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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
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ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 COMMISSION FILE NO. 0-1322
----------------- ------
KNICKERBOCKER VILLAGE, INC.
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(Exact name of Registrant as specified in its Charter)
NEW YORK 13-0924285
- ------------------------------- -------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10 Monroe Street, New York, New York 10002
- ------------------------------------------ ------------------------
(Address of principal Executive Offices) Zip Code
Registrant's Telephone Number, including Area Code: (212) 227-0955
--------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
- ------------------- ---------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Limited Dividend Capital Stock, Par Value $2.15
- --------------------------------------------------------------------------------
(Title of class)
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B 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-KSB or any amendment to this Form 10-KSB
__________.
Check whether the Registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter periods that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past ninety (90) days.
Yes X No ____
----
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State Registrant's revenues for its most recent fiscal year: $9,578,277
----------
State the aggregate market value of the voting stock held by non-affiliates
of the Registrant as of February 28, 1997. Approximately $16,000 which is based
on par value of the voting stock. No active trading market exists for the
Registrant's Capital Stock.
Indicate the number of shares outstanding of each of the Issuer's classes
of Common Stock, as of February 28, 1997.
Capital Stock, $2.15 par value - 147,464 Shares
DOCUMENTS INCORPORATED BY REFERENCE - NONE
Transitional Small Business Disclosure Format:
Yes ____ No X
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2
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KNICKERBOCKER VILLAGE, INC.
INDEX TO FORM 10-KSB - PARTS I - IV
-----------------------------------
PAGE NO.
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PART I -
Item 1. DESCRIPTION OF BUSINESS...................5-8
Item 2. DESCRIPTION OF PROPERTIES.................8-11
Item 3. LEGAL PROCEEDINGS.........................11
Item 4. SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS.......................11
PART II -
Item 5. MARKET FOR THE REGISTRANT'S
COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS........................11
Item 6. MANAGEMENT'S DISCUSSION AND
ANALYSIS OR PLAN OF OPERATION..............12-14
Item 7 FINANCIAL STATEMENTS.......................15
Item 8 CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.......................15
PART III -
Item 9. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH 16(a) OF
THE EXCHANGE ACT...........................16-17
3
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Page No.
--------
Item 10. EXECUTIVE COMPENSATION......................17
Item 11. SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND
MANAGEMENT..................................18-19
Item 12. CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS........................19
PART IV -
Item 13. EXHIBITS AND REPORTS ON
FORM 8-K....................................19
4
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PART I
------
ITEM 1 DESCRIPTION OF BUSINESS
- ------ -----------------------
The Registrant is a "limited dividend housing corporation" created and
formed under the New York Private Housing Law on September 5, 1933.
The Registrant owns a housing development located at the corners of
Monroe, Market, Catherine and Cherry Streets in Manhattan, New York.
The properties are managed by Cherry Green Property Corp., the
Managing Agent, and is subject to the supervision of the New York
State Division of Housing and Community Renewal ("DHCR"), which must
approve all management fees and rent increases and contracts in excess
of $30,000. (See "Item 12-Certain Relationships and Related
Transactions"). Dividends to stockholders are limited by law to six
percent (6.0%) of par value on a cumulative basis. The Registrant has
not paid any dividends since 1968. As a result, the cumulative
dividends unpaid through December 31, 1996, amounted to approximately
$533,000 or approximately $3.61 per share. (See Note 6 of Notes to
Financial Statements). No dividends were declared or paid during 1996
or 1995. In the event of liquidation, stockholders cannot receive
more than the cumulative unpaid dividends, plus the amount of their
original investment. Any surplus in excess of such amounts reverts to
public authorities.
The Registrant's properties are managed by Cherry Green Property
Corp., pursuant to a Management Contract approved by the DHCR. Cherry
Green Property Corp. is a real estate management company, which
manages and administers real estate. Cherry Green Property Corp. is
the record and beneficial owner of over ninety-five percent (95.0%) of
the Registrant's outstanding shares. During 1996, the Registrant paid
Cherry Green Property Corp. a management fee approved by the DHCR in
the amount of approximately $924,000 compared to approximately
$876,000 paid in 1995. (See Exhibit 10.1 annexed hereto and Note 8 of
Notes to Financial Statements.) The Registrant employs fifty-five
(55) persons of which fifty-four (54) persons are full-time employees.
In 1996, the Registrant received a two step rent increase. The first
increase of approximately 5.5% was effective June 1, 1996 and the
second increase of approximately 5.3% will be effective June 1, 1997.
Accordingly, net rental income in 1996 increased by approximately
$256,000 over 1995 amounts. Other income in 1996 decreased
approximately $23,000 from 1995 amounts due to a decrease in interest
income resulting from lower reserve fund balances. Operating expenses
for 1996 increased approximately $250,000, or three percent (3.0%) due
to increases in wages and related costs, real estate
5
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taxes, utilities, depreciation and amortization, and management fee
offset by decreases in mortgage and other interest and miscellaneous
operating and general expenses. Wages and related costs increased by
approximately $81,000 or approximately four percent (4.0%) in 1996 as
compared to 1995. This increase was attributable to an increase in
wages and related payroll taxes of approximately $50,000 primarily due
to increases in union wage rates, and an increase in employee benefits
of approximately $31,000 primarily due to increases in union pension
rates. Real estate taxes increased by approximately $36,000 or
approximately five percent (5.0%) in 1996 as compared to 1995 due to
increases in the New York City tax rates. Utilities increased by
approximately $72,000 or approximately four percent (4.0%) in 1996
primarily due to a rise in fuel oil prices during 1996. Depreciation
and amortization increased in 1996 as compared to 1995 by
approximately $56,000 or approximately twelve percent (12.0%)
primarily due to additional depreciation expense incurred on the
acquisition of fixed assets.
Mortgage and other interest decreased by approximately $14,000 or
approximately two percent (2.0%) in 1996 as compared to 1995 due to a
reduction in the principal balance due on the related mortgage debt.
The management fee increased by approximately $48,000 or five percent
(5.0%) in 1996 as compared to 1995, due to increases in the management
fee, which were approved by the DHCR of 2.3% effective July 1, 1995,
and 2.75% effective July 1, 1996. In addition, the Registrant received
a management agent financial award in 1996, which was approved by the
DHCR, that exceeded the amount received in 1995 by approximately
$24,000. Miscellaneous operating and general expenses decreased by
approximately $32,000 or approximately two percent (2.0%) in 1996 as
compared to 1995, primarily due to a decrease in security costs. The
provision for income taxes increased by approximately $34,000 in 1996
compared to 1995, primarily due to reductions in the 1995 deferred tax
provision due to changes in the Registrant's valuation allowance. (See
Note 7 to the Financial Statements, Pages F-10 and F-11.
RE-FINANCE OF MORTGAGE
----------------------
On January 30, 1997 (the "Closing Date"), Registrant entered into a
Consolidation, Modification and Extension Agreement, (the "Loan
Agreement") (which is incorporated herein by reference and a copy of
which is annexed as Exhibit 10.2 hereto), by and among the Registrant,
and The Greater New York Savings Bank (the "Bank" or "Mortgage
Lender") (capitalized terms not otherwise defined herein are used
herein as set forth in the Loan Agreement) relating to a loan in the
principal amount of $6,300,000 (the "Loan Amount"), with a ten (10)
year term, (with a five year option to extend the loan as described
below) with interest at eight and one-half percent (8 1/2%) per annum.
At the time of closing, the principal balance due on the
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existing mortgage was $5,994,529.72. The Mortgage Increase of
$305,470.28 was evidenced by the "GAP" Mortgage and "GAP" Note. The
current monthly principal and interest under the Note is $50,729.32,
with a monthly escrow for taxes of $103,090.68 and the total monthly
payment is $153,820.00. The Loan Agreement provides that the Loan
Amount will be repaid at the aforesaid interest rate in equal monthly
installments sufficient to repay the Loan Amount in twenty-five (25)
years. The Registrant refinanced its existing mortgage with interest
at ten percent (10%) per annum from The Greater New York Savings Bank,
which had a remaining principal balance of approximately $6,008,000 at
December 31, 1996. See Note 5 to Financial Statements, Page F-9.
Monthly payments in 1996, inclusive of interest were approximately
$64,000. The Loan Agreement has been approved by the DHCR. Principal
payments due on the mortgage for the next two (2) years are
approximately: $90,000 (1997); and $82,000 (1998). As a result of
the refinancing, annual payments of principal and interest due the
Bank, will be reduced by approximately $155,000 per annum. Prepayment
may be made by the Registrant with thirty (30) days prior written
notice to the Bank with a prepayment penalty of: 5% of the outstanding
principal balance if prepaid during the first, second or third year of
the initial term or the first year of any extended term; 4% of the
outstanding principal balance if prepaid during the fourth, fifth or
sixth year of the initial term or the second year of any extended
term; 3% of the outstanding principal balance if prepaid during the
seventh or eighth year of the initial term or the third year of any
extended term; 2% of the outstanding principal balance if prepaid
during the ninth year of the initial term or the fourth year of any
extended term; 1% of the outstanding principal balance if prepaid
during the first six months of the tenth year of the initial term or
the first six months of the fifth year of any extended term; and there
shall be no prepayment penalty during the last six months of the tenth
year of the initial term or the last six months of the fifth year of
any extended term.
