current fiscal year are available. All bonuses are subject to
applicable payroll taxes.
7. Any bonus payable under this Program may, at the Company's
discretion, be paid in General Host's common stock in lieu of cash,
which stock may be subject to certain restrictions in accordance
with Federal Securities laws. In such event, the Company will
consider the tax effects and either provide low cost tax loans or a
cash payment to cover Participants' additional tax liability.
- Page 5 -
<PAGE> 7
FRANK'S NURSERY & CRAFTS, INC.
EXECUTIVE COMPENSATION PROGRAM
Bonus Potential Matrix
Operating Income Objective (Fiscal Year 1997)
<TABLE>
<CAPTION>
- ------------ ---------------- ---------------- ------------------- ---------------- ------------- -------------
MAXIMUM BONUS MAXIMUM BONUS
PARTICIPANTS OPERATING INCOME ACHIEVEMENT OF ACHIEVEMENT OF ACHIEVEMENT OF CORP TARGET CORP TARGET
OBJECTIVE OPERATING INCOME BUSINESS OBJECTIVES CORPORATE TARGET NOT ACHIEVED ACHIEVED
- ------------ ---------------- ---------------- ------------------- ---------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Group 1 $28 mm (Minimum) 3% 10% --- 13% 13%
$30 mm (Target) 20% 10% 6% 30% 36%
$36 mm (Maximum) 25% 15% 8% 40% 48%
Group 2 $28 mm (Minimum) 3% 10% --- 13% 13%
$30 mm (Target) 10% 20% 6% 30% 36%
$36 mm (Maximum) 15% 25% 8% 40% 48%
Group 3 $28 mm (Minimum) 3% 7% --- 10% 10%
$30 mm (Target) 10% 10% 4% 20% 24%
$36 mm (Maximum) 15% 15% 6% 30% 36%
</TABLE>
Notes: Bonus awards will not be granted if FNC operating income is less than
$28 mm.
Corporate Target established at $0.23 Earnings Per Share.
<PAGE> 1
EXHIBIT 10.03(b)
GENERAL HOST CORPORATION
EXECUTIVE
COMPENSATION PROGRAM
FISCAL 1997
[GENERAL HOST CORPORATION LOGO]
<PAGE> 2
GENERAL HOST CORPORATION
EXECUTIVE COMPENSATION PROGRAM
I. ELIGIBILITY AND PARTICIPATION
Individuals eligible to participate are the following:
- Chief Executive Officer
- Operating Company Presidents
- Designated Corporate Staff Members
The basis of participation for individuals who are permitted to enter the
Program during the year will be determined at time of entry by the Chief
Executive Officer.
II. PROGRAM DESIGN
A. GROUP 1 - CEO AND OPERATING COMPANY PRESIDENTS
The Program is designed to pay a bonus that ranges up to 60% of base
salary. The amount of the bonus award will be based on three factors:
- Operating Profit Objective Attainment
- Specific Objective Achievement
- Corporate Target Result Attainment
1. Corporate Profit Objective Attainment
The Chief Executive Officer and Operating Company Presidents can
earn bonuses ranging up to 30% of base salary, based on the
relationship between reported operating income and the operating
income objectives established by the Board's Compensation
Committee. Operating income objectives will be set for the 3%,
15% and 30% payment levels. (Percentage achievement for operating
income levels between the objectives established for the 3% and
15% levels, and the 15% and 30% levels, will be interpolated to
the nearest percent.) Reported operating income will, in all
cases, be computed (1) before interest expense, (2) before
provisions for federal and state income taxes, (3) after
provisions for payment of bonuses to the operating company
president payable under this Program and to other operating
company employees under any bonus program in effect for such
operating company covering employees not covered by this Program,
and (4) will be adjusted to reflect any variances for the year
between actual and budgeted interest expense (both intercompany
interest and outside interest expense). In the case of the Chief
Executive Officer and Senior Executives of the corporation, profit
objectives will be based upon net income per share, as reported in
the Consolidated Audited Financial Statements for each fiscal
year, and will be after appropriate provisions for payment of
bonuses under this Program.
- Page 1 -
<PAGE> 3
In determining the extent to which an individual has met his
profit objectives, the Chief Executive Officer will have the
discretion to reduce reported operating profit appropriately, for
purposes of this Program, where reported profits were achieved by
actions significantly at variance with planned profit achievement
and which actions did not receive prior review and approval of the
Chief Executive Officer.