At Registrant's option, Registrant may extend the Maturity Date to a
date which is five (5) years from the Maturity Date, subject to the
following terms and conditions:
(a) Registrant shall give the Mortgage Lender written notice not less
than sixty (60) days or greater than six (6) months prior to the
Maturity Date;
(b) Registrant shall not be in default in its obligations under any of
the documents evidencing the Mortgage on the date the Registrant
exercises its option to extend the Maturity Date and on the Maturity
Date;
(c) Registrant shall pay to the Mortgage Lender an "Extension Fee"
equal to one-half (1/2%) percent of the outstanding principal balance
of the Mortgage;
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(d) During the extended term, Registrant shall repay the principal
balance of the Mortgage outstanding on the Maturity Date with interest
at the Extended Term Interest Rate (as hereinafter defined), in equal
monthly installments sufficient to repay such principal balance in
fifteen (15) years. The term "Extended Term Interest Rate" means a
rate that is one hundred seventy-five (175) basis points (1.75%) over
the average yield on actively traded United States Treasury securities
adjusted to a constant maturity of five (5) years. The Extended Term
Interest Rate shall be effective on the Maturity Date and determined
on a date which is three (3) days before the Maturity Date. In no
instance however, shall the Extended Term Interest Rate be less than
the Interest Rate.
(e) The outstanding principal amount of the Mortgage on the Maturity
Date shall not exceed seventy-five percent (75%) of the combined
appraised value of the subject Property as based on an appraisal of
such Property, which value will be determined by the Mortgage Lender
in its sole and absolute discretion and which appraisal shall be
prepared by the Mortgage Lender's appraisers at Registrant's sole cost
and expense.
(f) The combined actual net operating income of the subject Property
shall exceed the debt service by 1.25 times as determined by the
Mortgage Lender in its sole and absolute discretion. Debt service
coverage shall be calculated for the twelve (12) calendar month period
ending immediately preceding the date the required extension notice is
delivered to the Mortgage Lender and shall be based on the outstanding
principal balance amount of the Loan on the Maturity Date and the
Extended Term Interest Rate.
(g) To the extent that the Registrant is prohibited from extending the
term of the Mortgage solely due to its failure to satisfy both
requirements (e) and (f) immediately above, the Registrant may repay
principal to the Mortgage Lender in a sufficient amount, as determined
by the Mortgage Lender, so as to enable Registrant to satisfy
requirements (e) and (f) above based on the reduced principal amount
outstanding after such payments are made.
8
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ITEM 2 DESCRIPTION OF PROPERTIES
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The Registrant's property consists of twelve (12) apartment buildings,
eleven (11) of which are twelve (12) stories high and one which is ten
(10) stories high, constructed in 1934 at Monroe and Catherine Streets
in New York City and consisting of approximately 6,000 rooms in
approximately 1,600 apartments with commercial stores on the ground
floor of some of the buildings. The Registrant believes that such
premises are in satisfactory condition and are suitable for use as
residential dwellings and commercial units, as applicable. The
buildings, land and boiler are subject to a mortgage in the principal
amount of approximately $6,008,000 owing at December 31, 1996. (See
Item 1 above and Note 5 to Financial Statements.)
Management believes that the Registrant's properties are adequately
covered by insurance.
The Registrant's residential properties have an occupancy rate of
approximately ninety-nine (99%) percent. No tenant occupies ten (10%)
percent or more of the rentable square footage of the properties. The
Registrant's properties are principally used for rental of residential
apartments for low to middle income families. The Registrant has
approximately $740,000 in monthly revenue from residential space, with
an average effective annual rental per room of $123.00 for the year
ended December 31, 1996. The average apartment is three and one-half
(3 1/2) rooms. Annual revenues from residential leases was
approximately $9,174,000 for the year ended December 31, 1996.
Residential leases of which there are approximately sixteen hundred
(1600), are generally renewed, subject to the terms of the applicable
leases and compliance by the tenants with same. The total annual
rental income on fifteen (15) commercial leases for the year ended
December 31, 1996, was approximately $287,000. Accordingly, gross
annual revenue for 1996 from residential leases was ninety six percent
(96%) of compared to commercial leases which accounted for three
percent (3%) gross annual revenue.
Real estate taxes on the Registrant's properties were approximately
$791,000 for the year ended December 31, 1996. The tax rate for the
1996 tax year was 10.807.
9
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The Registrant's estimated replacement, repairs and renovation budget
and status of projects for June 1, 1996 to May 31, 1997 ("1996
Projects") and June 1, 1997 to May 31, 1998 ("1997 Projects") are as
follows:
1996 PROJECTS APPROXIMATE COST
------------- ----------------
Appliance Replacement $ 60,000.00
Mailbox Replacement 225,000.00
Terrace/Waterproofing 140,000.00
Lead Paint Abatement 75,000.00
Elevator Modernization 100,000.00
Consulting Fees 50,000.00
Boiler Room and
Playground Studies 15,000.00
Stairway Repairs 20,000.00
Plumbing Study 15,000.00
Waste Storage Coolers 85,000.00
-----------
TOTAL: $785,000.00
1997 PROJECTS APPROXIMATE COST
- ------------- ----------------
Appliance Replacement $ 60,000.00
Elevator Modernization 100,000.00
Terrace Replacement/Parapet
Rehabilitation 150,000.00
Lead Paint Abatement 150,000.00
Stairways Repairs 20,000.00
Water Distribution 50,000.00
Asbestos Abatement 100,000.00
Consultant Fees 60,000.00
-----------
TOTAL: $700,000.00
The above estimates are for informational purposes only, and the
actual costs of such projects may differ. The cost of these projects
are funded from operations, and the money is deposited in an escrow
account which is supposed to be funded monthly in an amount of
approximately $69,000. However, the Registrant was in arrears in its
monthly funding in an amount of approximately $129,000 for the year
ended December 31, 1996. (See Notes 4 and 10 to Financial Statements.)
10
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In 1995, the Registrant obtained a lead paint risk assessment report
of its properties at an approximate cost, including fees and expenses
of $22,000. In 1995, the Registrant expended approximately $13,000 on
asbestos abatement.
The Registrant made a commitment to its Bank to complete asbestos
abatement work in the amount of $200,000 and lead abatement work in
the amount of $225,000 at its premises in 1997 and 1998. The costs of
additional asbestos abatement or lead paint remediation, if necessary,
at the Registrant's properties in excess of the aforesaid amounts can
not be determined at this time.
ITEM 3 LEGAL PROCEEDINGS
- ------ -----------------
None.
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
- ------ -----------------------------------------------------
None.
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON
- ------ ----------------------------------
EQUITY AND RELATED STOCKHOLDER MATTERS
--------------------------------------
The Company's Limited Dividend Capital Stock, par value $2.15
("Capital Stock"), is traded over-the-counter. No established trading
market exists with respect to such stock since approximately 140,242
shares (approximately 95%) of the 147,464 shares outstanding are owned
by Cherry Green Property Corp. Since 1971, no bid and asked prices
have been reported by the National Quotation Bureau, Inc.
No dividends have been paid since 1968. The holders of Capital Stock
cannot, at any time, receive repayment of their investment in excess
of the par value of the stock, together with cumulative unpaid
dividends at the rate of 6.0% of par value ($2.15 per share) per annum
(without interest). Dividends amounting to $19,023 were declared
during 1979, but were not paid as of December 31, 1996. No dividends
were declared or paid in 1996. Cumulative dividends unpaid as of
December 31, 1996 and December 31, 1995 amounted to $532,643 and
$513,620 (approximately $3.61 and $3.48 per share), respectively.
(See Note 6 of Notes to Financial Statements.)
There are approximately 340 holders of record of the Registrant's
Capital Stock as of March 1, 1997.
11
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ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS
- ------ ------------------------------------
OR PLAN OF OPERATIONS
---------------------
A) Liquidity - As of December 31, 1996, the Registrant had a working
capital deficiency of approximately $258,000. At December 31,
1995, the Registrant had a working capital deficiency of
approximately $64,000. This decrease is primarily attributable
to accounts payable for asbestos removal and lead paint
remediation costs of $212,500 at December 31, 1996. (See Note 10
to the Financial Statements, Page F-12). As of December 31,
1996, the Registrant was in arrears on its required contributions
to its special fund for replacements, painting and decorating in
the amount of approximate $129,000. (See Note 10 to the financial
statements, page F-12). During April 1996, the Registrant
received a two step rent increase, which was approved by the
DHCR. The first increase of approximately 5.5% was effective
June 1, 1996 and the second increase of approximately 5.3% will
be effective June 1, 1997. (See Item I above and (c) below and
Note 12 to the Financial Statements, Page F-12). On January 30,
1997 the Registrant entered into an extension and modification
agreement with The Greater New York Savings Bank (the "Bank"),
which increased the principal amount of the Registrant's mortgage
payable to $6,300,000. (See Note 5 to the Financial Statements,
Page F-9). The annual payments of principal and interest due to
the ("Bank"), will be reduced by approximately $155,000 per
annum. Subject to unforeseen circumstances, the two step rent
increase effective June 1, 1996 and June 1, 1997 and the
extension and modification of the Registrant's mortgage payable,
which took place on January 30, 1997, will increase the future
liquidity of the Registrant.
B) Capital Resources - The Registrant has set aside funds for
capital improvements and repairs amounting to $115,975 and
$350,901 as of December 31, 1996 and 1995. (See Note 4 to the
Financial Statements, Page F-9).
C) Results of Operations - In 1996, the Registrant received a two
step rent increase. The first increase of approximately 5.5% was
effective June 1, 1996 and the second increase of approximately
5.3% will be effective June 1, 1997. Accordingly, net rental
income in 1996 increased by approximately $256,000 over 1995
amounts. Other income in 1996 decreased approximately $23,000
from 1995 amounts due to a decrease in interest income resulting
from lower reserve fund balances. Operating expenses for 1996
increased approximately $250,000, or three percent (3.0%) due to
increases in wages and related costs, real estate taxes,
utilities, depreciation and amortization,
12
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and management fee offset by decreases in mortgage and other
interest and miscellaneous operating and general expenses. Wages
and related costs increased by approximately $81,000 or
approximately four percent (4.0%) in 1996 as compared to 1995.
This increase was attributable to an increase in wages and
related payroll taxes of approximately $50,000 primarily due to
increases in union wage rates, and an increase in employee
benefits of approximately $31,000 primarily due to increases in
union pension rates. Real estate taxes increased by
approximately $36,000 or approximately five percent (5.0%) in
1996 as compared to 1995 due to increases in the New York City
tax rates. Utilities increased by approximately $72,000 or
approximately four percent (4.0%) in 1996 primarily due to a rise
in fuel oil prices during 1996. Depreciation and amortization
increased in 1996 as compared to 1995 by approximately $56,000 or
approximately twelve percent (12.0%) primarily due to additional
depreciation expense incurred on the acquisition of fixed assets.
Mortgage and other interest decreased by approximately $14,000 or
approximately two percent (2.0%) in 1996 as compared to 1995 due
to a reduction in the principal balance due on the related
mortgage debt. The management fee increased by approximately
$48,000 or five percent (5.0%) in 1996 as compared to 1995, due
to increases in the management fee, which were approved by the
DHCR of 2.3% effective July 1, 1995, and 2.75% effective July 1,
1996. In addition the Registrant received a management agent
financial award in 1996, which was approved by the DHCR, that
exceeded the amount received in 1995 by approximately $24,000.
Miscellaneous operating and general expenses decreased by
approximately $32,000 or approximately two percent (2.0%) in 1996
as compared to 1995, primarily due to a decrease in security
costs. The provision for income taxes increased by approximately
$34,000 in 1996 compared to 1995, primarily due to reductions in
the 1995 deferred tax provision due to changes in the
Registrant's valuation allowance. (See Note 7 to the Financial
Statements, Pages F-10 and F-11.
In 1995, net rental income increased by approximately $341,000
over 1994 amounts, primarily due to a two-step rent increase
which was approved by the DHCR in 1994. The first increase of
approximately 5.3% was effective November 1, 1993, and the second
increase of approximately 5.0% was effective November 1, 1994.
Operating expenses for 1995 increased by approximately $346,000
or approximately four percent (4.0%) over 1994 amounts due to
increases in real estate taxes, utilities, maintenance, repairs
and decorating, depreciation and amortization, and miscellaneous
operating expenses offset by decreases in wages and related
costs, management fee and
13
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provision for doubtful accounts. Wages and related costs
decreased by approximately $19,000 or approximately one percent
(1.0%) in 1995 as compared to 1994. This decrease was
attributable to a reduction in snow removal costs in 1995 as
compared to 1994. Real estate taxes increased by approximately
$34,000 or approximately five percent (5.0%) in 1995 as compared
to 1994 primarily due to increases in the New York City tax
rates. Utilities increased by approximately $108,000 or
approximately six percent (6.0%) in 1995 as compared to 1994.
This increase was primarily attributable to increases in Con
Edison's electrical rates and New York City's water and sewer tax
rates. Maintenance, repairs and decorating expenses increased by
approximately $123,000 or approximately twelve percent (12.0%) in
1995 as compared to 1994. These expenses increased primarily due
to increased expenses for terrace replacements, stairway repairs,
and plumbing. Depreciation and amortization increased in 1995 as
compared to 1994 by approximately $66,000 or approximately
seventeen percent (17.0%) primarily due to the acquisition of
additional fixed assets. Mortgage and other interest decreased
by approximately $14,000 or approximately two percent (2.0%) in
1995 as compared to 1994 due to reductions in the principal
balance due on the related mortgage debt. The management fee
decreased by approximately $41,000 or approximately four percent
(4.0%), primarily due to a decrease in the management agent
financial award received in 1995 as compared to 1994. These
awards were approved by the DHCR. The provision for doubtful
accounts decreased by approximately $42,000 or approximately
thirty three percent (33.0%) in 1995 as compared to 1994, due to
an increase in bad debts expense in 1994 attributable to the rent
increase and retroactive surcharges. Miscellaneous operating and
general expenses increased by approximately $132,000 or ten
percent (10.0%) in 1995 as compared to 1994. This increase was
primarily attributable to additional security guard services of
approximately $96,000, and increases in insurance expense of
approximately $56,000 offset by a reduction in legal fees of
approximately $30,000.
The Registrant showed net income of approximately $9,000 from
operations in 1995 compared to $93,000 from operations for 1994.
However, had the Registrant not received a one time gain of
approximately $90,000 upon the sale of all its stock in an
insurance company, the Registrant's 1994 net income would have
been minimal.
14
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ITEM 7 FINANCIAL STATEMENTS
- ------ --------------------
Information required by this Item is attached to this Report as pages
F-1 through F-12 following Part IV, Item 13.
ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
- ------ ---------------------------------------------
ON ACCOUNTING AND FINANCIAL DISCLOSURE
--------------------------------------
None.
15
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PART III
--------
ITEM 9 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
- ------ PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
----------------------------------------------------------
Position with Held Principal
Name Age Registrant Since Occupation
- --------------------------- --- ------------- ----- ---------------
Irene Pletka (1) (2) 55 President and 1977 Commercial
Director Photographer
Peter Pletka (1) (2) 59 Vice 1992 Physician
President
Howard Kestenberg 40 Director 1992 Real Estate
(3) Entrepreneur
Robert Gershon 60 Director, 1977 Principal in
(2) (4) President Carl Gerson &
Treasurer Co., a Real
Estate Brokerage.
Melvin Gershon 54 Director and 1977 Principal in the firm
(2) (4) Secretary of Carl Gershon & Co.
Ray Knight 46 Director 1993 Housing Management
Representative, New York
State Division of
Housing and Community
Renewal.
__________________________________________________
(1) Dr. Peter Pletka and Mrs. Irene Pletka are husband and wife.
(2) Irene Pletka, Dr. Peter Pletka, Robert Gershon and Melvin Gershon are all
shareholders, officers and directors of Cherry Green Property Corp. (See
Item 11-Security Ownership of Certain Beneficial Owners and Management and
Item 12-Certain Relationships and Related Transaction).]
(3) Mr. Kestenberg is a shareholder of Cherry Green Property Corp. (See Item
11-Security Ownership of Certain Beneficial Owners and Management and Item
12-Certain Relationships and Related Transaction).]
(4) Mr. Melvin Gershon and Mr. Robert Gershon are brothers.
16
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The respective terms of the officers and directors of the Registrant will
continue until the next Annual Meeting of Shareholders or until their
successors have been elected and qualified in accordance with the
Registrant's By-laws.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
--------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 (the "Exchange
Act") requires the Company's directors and executive officers, and
persons who own more than ten percent (10%) of a registered class of
the Company's equity securities, to file with the Securities and
Exchange Commission ("SEC") and the American Stock Exchange, initial
reports of ownership and reports of changes in ownership of common
stock and other equity securities of the Company. Officers, directors
and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a)
forms they file.
Management believes that Cherry Green Property Corp. has made all
requisite filings of Form 3, 4 and 5 required to be filed under 16(a)
of the Exchange Act relating to the Registrant during the two (2)
fiscal years ended December 31, 1996 and 1995, respectively.