In addition, at the discretion of the Chief Executive Officer,
reported operating profit for the performance year will be
increased or decreased by an amount equal to 20% of the difference
between the assets employed in the business at the beginning and
end of the current performance year.
2. Specific Objective Achievement
Up to 24% of base salary will be paid for the achievement of
specific objectives. Operating profit levels will be established
for each participant below which no bonus will be paid for
specific objective achievement.
The specific objectives will be developed between the participant
and his immediate superior, and approved by the Chief Executive
Officer. Objectives shall not be more than five (preferably four)
specific items; these items will have a weighted value approved by
the Chief Executive Officer and recorded with the Program
Administrator.
Within two weeks following the close of the year, each
participant, in conjunction with the Program Administrator, is to
submit a written summary of his degree of accomplishment of his
specific objectives. This statement, together with a recommended
award, shall then be submitted to the Chief Executive Officer.
During the year, revisions to objectives, where appropriate, are
to be submitted and approved by the Chief Executive Officer.
- Page 2 -
<PAGE> 4
B. GROUP 2 - CORPORATE STAFF EXECUTIVES
The Program is designed to pay a bonus that ranges up to a maximum of 48%
of base salary. The amount of the bonus award will be based on corporate
profit objective attainment, specific objective achievement, and
corporate target result attainment.
1. Corporate Profit Objective Attainment
Participants can earn bonuses ranging up to 20% of base salary,
based on the relationship between reported profit and the profit
objectives established by the Chief Executive Officer. Profit
objectives will be set for the 3%, 10% and 20% payment levels.
(Percentage achievement for profits between the objectives
established for the 3% and 10% levels, and the 10% and 20% levels,
will be interpolated to the nearest percent.) Reported profits
will, in all cases, be computed after provisions for payments of
bonuses under this Program and under any other bonus program in
effect for Corporate staff employees.
For purposes of this Paragraph IIB (1), provisions will be made
for payment of bonuses (other than to the Chief Executive Officer)
pursuant to Paragraphs IIA (1) and (2), before determining the
extent to which the Corporate Target Result has been attained.
2. Specific Objective Achievement
Up to 24% of base salary will be paid for the achievement of
specific objectives (see Paragraph IIA (2) regarding establishment
of specific objectives). Any bonus payable under this Paragraph
is also subject to the following limitations: (1) if less than
75% of the Corporate Target Result is achieved, any bonus
otherwise earned is reduced by 50%; (2) the Chief Executive
Officer will establish a profit objective level for the Corporate
Staff below which no bonus will be paid.
C. CORPORATE TARGET RESULT ATTAINMENT
When the Corporate Target Result is achieved, any Profit Objective bonus
otherwise earned pursuant to IIA and IIB above shall be increased by 20%.
The Corporate Target Result will be computed after provision for bonus
payments under this Program.
At the beginning of each year, the Chief Executive Officer determines the
Corporate Target Result, subject to the approval of the Compensation
Committee of the Board of Directors. The Corporate Target Result will
be recorded with the Administrator along with the profit objectives and
specific objectives of each participant.
- Page 3 -
<PAGE> 5
III. GENERAL PROGRAM CONTROLS
1. No awards will be paid with respect to achievement of
specific objectives in a year when dividends (cash or stock in lieu
of cash) on the Company's Common Stock are not paid. If a dividend
is paid for a portion of the year, any specific objective
achievement bonus otherwise earned will be pro-rated.
2. Any bonus otherwise payable under this Program to the Chief
Executive Officer or any Corporate Staff Member will be reduced
proportionately to the extent necessary, if any, to prevent the
Corporation from reporting a loss for the fiscal year in question.
3. Anything herein to the contrary notwithstanding, no bonus
will be paid to any individual whose overall performance during the
year, in the judgment and at the discretion of his supervisor and
the CEO, was unsatisfactory.
4. In the event that profit targets are not attained, the Chief
Executive Officer will have the discretion to recommend the payment
of a reasonable and appropriate bonus for performance that was
otherwise outstanding.
IV. ADMINISTRATION
1. Individual awards will be computed on base salary as of
February 1 of the current fiscal year.
2. The Program must be approved by the Compensation Committee of
the Board of Directors. The CEO's objectives and the Corporate
Target Result must also be approved by the Compensation Committee.
3. The Chief Executive Officer and the Vice President, Human
Resources will be the Administrators of the Program. They will
prepare a report for the Compensation Committee by the end of
February of each year, documenting last year's results and listing
the year's:
a. Program Participants
b. Corporate Profit Objectives
c. Specific Objectives for Each Participant
d. Corporate Target Result
e. Bonus Possibilities for Each Participant
4. The Chief Executive Officer will have full and final
discretion to determine the amount of bonus, if any, to be paid to
any Participant who dies or retires during the year, or whose
responsibilities are changed during the year, subject to the
approval of the Board of Directors.
In the event there is any dispute as to the amount of any bonus
payable under this Program, the Board of Directors will have full
and final discretion to resolve the matter as it deems equitable
and appropriate.
- Page 4 -
<PAGE> 6
5. Any bonuses payable under this Program will be payable within
a reasonable time after audited financial statements for the
current fiscal year are available. All bonuses are subject to
applicable payroll taxes.
6. Any bonus payable under this Program may, at the Company's
discretion, be paid in General Host's common stock in lieu of
cash, which stock may be subject to certain restrictions in
accordance with Federal Securities laws. In such event, the
Company will consider the tax effects and either provide low cost
tax loans or a cash payment to cover Participant's additional tax
liability.
- Page 5 -
<PAGE> 7
GENERAL HOST CORPORATION
EXECUTIVE COMPENSATION PROGRAM
Bonus Potential Matrix
Earnings Per Share Objective (Fiscal Year 1997)
<TABLE>
<CAPTION>
EPS $0.15 (MINIMUM) EPS $0.23 (TARGET) EPS $0.47 (MAXIMUM)
-------------------------------- ----------------------------------------- -----------------------------------------
PROFIT SPECIFIC MAXIMUM PROFIT SPECIFIC CORPORATE MAXIMUM PROFIT SPECIFIC CORPORATE MAXIMUM
PARTICIPANTS OBJECTIVE OBJECTIVES POTENTIAL OBJECTIVE OBJECTIVES TARGET POTENTIAL OBJECTIVE OBJECTIVES TARGET POTENTIAL
- ------------ --------- ---------- --------- --------- ---------- --------- --------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Group 1 3% 24% 27% 15% 24% 3% 42% 30% 24% 6% 60%
Group 2 3% 24% 27% 10% 24% 2% 36% 20% 24% 4% 48%
</TABLE>
<PAGE> 1
Exhibit 11.01
GENERAL HOST CORPORATION
ADDITIONAL EARNINGS PER SHARE INFORMATION
FISCAL YEARS ENDED JANUARY 26, 1997, JANUARY 28, 1996
AND JANUARY 29, 1995
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Earnings (loss) for full dilution:
Income (loss) from continuing operations $(10,740) $ (4,339) $ 8,585
Add interest on 8% Convertible Debentures,
net of tax effect 5,200 5,200 5,200
-------- -------- --------
Income (loss) from continuing operations,
as adjusted (5,540) 861 13,785
Loss from discontinued operations (3,000)
-------- -------- --------
Net income (loss), as adjusted $ (5,540) $ (2,139) $ 13,785
======== ======== ========
Shares used for calculating
primary earnings per share 24,414 24,416 24,411
Additional shares from assumed conversion
of 8% Convertible Debentures 7,620 7,620 7,620
Additional shares resulting from
assumed exercise of stock options 0 0 0
-------- -------- --------
32,034 32,036 32,031
======== ======== ========
Fully diluted earnings (loss) per share:
Income (loss) from continuing operations $ (.17) $ .03 $ .43
Loss from discontinued operations (.10)
-------- -------- --------
Net income (loss) $ (.17)(1) $ (.07)(1) $ .43(1)
======== ======== ========
</TABLE>
1 This calculation is submitted in accordance with Regulation S-K item
601 (b)(11) although it is contrary to paragraph 40 of APB Opinion 15
because it produces an anti-dilutive result.