ITEM 10 EXECUTIVE COMPENSATION
- ------- ----------------------
During the year ended December 31, 1996, no officer or director of the
Registrant received any compensation from the Registrant for his or
her services. The Registrant did not grant or award stock options,
stock appreciation rights or long-term incentive plans to any of its
executive officers in the last fiscal year. The Registrant does not
presently maintain a pension plan or other retirement plan for its
named executive officers.
The housing complex owned by the Registrant is managed by Cherry Green
Property Corp., pursuant to a management contract approved by the
DHCR. Cherry Green was granted an increase its management fee of
2.3%, effective July 1, 1996, pursuant to a Contract for Managing
Agents Extension Agreement, approved by the DHCR on October 24, 1996.
(See Exhibit 10.1 annexed hereto.) Such fee is reviewed and adjusted
annually effective July 1 of each year, by the DHCR. Cherry Green
Property Corp. owns over 95.0% of the Registrant's Capital Stock.
Several officers and directors of Cherry Green Property Corp. are
officers and directors of the Registrant. (See Item 9 herein). During
1996, the Registrant paid Cherry Green Property Corp. a management and
administrative fee of $943,000. Such fee was approved by the DHCR.
Management and administrative fees increased in 1996 compared to 1995,
due to a management agent award of approximately $48,000 granted in
1996. (See Items 1, 9, 11 and 12 and Note 8 of Notes to Financial
Statements.)
17
<PAGE>
ITEM 11 SECURITY OWNERSHIP OF CERTAIN
- ------- -----------------------------
BENEFICIAL OWNERS AND MANAGEMENT.
---------------------------------
(a) Security Ownership of Certain Beneficial Owners. Following is a
list of those persons known by the Registrant to be the
beneficial owners of more than 5% of the outstanding Capital
Stock of the Registrant as of December 31, 1996:
Name and Address Amount and Nature Percent of
Title of Class of Beneficial Owner of Beneficial Ownership Class
- ------------------- ------------------- ----------------------- ------
Limited Dividend Cherry Green 140,242 Shares of 95%
Capital Stock, Property Corp. Record and Beneficial
(par value $2.15) 11 Monroe Street Ownership
New York, NY
(b) Security Ownership of Management
As of December 31, 1996, no Directors or Officers owned any
shares of the Registrant's Limited Dividend Capital Stock, $2.15
par value. However, the following Officers and Directors of the
Registrant own of record and beneficially that percentage of
Common Stock of Cherry Green Property Corp. as set forth below:
Percent Owned of Cherry
Name Position with Registrant Green Property Corp.
- -------------------- ------------------------ -----------------------
Irene Pletka (1) Director and President 53.3
Peter Pletka (1) Vice President 53.3
Howard Kestenberg Director 18.3
Robert Gershon (2) Director, Vice President 9.6
and Treasurer
Melvin Gershon (2) Director and Secretary 6.3
- -----------------------------------------------------------------------
(1) Such shares of Cherry Green Property Corp. are owned collectively
by Mr. and Mrs. Pletka.
(2) Robert Gershon and Melvin Gershon are brothers.
18
<PAGE>
(c) Change in control.
There are no known arrangements, the application of which may at
a subsequent date result in a change in control of the
Registrant.
ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- ------- ----------------------------------------------
The Registrant is managed by Cherry Green Property Corp., the owner of
over 95% of the Registrant's outstanding Capital Stock. Several
officers and directors of the Registrant are shareholders, officers
and directors of Cherry Green Property Corp. (See Items 1, 9, 10 and
11 herein). During 1996, the Registrant paid Cherry Green Property
Corp. a management and administrative fee of $923,000. Such fee was
approved by the DHCR pursuant to a contract, effective July 1, 1996.
(See Exhibit 10.1 annexed hereto) (See Note 8 of Notes to Financial
Statements).
PART IV
-------
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K
- ------- --------------------------------
(a) The list of Financial Statements and Notes required by Item 7 and
by Item 13(a) are set forth on pages F-1 through F-12 attached
hereto.
(b) Reports on Form 8-K:
None.
(c) Exhibits:
10.1 - Contract for Managing Agent Extension Agreement, dated as
of July 1, 1996, by and between Knickerbocker Village, Inc. and
Cherry Green Property Corp. and approved by the New York State
Division of Housing and Community Renewal on October 24, 1996.
10.2 - Consolidation, Modification and Extension Agreement, dated
January 30, 1997, by and between Knickerbocker Village, Inc. and
The Greater New York Savings Bank.
19
<PAGE>
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.
(Registrant): KNICKERBOCKER VILLAGE, INC.:
- -----------------------------------------------------------------
By (Signature and Title) :S/ROBERT GERSHON
- ------------------------------------------------------------------
ROBERT GERSHON, Director and Treasurer
Dated: April 11, 1997
- ----------------------
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.
(Signature and Title) :S/IRENE PLETKA
- -------------------------------------------------------------------
IRENE PLETKA, Director and President
Dated: April 11, 1997
- ----------------------
(Signature and Title) :S/PETER PLETKA
- -------------------------------------------------------------------
PETER PLETKA, Vice President
Dated: April 11, 1997
- -----------------------
(Signature and Title) :S/MELVIN GERSHON
- -------------------------------------------------------------------
MELVIN GERSHON, Director and Secretary
Dated: April 11, 1997
- -----------------------
20
<PAGE>
KNICKERBOCKER VILLAGE, INC.
---------------------------
INDEX TO FINANCIAL STATEMENTS
-----------------------------
Independent Auditor's Report F-2
Balance Sheets F-3 to F-4
Statements of Operations and Retained Earnings,
Years Ended December 31, 1996 and 1995 F-5
Statements of Cash Flows,
Years Ended December 31, 1996 and 1995 F-6
Notes to Financial Statements F-7 to F-12
F-1
<PAGE>
HELD KRANZLER & COMPANY
257 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10010
(212) 533-2727
INDEPENDENT AUDITORS' REPORT
----------------------------
Board of Directors
Knickerbocker Village, Inc.
10 Monroe Street
New York, New York 10002
We have audited the accompanying balance sheets of Knickerbocker Village, Inc.,
as of December 31, 1996 and 1995, and the related statements of operations and
retained earnings and cash flows for each of the years in the two-year period
ended December 31, 1996. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Knickerbocker Village, Inc., as
of December 31, 1996 and 1995, and the results of its operations and its cash
flows for each of the years in the two-year period ended December 31, 1996, in
conformity with generally accepted accounting principles.
In our report dated March 8, 1996, we expressed an opinion that the 1995
financial statements did not fairly present financial position, results of
operations, and cash flows in conformity with generally accepted accounting
principles because the Company's policy of expensing appliances as opposed to
capitalizing them as fixed assets was a departure from generally accepted
accounting principles. As described in Note 2, the Company has changed its
method of accounting for those items and has restated its 1995 financial
statements to conform with generally accepted accounting principles.
Accordingly, our present opinion on the 1995 financial statements, as presented
herein, is different from that expressed in our previous report.
February 10, 1997 HELD KRANZLER & COMPANY
F-2
<PAGE>
KNICKERBOCKER VILLAGE, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ------------
(Note 2)
Assets
- ------
Current Assets:
<S> <C> <C>
Cash $ 415 $ 0
Accounts receivable (less allowance for
doubtful accounts of $260,000 in 1996
and $312,000 in 1995) 207,999 253,888
Interest and other receivables 14,365 11,379
Prepaid expenses and other current assets (Note 12) 1,610,943 1,468,277
Deferred tax asset, net (Note 7) 92,000 46,000
----------- -----------
Total Current Assets 1,925,722 1,779,544
----------- -----------
Special Funds And Deposits:
Funds for replacements, painting and
decorating (Notes 4 and 10) 115,975 350,901
Tenants' security deposits - contra 642,628 628,582
----------- -----------
Total Special Funds and Deposits 758,603 979,483
----------- -----------
Fixed Assets, At Cost: (Notes 2, 4 and 5)
Land 3,273,281 3,273,281
Buildings and building equipment 15,086,968 14,091,733
----------- -----------
18,360,249 17,365,014
Less: Accumulated depreciation 10,898,301 10,423,499
----------- -----------
Net Fixed Assets 7,461,948 6,941,515
----------- -----------
Other Assets:
Deferred tax asset, net (Note 7) 34,000 26,000
Other Assets 37,139 55,831
----------- -----------
Total Other Assets 71,139 81,831
----------- -----------
Total Assets $10,217,412 $ 9,782,373
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-3
<PAGE>
KNICKERBOCKER VILLAGE, INC.