<PAGE> 1
EXHIBIT 12.01
GENERAL HOST CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
1996 1995 1994 1993 1992
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Earnings:
Income (loss) from continuing
operations before income taxes ($10,740) ($4,964) $7,685 ($53,906) $1,005
Fixed charges against earnings 27,937 31,064 29,672 31,183 30,679
Amortization of capitalized interest 219 217 215 182 130
----------- ----------- ----------- ----------- -----------
Total earnings $17,416 $26,317 $37,572 ($22,541) $31,814
=========== =========== =========== =========== ===========
Fixed Charges:
Interest and debt $20,863 $23,845 $22,911 $23,251 $23,232
33 1/3% of net minimum rent expense 7,074 7,219 6,761 7,932 7,447
----------- ----------- ----------- ----------- -----------
Fixed charges against earnings 27,937 31,064 29,672 31,183 30,679
Interest capitalized 231 76 28 542 1,000
----------- ----------- ----------- ----------- -----------
Total fixed charges $28,168 $31,140 $29,700 $31,725 $31,679
=========== =========== =========== =========== ===========
Excess (defiency) ($10,752) ($4,823) $7,872 ($54,266) $135
=========== =========== =========== =========== ===========
Ratio 0.62 0.85 1.27 (0.71) 1.00
=========== =========== =========== =========== ===========
Minimum rent expense $21,224 $21,658 $20,285 $23,798 $22,342
=========== =========== =========== =========== ===========
</TABLE>
<PAGE> 1
EXHIBIT 21.01
Subsidiaries
STATE OF OTHER NAMES FOR
COMPANY INCORPORATION TRANSACTING BUSINESS
- ------- ------------- --------------------
AMS Industries, Inc.
(formerly Cudahy Company) Delaware -------
Frank's Nursery &
Crafts, Inc. Michigan -------
General Host Holding
Corp. New York -------
The names of all other subsidiaries are omitted since, considered in the
aggregate as a single subsidiary, they would not have constituted, as of the
fiscal year ended January 26, 1997, a "significant subsidiary," as that term is
defined in Rule 1.02(w) of Regulation S-X.
<PAGE> 1
EXHIBIT 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 33-50020) of General Host Corporation of our report
dated February 26, 1997 appearing on page F-1 of this Form 10-K.
Price Waterhouse LLP
Detroit, Michigan
February 26, 1997
<PAGE> 1
EXHIBIT 24.01(a)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that Christopher A. Forster, a Director
of GENERAL HOST CORPORATION, a New York corporation ("the Corporation"), hereby
constitutes and appoints Harris J. Ashton, J. Theodore Everingham and James R.
Simpson, and each of them (with full power to each of them to act alone), his
true and lawful attorney-in-fact and agent, for him and on his behalf and in
his name place and stead, to sign, execute and affix his name thereto and file
the Corporation's Annual Report on Form 10-K for the fiscal year ended January
26, 1997, with the Securities and Exchange Commission and any other appropriate
authority, granting unto such persons and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as he himself might or could do if
personally present, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney on
March , 1997.
/s/ Christopher A. Forster
--------------------------
Christopher A. Forster
<PAGE> 1
EXHIBIT 24.01(b)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that S. Joseph Fortunato, a Director of
GENERAL HOST CORPORATION, a New York corporation ("the Corporation"), hereby
constitutes and appoints Harris J. Ashton, J. Theodore Everingham and James R.
Simpson, and each of them (with full power to each of them to act alone), his
true and lawful attorney-in-fact and agent, for him and on his behalf and in
his name place and stead, to sign, execute and affix his name thereto and file
the Corporation's Annual Report on Form 10-K for the fiscal year ended January
26, 1997, with the Securities and Exchange Commission and any other appropriate
authority, granting unto such persons and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as he himself might or could do if
personally present, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney on
March 24, 1997.
/s/ S. Joseph Fortunato
-----------------------
S. Joseph Fortunato
<PAGE> 1
EXHIBIT 24.01(c)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that Philip B. Harley, a Director of
GENERAL HOST CORPORATION, a New York corporation ("the Corporation"), hereby
constitutes and appoints Harris J. Ashton, J. Theodore Everingham and James R.
Simpson, and each of them (with full power to each of them to act alone), his
true and lawful attorney-in-fact and agent, for him and on his behalf and in
his name place and stead, to sign, execute and affix his name thereto and file
the Corporation's Annual Report on Form 10-K for the fiscal year ended January
26, 1997, with the Securities and Exchange Commission and any other appropriate
authority, granting unto such persons and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as he himself might or could do if
personally present, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney on
March 19, 1997.