BALANCE SHEETS
AS OF DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- ------------
Liabilities And Stockholders' Equity (Note 2)
- ------------------------------------
Current Liabilities:
<S> <C> <C>
Accounts payable and accrued expenses (Note 10) $ 1,991,946 $1,608,240
Unearned rental income 82,973 42,866
Dividends payable (Note 6) 19,023 19,023
Current portion of long-term debt (Note 5) 90,000 154,699
Bank Overdraft 0 18,826
----------- -----------
Total Current Liabilities 2,183,942 1,843,654
Tenants' Security Deposits - Contra 642,628 628,582
Other Liabilities (Note 10) 212,500 0
Long-Term Debt, less current portion (Note 5) 5,918,130 6,008,130
------------ -----------
Total Liabilities 8,957,200 8,480,366
------------ -----------
Commitments and Contingencies (Note 10)
Stockholders' Equity:
Limited dividend capital stock,
par value $2.15 per share,
Authorized - 348,837 shares;
issued and outstanding - 147,464 (Note 6) 317,048 317,048
Retained earnings (Note 2) 943,164 984,959
------------ -----------
Total Stockholders' Equity 1,260,212 1,302,007
----------- -----------
Total Liabilities And Stockholders' Equity $ 10,217,412 $ 9,782,373
</TABLE>
The accompanying notes are an integral part of the financial statements
F-4
<PAGE>
KNICKERBOCKER VILLAGE, INC.
STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
(Note 2)
Revenues:
Rentals (Note 11) $9,564,139 $9,307,966
Other income 14,138 37,633
---------- ----------
9,578,277 9,345,599
---------- ----------
Expenses:
Wages and related costs 2,243,192 2,162,234
Real estate taxes 790,794 754,653
Utilities 1,844,802 1,772,728
Maintenance, repairs and decorating 1,119,914 1,121,759
Depreciation and amortization 508,519 452,078
Mortgage and other interest 623,879 638,146
Management fee (Note 8) 923,873 876,183
Provision for doubtful accounts 88,000 83,298
Miscellaneous operating and general expenses 1,439,099 1,471,467
---------- ----------
9,582,072 9,332,546
---------- ----------
Income (loss) before income taxes (3,795) 13,053
Provision for income taxes (Note 7) 38,000 3,702
---------- ----------
Net income (loss) (41,795) 9,351
---------- ----------
Retained earnings at beginning of period
As previously reported 891,959 887,308
Prior period adjustment (Note 2) 93,000 88,300
---------- ----------
As restated 984,959 975,608
---------- ----------
Retained earnings at end of period $ 943,164 $ 984,959
========== ==========
Net income (loss) per share $(0.28) $0.06
========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements
F-5
<PAGE>
KNICKERBOCKER VILLAGE, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
1996 1995
---------- ----------
(Note 2)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (41,795) $ 9,351
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 508,519 452,078
Provision for bad debts 88,000 72,000
Deferred income taxes (54,000) (131,000)
Changes in assets (increase) decrease:
Accounts receivable (42,111) (144,974)
Interest and other receivables (2,986) 85,532
Prepaid expenses and other current assets (142,666) (101,253)
Other assets (15,025) 0
Changes in liabilities increase (decrease):
Accounts payable and accrued expenses 383,705 77,614
Unearned rental income 40,107 (1,563)
Other liabilities 212,500 0
--------- ---------
Net cash provided by operating activities 934,248 520,291
--------- ---------
Cash Flows From Investing Activities:
Interest earned on reserve fund investments (6,835) 0
Capital expenditures (995,235) (670,487)
Contributions of cash from operations to replacement fund (404,000) (366,666)
Reimbursement of expenditures paid by housing company
from replacement fund 646,661 394,534
Contributions from sale of investments (235,286) (327,392)
Proceeds of investments from replacement funds 234,387 505,016
--------- ---------
Net cash used in investing activities (760,308) (464,995)
--------- ---------
Cash flows from financing activities:
Payments on long-term debt (154,699) (140,036)
Proceeds from (payments of) bank overdraft (18,826) 18,826
--------- ---------
Net cash used in financing activities (173,525) (121,210)
--------- ---------
Net increase (decrease) in cash 415 (65,914)
Cash at beginning of period 0 65,914
--------- ---------
Cash at end of period $ 415 $ 0
========= =========
Supplemental Disclosures Of Cash Flow Information:
Cash paid during the years for:
Interest $ 623,515 $ 639,313
Income taxes 121,487 4,567
</TABLE>
The accompanying notes are an integral part of the financial statements
F-6
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - CORPORATE ORGANIZATION
----------------------
Knickerbocker Village, Inc. (the Company), is a public limited dividend
housing company formed, pursuant to the Housing Laws of the State of New
York, on September 5, 1933. The Company is regulated by the Division of
Housing and Community Renewal (DHCR), a New York State regulatory agency.
The Company is located in lower Manhattan and operates approximately 1,600
rental units ranging in size from studios through three bedroom apartments.
The Company requires one (1) month's rent as a security deposit on all
apartments.
NOTE 2 - PRIOR PERIOD ADJUSTMENT
-----------------------
The balance of retained earnings at December 31, 1995 has been restated from
amounts previously reported to reflect an increase of $93,000 ($0.63 per
share), resulting from a change in the Company's policy from expensing
appliances as purchased to capitalizing the appliances as fixed assets. The
change was made to conform with generally accepted accounting principles. Of
this amount, $4,700 ($0.03 per share) is applicable to 1995 and has been
reflected as a decrease to operating expenses of $7,700, and an increase in
the provision for income taxes of $3,000 for that year. The balance of this
adjustment (applicable to years prior to 1995) is being credited to retained
earnings at January 1, 1995.
NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
REVENUE RECOGNITION
-------------------
The Company recognizes revenue in the accounting period that corresponds to
the month for which rental income is billed. Rents received but not
recognized as revenue as of December 31, are recorded as unearned rental
income.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
-------------------------------
Bad debts are provided for on the allowance method based on historical
experience and management's evaluation of outstanding rents receivable.
FIXED ASSETS
------------
Fixed assets consists primarily of building improvements and equipment and
are recorded at cost. Depreciation is provided for financial statement
purposes on the straight-line method, over the estimated useful lives of the
fixed asset, which range from 5 to 30 years. For federal income tax
purposes, depreciation is provided for on the straight-line and accelerated
methods.
F-7
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
FIXED ASSETS, continued
- -----------------------
Expenditures for maintenance and repairs are charged to operations as
incurred. Upon sale or retirement of property, the cost and accumulated
depreciation are removed from the respective accounts and any gain or loss is
reflected in operations for the year. Depreciation expense for the years
ended December 31, 1996 and 1995 was approximately $475,000 and $443,000
respectively.
INCOME TAXES
- ------------
Deferred tax assets and liabilities reflect the tax consequences on future
years of differences between the tax bases of assets and liabilities, and
their financial reporting amounts, using enacted tax rates in effect for the
year in which the differences are expected to reverse.
CONCENTRATION OF CREDIT RISK
- ----------------------------
The Company places its cash and investments for its Replacement Fund (See
Note 4) with a high quality credit institution. At times such investments
may be in excess of FDIC insured limits.
INVESTMENTS
- -----------
All investments in the replacement, painting and decorating fund (See Note 4)
are available for sale and are carried at fair values.
ESTIMATES
- ---------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
RECLASSIFICATIONS
- -----------------
Certain prior year balances have been reclassified to conform with current
year classifications.
FAIR VALUE OF FINANCIAL INSTRUMENTS
- -----------------------------------
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments:
F-8
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
FAIR VALUE OF FINANCIAL INSTRUMENTS, continued
----------------------------------------------
1. Cash and cash equivalents - The carrying amounts approximate fair value
because of the short maturity of these instruments.
2. Investments - Fair value approximates quoted market value.
3. Receivables - The carrying amount approximates fair value because of the
short maturity of these instruments.
4. Debt - The carrying amounts approximate fair value based on borrowing
rates currently available to the Company for bank loans with similar
terms.
NOTE 4 - REPLACEMENT, PAINTING AND DECORATING FUNDS
------------------------------------------
Maintenance of these funds is requested by the Commissioner of Housing and
Community Renewal of the State of New York. These funds were comprised of
the following at December 31:
1996 1995
-------- --------
Cash $115,975 $118,054
Investments:
Treasury Bills - Available for sale 0 232,847
-------- --------
$115,975 $350,901
======== ========
NOTE 5 - LONG-TERM DEBT
--------------
Long-term debt represents a mortgage payable to the Greater New York Savings
Bank, ("GNYSB") collateralized by land, buildings and boilers, due July 1,
1997. On January 30, 1997, the Company entered into an extension and
modification agreement with the GNYSB for the principal amount of $6,300,000.
The extended and modified mortgage is payable in monthly installments of
$50,729, inclusive of interest at the rate of 8 1/2% per annum, commencing on
March 1, 1997 and due on February 1, 2007. On the maturity date, the Company
has the option of paying the remaining principal balance, or entering into a
five (5) year extension agreement with the lender. The aggregate maturities
for long-term debt for the five years after December 31, 1996 are $90,000,
$82,000, $89,000, $97,000 and $105,000, respectively.
NOTE 6 - DIVIDENDS PAYABLE AND CAPITAL STOCK
-----------------------------------
The holders of the Company's capital stock cannot at any time receive, in
repayment of their investment, any sums in excess of the par value of the
stock together with cumulative dividends at the rate of 6% of par value per
annum (without interest). Any surplus in excess of such amounts upon
dissolution reverts to the public authorities.
F-9
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
DIVIDENDS PAYABLE AND CAPITAL STOCK, continued
----------------------------------------------
Cumulative dividends unpaid to December 31, 1996 amounted to $532,643 or
approximately $3.61 per share and unpaid to December 31, 1995 amounted to
$513,620 or approximately $3.48 per share. Dividends amounting to $19,023
were declared during 1979, but were not paid as of December 31, 1996. Such
dividends were approved by the DHCR. No dividends were declared or paid in
1996 or 1995.
NOTE 7 - INCOME TAXES
------------
The provision for income taxes for the years ended December 31, 1996 and 1995
consist of the following:
1996 1995
--------- --------
Current Taxes
Federal $ 66,000 $ 71,000
New York City 26,000 22,000
---------- ----------
total $ 92,000 $ 93,000
---------- ----------
Deferred Taxes
- --------------
Federal $ (40,000) $ (64,813)
New York City (14,000) (24,485)
---------- ----------
Total $ (54,000) $ (89,298)
---------- ----------
Provision For Income Taxes $ 38,000 $ 3,702
========== ==========
The provision for income taxes differs from amounts computed at statutory rates
as follows:
1996 1995
---------- -----------
Federal income taxes
at statuory rate $ 0 $ 2,000
New York City alternative
minimum tax, net of
federal benefit 14,000 12,000
Other, net 24,000 (10,298)
---------- ----------
Total $ 38,000 $ 3,702
=========== ===========
F-10
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
INCOME TAXES, continued
-----------------------
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. At December
31, 1996 and December 31, 1995, the net deferred tax assets of $126,000 and
$72,000 respectively, were included in the Company's balance sheets as
follows:
1996 1995
-------- --------
Deferred tax asset, net
- Current $ 92,000 $ 46,000
Deferred tax asset, net
- Long term 34,000 26,000
--------- ---------
Deferred tax asset, net $ 126,000 $ 72,000
========= =========
Significant components of the Company's net deferred tax asset are as
follows:
1996 1995
--------- --------
Tax effects of:
Accounts receivable $ 104,000 $ 125,000
Unearned rental income 33,000 17,000
Buildings and building equipment 369,000 258,000
--------- ---------
Gross deferred tax asset 506,000 400,000
Valuation allowance (380,000) (328,000)
--------- ---------
Net deferred tax asset $ 126,000 $ 72,000
========= =========
Management believes that a valuation allowance is appropriate given the
current estimates of future taxable income, as well as consideration of
available tax planning strategies. If the company is unable to generate
sufficient taxable income in the future through operating results, increases
in the valuation allowance will be required through a charge to expense.
However, if the Company achieves profitability to utilize a greater portion
of the deferred tax asset, the valuation allowance will be reduced through a
credit to income. The net change in the valuation allowance for the years
ended December 31, 1996 and 1995 was an increase of $52,000 and a decrease of
$133,000, respectively.
NOTE 8 - MANAGEMENT FEE
--------------
The management fee, set by DHCR, was paid to Cherry Green Property Corp.,
(Cherry Green), the owner of approximately 95% of the outstanding shares of
the Registrant. Such fee is reviewed and adjusted annually effective July 1
of each year, by the DHCR.
On March 8, 1996 and October 24, 1996 the DHCR approved increases in the
management fee of 2.3% effective July 1, 1995 and 2.75% effective July 1,
1996, respectively. The increase effective July 1, 1995 was accrued in the
financial statements as of December 31, 1995.
F-11
<PAGE>
KNICKERBOCKER VILLAGE, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 9 - PENSION PLAN
------------
Certain employees of the Company are covered under a union sponsored, multi-
employer defined benefit pension plan. This plan is not administered by the
Company and contributions are determined by the union. The Company's
contributions for this plan were approximately $71,000 and $43,000 for the
years ended December 31, 1996 and 1995, respectively.
NOTE 10- COMMITMENTS AND CONTINGENCIES
-----------------------------
As of December 31, 1996, the Company was in arrears on its contributions as
requested by DHCR to its' special fund for replacements, painting and
decorating in the amount of approximately $129,000 (Note 4). The Company, in
accordance with the extension and modification agreement with it's bank dated
January 30, 1997, (note 5) has made a commitment to complete asbestos
abatement work and lead paint remediation work of approximately $425,000 in
1997 and 1998. These costs have been accrued in the financial statements as
of December 31, 1996. The costs of any additional asbestos abatement or lead
paint remediation, if necessary, in excess of the amounts accrued at December
31, 1996, can not be determined at this time.
NOTE 11- RENTAL INCOME
-------------
During April 1996, the Company received a two step rent increase, which was
approved by the DHCR. The first increase of approximately 5.5% was effective
June 1, 1996 and the second increase of approximately 5.3% will be effective
June 1, 1997.
NOTE 12- PREPAID EXPENSES AND OTHER CURRENT ASSETS
-----------------------------------------
Prepaid expenses and other current assets in the accompanying balance sheets
are as follows:
1996 1995
---------- ----------
Escrow Account $ 277,083 $ 230,461
Prepaid:
Insurance 514,696 523,859
Water and Sewer 202,854 232,461
Real Estate Taxes 415,687 396,723
Federal Income Tax 70,835 0
NYC Corp. Tax 30,000 0
Interest 0 15,194
Supplies 76,179 66,602
Expenses - Other 23,609 2,977
---------- ----------
TOTAL $1,610,943 $1,468,277
========== ==========
F-12
<PAGE>
EXHIBIT 10.1
CONSOLIDATION MODIFICATION AND EXTENSION AGREEMENT
--------------------------------------------------
AGREEMENT, made the 30th day of January, 1997, between KNICKERBOCKER
VILLAGE, INC., a Limited Dividend Housing Company, having an address at 10
Monroe Street, New York, New York 10002, (hereinafter designated as the
"Mortgagor"), and THE GREATER NEW YORK SAVINGS BANK, a New York corporation
having its place of business at No.211 Station Road, Mineola, New York 11501-
4214, Attention: Commercial Real Estate, (hereinafter designated as the
"Mortgagee").
NOW THEREFORE, in consideration of the mutual premises herein contained,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Mortgagor and Mortgagee agree as follows:
In order to induce the Mortgagee to enter into this agreement, the
Mortgagor represents and warrants that the Mortgagor now owns in fee simple the
entire premises covered by the mortgage or mortgages hereinafter described,
which premises are located at 10-20/30-40 Monroe Street, New York, New York and
more particularly described in Schedule "A" annexed hereto.
The Mortgagee is the holder of the mortgage or mortgages covering said
premises, and the respective bonds, notes or obligations secured thereby, set
forth in Schedule "B" attached hereto and made a part hereof (collectively,
"said mortgage" and "said obligation").
In the event more than one mortgage is hereinbefore described, then
(i) said mortgages are hereby consolidated and combined so that they
will together form a single lien on said premises for the full
amount of the mortgage debt and interest as herein set forth, and
(ii) said mortgages and the bonds, notes or obligations secured thereby
shall be treated, and are hereinafter referred to, as if they were
one obligation and one mortgage, given to secure the payment of
said mortgage debt and interest, and are hereinafter collectively
referred to as "said obligation" or "said mortgage" or the
"Mortgage,"
Said mortgage is and shall be and remain a lien against said premises,
and is and shall be and remain also a lien on, and is hereby spread to cover the
following:
(i) the premises described in Schedule "A" (the "Mortgaged Property"),
including all easements, rights, privileges and appurtenances that in any way
belong or appertain to such premises, and all estate, right, title, interest,
claim or demand whatsoever of Mortgagor therein and in the streets and ways
adjacent thereto, whether in law or in equity, in possession or expectancy, now
owned or hereafter acquired, together with any and all options now or hereafter
held by Mortgagor to purchase, lease, sublease or otherwise acquire such
premises or any portion thereof or interest therein, and any other estate in
such premises now owned or hereafter acquired by Mortgagor, and all land lying
in the bed of any street, road, highway or avenue, opened or proposed, in front
of or adjoining the Mortgaged Property (collectively, the "Premises");
(ii) all structures or buildings now or hereafter located upon the
Premises, or on any part thereof, including all plant equipment, apparatus,
machinery and fixtures forming part of said structures or buildings
(collectively, the "Improvements");
(iii) all fixtures, fittings, furniture, furnishings, appliances,
apparatus, equipment, machinery and other articles of personal property
(including, without limitation, all building service equipment and building
materials and supplies) and replacements thereof, now or at any time
hereinafter attached to, placed upon, or used or to be used in any way in
connection with the use, enjoyment, occupancy or operation of the Premises or
the Improvements (collectively, the "Chattels");
(iv) all leases subleases, tenancies, subtenancies and rental, use or
occupancy agreements for the use and occupancy of all or any portion of the
Mortgaged Property which are now in
<PAGE>
existence or which may exist at any time during the period that this Mortgage is
in effect, (leases, subleases, tenancies, subtenancies and rental, use or
occupancy agreements, as modified, amended, renewed or extended, are hereinafter
referred to, each as a "Lease" and, collectively, as the "Leases"), and all
estate, right, title, interest, claim or demand of Mortgagor under the Leases,
including, without limitation, any cash or securities deposited by lessees or
others to secure their performance, the rents and all other sums payable
thereunder and the right to receive and collect the rents, revenues, receipts,
income, earnings, issues and profits derived from the Mortgaged Property
(collectively, the "Rents"), subject, however, to any license to collect the
Rents granted by Mortgagee to Mortgagor in the Absolute Assignment of Rents and
Leases (the "Absolute Assignment") executed in connection with the Loan and all
guaranties of the payment or performance of lessees and other obligors under
such Leases and other agreements and instrument;
(v) all agreements, franchises, permits, applications, certificates and
licenses relating to the use, occupation, development, subdivision or operation
of the Mortgaged Property or any business or activity conducted by or on behalf
of Mortgagor on the Mortgaged Property, and any and all other general
intangibles relating to the development, operation or use of the Mortgaged
Property, including, without limitation, all names under or by which the
Mortgaged Property or any of the Improvements may at any time be operated or
known and all rights to carry on business under any such names or any variant
thereof, and all copyrights, trademarks and goodwill in any way relating to the
Mortgaged Property;
(vi) all proceeds of the conversion, voluntary or involuntary, of any
of the foregoing into cash or liquidated claims, including, without limitation,
proceeds of insurance (and any unearned premiums on such insurance policies) and
condemnations awards (or any transfer made in lieu thereof), tax certiorari
refunds, and the right to receive the sums, together with all causes of action
and recoveries for any loss or diminution in value of any of the foregoing.