/s/ Philip B. Harley
---------------------
Philip B. Harley
<PAGE> 1
EXHIBIT 24.01(d)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that Richard W. Haskel, a Director of
GENERAL HOST CORPORATION, a New York corporation ("the Corporation"), hereby
constitutes and appoints Harris J. Ashton, J. Theodore Everingham and James R.
Simpson, and each of them (with full power to each of them to act alone), his
true and lawful attorney-in-fact and agent, for him and on his behalf and in
his name place and stead, to sign, execute and affix his name thereto and file
the Corporation's Annual Report on Form 10-K for the fiscal year ended January
26, 1997, with the Securities and Exchange Commission and any other appropriate
authority, granting unto such persons and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as he himself might or could do if
personally present, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney on
March 19, 1997.
/s/ Richard W. Haskel
---------------------
Richard W. Haskel
<PAGE> 1
EXHIBIT 24.01(e)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that Edward H. Hoornstra, a Director of
GENERAL HOST CORPORATION, a New York corporation ("the Corporation"), hereby
constitutes and appoints Harris J. Ashton, J. Theodore Everingham and James R.
Simpson, and each of them (with full power to each of them to act alone), his
true and lawful attorney-in-fact and agent, for him and on his behalf and in
his name place and stead, to sign, execute and affix his name thereto and file
the Corporation's Annual Report on Form 10-K for the fiscal year ended January
26, 1997, with the Securities and Exchange Commission and any other appropriate
authority, granting unto such persons and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as he himself might or could do if
personally present, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney on
March , 1997.
/s/ Edward H. Hoornstra
-----------------------
Edward H. Hoornstra
<PAGE> 1
EXHIBIT 24.01(f)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that Charles B. Johnson, a Director of
GENERAL HOST CORPORATION, a New York corporation ("the Corporation"), hereby
constitutes and appoints Harris J. Ashton, J. Theodore Everingham and James R.
Simpson, and each of them (with full power to each of them to act alone), his
true and lawful attorney-in-fact and agent, for him and on his behalf and in
his name place and stead, to sign, execute and affix his name thereto and file
the Corporation's Annual Report on Form 10-K for the fiscal year ended January
26, 1997, with the Securities and Exchange Commission and any other appropriate
authority, granting unto such persons and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as he himself might or could do if
personally present, hereby ratifying and confirming all that such
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney on
March , 1997.
/s/ Charles B. Johnson
----------------------
Charles B. Johnson
<PAGE> 1
EXHIBIT 24.01(g)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS that Kelly Ashton Sant Albano, a
Director of GENERAL HOST CORPORATION, a New York corporation ("the
Corporation"), hereby constitutes and appoints Harris J. Ashton, J. Theodore
Everingham and James R. Simpson, and each of them (with full power to each of
them to act alone), her true and lawful attorney-in-fact and agent, for her and
on her behalf and in her name place and stead, to sign, execute and affix her
name thereto and file the Corporation's Annual Report on Form 10-K for the
fiscal year ended January 26, 1997, with the Securities and Exchange Commission
and any other appropriate authority, granting unto such persons and each of
them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises in order to
effectuate the same as fully to all intents and purposes as she herself might
or could do if personally present, hereby ratifying and confirming all that
such attorneys-in-fact and agents, or any of them, may lawfully do or cause to
be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has signed this Power of Attorney on
March 26, 1997.
/s/ Kelly Ashton Sant Albano
----------------------------
Kelly Ashton Sant Albano
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-26-1997
<PERIOD-START> JAN-29-1996
<PERIOD-END> JAN-26-1997
<CASH> 43,320
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 81,575
<CURRENT-ASSETS> 139,986
<PP&E> 393,854
<DEPRECIATION> 173,228
<TOTAL-ASSETS> 386,422
<CURRENT-LIABILITIES> 86,717
<BONDS> 192,761
0
0
<COMMON> 31,752
<OTHER-SE> 67,743
<TOTAL-LIABILITY-AND-EQUITY> 386,422
<SALES> 530,752
<TOTAL-REVENUES> 531,577
<CGS> 383,099
<TOTAL-COSTS> 383,099
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,863
<INCOME-PRETAX> (10,740)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,740)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,740)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> (.44)
</TABLE>