(vii) the right, in the name and on behalf of Mortgagor, to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to commence any action or proceeding to protect Mortgagee's
interest in the Mortgaged Property; and
(viii) all additions, accessions, replacements, substitutions, and
renewals of or to any of the foregoing.
This Agreement is intended to amend and restate in their entirety the
provisions of the existing notes and mortgages, but the execution and delivery
of this agreement shall not in any way be deemed to create a new indebtedness or
to impair the liens of the existing mortgages ("said mortgage"). The Mortgagor
and the Mortgagee certify that this agreement secures the same principal
indebtedness that is secured by the said mortgage and secures no further or
other principal indebtedness or obligation.
The terms, conditions and provisions set forth herein shall supersede
in their entirety all of the terms, conditions and provisions for said mortgage
and obligation.
There is now owing on said obligation and secured by said mortgage,
without defense, offset or counterclaim of any kind, the principal sum of Six
Million Three Hundred Thousand and 00/100 Dollars ($6,300,000.00) with interest
on said principal sum from the date hereof.
Interest during the loan term shall be computed on the basis of a 360-
day year and twelve 30-day months.
The Mortgagor will pay said last mentioned principal sum of
$6,300,000.00 with interest thereon or on so much thereof as may from time to
time remain outstanding in the meantime in accordance with the terms of the
Amended and Restated Mortgage Note of even date herewith (the "Note") which
interesst shall be payable from January 30, 1997 at the rate of eight and one
half percent (8.5%) per annum to and including February 1, 2007 (the "Maturity
Date") and at the Adjusted Rate (as such term is defined in the Note secured
hereby), during the Extended Term (as such term is defined in the Note secured
hereby).
2
<PAGE>
In addition to payments of interest as set forth herein, the Mortgagor
shall make periodic payments of principal as follows:
(a) Commencing on the 1st day of March, 1997 and continuing on the first
day of each and every month thereafter to and including January 1, 2007 payments
of principal based upon a twenty-five (25) year amortization schedule; and
(b) On the Maturity Date, or on the Extended Maturity Date (as such term
is defined in the Note secured hereby) if said obligations are duly extended for
the Extended Term pursuant to the Note, the then outstanding Principal balance,
together with all accrued and unpaid interest and other amounts due under said
Note.
Unless the context otherwise specifies or requires, the terms specified
below shall have the meanings specified below.
"Authorizations" means all permits, certificates, approvals, consents,
licenses and authorizations (including, without limitation, Environmental
Authorizations) required to be obtained from governmental authorities having
jurisdiction over the Mortgaged Property in order that the Mortgaged Property
shall be owned, used, operated and maintained, and that Mortgagor's business
thereat shall be conducted in accordance with pertinent Requirements.
"Environmental Audit" means the environmental audit dated January 20, 1997
commissioned by Mortgagee in connection with the Mortgage.
"Environmental Authorization" means all Authorizations which pertain to
health, Hazardous Substances, environmental or ecological conditions at, on,
under or about the Mortgaged Property.
"Environmental Laws" (each, an "Environmental Law") means any and all
federal, state and local laws, statutes, regulations, ordinances, codes, rules,
rulings, judgments, decrees, orders, injunctions, and other requirements of
every governmental authority having jurisdiction, now or hereafter in effect
(including any of the foregoing which heretofore have been promulgated but which
are not yet in effect), in each instance as amended or extended, pertaining to
health, Hazardous Substances, environmental or ecological conditions at, on,
under or about the Mortgaged Property, including, without limitation, the
following:
(i) the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9600 et seq.;
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(ii) the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et
--
seq.:
----
(iii) the Toxic Substances Control Act, 15 U.S.C. Section 2601 et seq.:
------
(iv) the Clean Air Act, 42 U.S.C. Section 7401 et seq.:
------
(v) the Clean Water Act, 33 U.S.C. Section 1251 et seq.: and
------
(vi) the Hazardous Materials Transportation Act, 49 U.S.C.Section 1801 et
--
seq.
---
"Event of Default" is as defined in Article II of this Mortgage.
"Hazardous Substances" (each, a "Hazardous Substance") means: (i) asbestos
or asbestos-containing material, radon, "lead paint", polychlorinated biphenyls,
formaldehyde, flammable explosives, radioactive materials, petroleum and
products containing or derived from petroleum, underground storage tanks and
other underground storage facilities (i.e., any tank or facility and related
---
piping system of which ten percent (10%) or more by volume is underground); (ii)
any and all materials, substances, pollutants, contaminants and wastes defined
as "hazardous substances," hazardous waste", "hazardous air pollutant", or
"petroleum products", under any Environmental Law, or (iii) any and all other
hazardous or toxic materials, substances, polluntants, contaminants and
wastes.
"Involuntary Rate: means, from time to time, the highest rate of interest
the law then allows.
<PAGE>
"Loan Document" means all documents executed in connection with the loan
secured hereby, including this Agreement and the Note, which wholly or partially
secure or guarantee payment of the indebtedness evidenced by the Note.
"Prepayment Charge" means the charge described in the Note and this
Mortgage, which charge shall be due upon payment in full of the Note prior to
the maturity date set forth therein.
"Principals of Mortgagor" means Irene Pletka, Peter Pletka, Robert Gershon
and Melvin Gershon.
"Requirements" (each, a "Requirement") means any and all federal, state and
local laws, statutes, regulations, ordinances, codes, rules, rulings, judgments,
decrees, orders, injunctions, Authorizations, Environmental Laws and other
requirements of every governmental authority having jurisdiction, now or
hereafter in effect (including any of the foregoing which heretofore have been
promulgated but which are not yet in effect), in each instance as amended or
extended, which are applicable to Mortgagor, to the Mortgaged Property or any
portion thereof, as to the use, manner of use, occupancy, possession, condition,
operation, maintenance, alteration, repair, replacement, or restoration of the
Mortgaged Property or any portion thereof or to the conduct of Mortgagor's
business at the Mortgaged Property.
"To the best of Mortgagor's knowledge" means, with respect to any
representation or warranty contained in this Mortgage, that, after due inquiry,
Mortgagor knows of no fact(s) and has received no communication(s), oral or
written, which would cause a reasonably prudent person in the position of
Mortgagor (or the Principals of Mortgagor) to refrain from making the
representation or warranty in question.
ARTICLE I
Mortgagor's Covenants
---------------------
Mortgagor covenants and agrees as follows:
1.1 Title. This Mortgage is and shall remain a valid and enforceable
-----
first lien on the Mortgaged Property, subject only to the exceptions described
in this Mortgage. At Mortgagor's sole cost and without any expense to Mortgagee,
its successors or assigns, Mortgagor shall preserve such title and shall defend
and preserve the validity and priority of the lien of this Mortgage against the
claims of all other persons or entities and shall not do or permit to be done
anything which would impair the lien or priority of this Mortgage or the value
of the Mortgaged Property.
1.2 Security Agreement. This Mortgage shall, to the extent applicable,
------------------
constitute a security agreement under the Uniform Commercial Code of the state
in which the Mortgaged Property is situated. Mortgagor shall not make or execute
any other financing statement, lien, encumbrance or reservation of title as to
any element of the Mortgaged Property, or any addition or replacement thereto,
without Mortgagee's prior written consent. If Mortgagor shall default under any
of the Loan Documents, Mortgagee, in addition to any of the other rights or
remedies it may have, shall and may exercise immediately and without demand, any
and all rights and remedies granted to a secured party under the Uniform
Commercial Code of the state in which the Mortgaged Property is situated
1.3 Recordation; Certain Costs and Expenses.
---------------------------------------
(a) Recording and Filing. Upon the execution and delivery of this
--------------------
Mortgage, and thereafter from time to time and at any time, upon the demand of
Mortgagee, Mortgagor shall cause this Mortgage and any other instrument
creating or evidencing Mortgagee's lien upon the Mortgaged Property and each
instrument of further assurance delivered pursuant to this Mortgage to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of Mortgagee's interest in,
and to fully protect and preserve the lien of this Mortgage upon the Mortgaged
Property.
<PAGE>
(b) Fees and Costs of Mortgage, Related Documents. Mortgagor shall pay:
---------------------------------------------
(i) all filing, registration or recording fees, and all other expenses incurred
with respect to the execution, acknowledgement, filing, registration or
recording of this Mortgage, any extension or modification hereof, any mortgage
supplemental hereto, any other security instrument with respect to the Mortgaged
Property, any Uniform Commercial Code financing statement, any instrument of
further assurance, or any other Loan Document; and (ii) all federal, state,
county and municipal stamp taxes and other taxes, duties, imposts, assessments
and charges arising out of or in connection with the execution, delivery,
filing, registration, or recording of any of the Loan Documents, except to the
extent that Mortgagor is exempted by law from paying any such fee or expense and
satisfactory proof of such exemption is provided to Mortgagee's counsel,
provided, however, that if Mortgagee becomes liable for such fee or expense as a
result of Mortgagor's exemption, Mortgagor shall pay such fee or expense
notwithstanding its exempt status.
(c) Indemnification. Mortgagor shall indemnify and hold Mortgagee harmless
---------------
from and against any liability incurred by reason of the imposition of any tax
upon the making and recording of this Mortgage, any extension or modification
hereof, any mortgage supplemental hereto, the Note or any other Loan Document.
1.4 Obligation to Pay. Mortgagor shall punctually pay: (a) the principal,
-----------------
interest, Prepayment Charge (if any) and all other sums to become due under the
Note in strict compliance with the Note; (b) all other sums payable under or
secured by the Mortgage or any other Loan Document. All such payments under (a)
or (b) above shall be absolutely net to Mortgagee, without any abatement,
reduction, deduction, claim, counterclaim, set-off or offset whatsoever, whether
or not arising under the Loan Documents.
1.5 Compliance with Requirements.
----------------------------
(a) Legal Requirements. Mortgagor shall fully, faithfully and punctually
------------------
comply (and shall cause all lessees and other persons and entities which occupy
or enter upon the Mortgaged Property at all times so to comply) with all
applicable Requirements. Mortgagor, if a corporation, partnership, trust or
other legal entity, shall do all things necessary to preserve and keep in full
force and effect, in all jurisdictions where the same presently are in force and
effect, Mortgagor's existence, franchises, rights and privileges.
(b) Insurance Policy Requirements. Mortgagor shall fully, faithfully and
-----------------------------
punctually comply (and shall cause all lessees and other persons and entities
which occupy or enter upon the Mortgaged Property at all times so to comply)
with all provisions of all insurance policies covering or applicable to any
portion of the Mortgaged Property, all requirements of the issuer of any such
policies and all orders, rules, regulations, directives, codes and other
requirements of the National Board of Fire Underwriters (or any successor body
or other body performing similar functions) applicable to Mortgagor, the
Mortgaged Property or the use, manner of use, occupancy, possession, condition,
operation, maintenance, alteration, repair, replacement or restoration of the
Mortgaged Property or any portion thereof, except that Mortgagor shall not
effect, without prior written notice to Mortgagee, any such compliance that
necessitates structural changes to any of the Improvements.
1.6 Payment of Impositions for Mortgaged Property.
---------------------------------------------
(a) Taxes, Charges, Etc. Except to the extent that Mortgagee exercises any
-------------------
of the options set forth in this Mortgage, Mortgagor shall, at least ten days
before the due date, pay and discharge all taxes and other governmental charges
of every kind and nature, including, but not limited, to real estate, school and
personal property taxes, all general and special assessments, levies, permits,
inspection and license fees, vault charges, business improvement district fees,
all water and sewer rents and charges, and all other public charges whether of a
like or different nature, imposed upon or assessed against the Mortgaged
Property or any part thereof or upon the Rents or arising in respect of the
occupancy, use or possession thereof (collectively, "Impositions"). Mortgagor
shall, upon Mortgagee's request, promptly deliver to Mortgagee all receipts
evidencing such payments.
<PAGE>
(b) Liens and Claims. Mortgagor shall promptly pay all
----------------
lawful claims and demands of mechanics, materialmen, laborers and others that,
if not timely paid, might result in, or permit the creation of, a lien on the
Mortgaged Property or any part thereof, or on the Rents, or lead to the
interruption or suspension of any business of Mortgagor. Mortgagor shall not
create or permit to be created, and shall promptly discharge, any mortgage, lien
or charge on the Mortgaged Property or any part thereof or on the interest of
Mortgagor therein other than this Mortgage.
1.7 Indemnity by Mortgagor. Mortgagor shall defend and indemnify
----------------------
Mortgagee, Mortgagee's successor and assigns and all directors, officers,
shareholders, employees and agents of the foregoing (collectively, the
"Indemnified Parties") against, and save the Indemnified Parties harmless from,
and shall reimburse the Indemnified Parties with respect to, any and all claims,
demands, actions, causes of action, injuries, orders, losses, liabilities
(statutory or otherwise), obligations, damages (including, without limitation,
consequential damages), fines, penalties, costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements) incurred by, imposed
upon or asserted against the Indemnified Parties or any one or more of them by
reason of, or in connection with:
(a) Mortgagee's interest in this Mortgage, the Note or any other Loan
Document or the Mortgaged Property;
(b) any misrepresentation or other incorrect statement or certification by
Mortgagor, any Principal of Mortgagor or any Guarantor contained in the Note,
this Mortgage or any other Loan Document;
(c) any failure by Mortgagor to comply with any of the terms, conditions or
other provisions set forth in the Note, this Mortgage or any other Loan
Document;
(d) any acts or omissions of Mortgagee in connection with the exercise by
Mortgagee of any right, power or remedy available to Mortgagee under this
Mortgage or any Document;
(e) any use, non-use, occupancy, possession, condition (whether patent or
latent), operation, maintenance, alteration, repair, replacement, restoration or
management of the Mortgaged Property or any portion thereof;
(f) any accident, injury (including death resulting therefrom) or damage to
any person or property occurring in, on or about the Mortgaged Property or any
portion thereof, whether resulting from any act or omission of Mortgagor or any
agent, employee, contractor, lessee, sublessee, licensee or invitee of Mortgagor
or otherwise; or
(g) any taxes, impositions, charges, assessments or levies, except income
taxes imposed on Mortgagee by reason of Mortgagee's ownership of the Note, or
this Mortgage or any other Loan Document.
All amounts payable to Mortgagee under this Section shall be payable
upon demand of Mortgagee, together with interest at the Involuntary Rate from
the date of such demand, until the date of receipt by Mortgagee of full payment,
and shall be secured by this Mortgage. Mortgagor's obligations under this
Section shall survive payment in full of the Note and any discharge, release or
satisfaction of this Mortgage, any complete or partial foreclosure of this
Mortgage or the delivery of one or more deeds in lieu of any such foreclosure.
1.8 Insurance and Casualty.
----------------------
(a) Basic Insurance Requirements. Mortgagor shall, at Mortgagor's own
----------------------------
cost and without expense to Mortgagee, keep the Imporvements and Chattels
insured for the benefit of Mortgagee aganinst loss by fire, casualty and such
other hazards as may be specified by Mortgagee, including such hazards as are
covered by insurance known as "broad form of supplemental or extended coverage."
Such insurance shall be written in forms, and by companies authorized to do
buisiness in the state where the Mortgaged Property is situated,
6
<PAGE>
satisfactory to Mortgagee, and in amounts sufficient to prevent Mortgagor or
Mortgagee from becoming a coinsurer of any loss under the applicable policies,
but in no event in an amount less than the greater of:
(i) one hundred percent (100%) of the then actual replacement value of
the Improvements (excluding foundations) as determined by Mortgagor in
accordance with generally accepted insurance practice and reasonably approved by
Mortgagee or, at the option of Mortgagee, as determined, at Mortgagor's expense,
by the insurer or insurers or by an expert appraiser reasonably approved by
Mortgagee; or
(ii) the principal sum of the Note outstanding from time to time, plus
all interest accrued thereon and all other sums due Mortgagee under any of the
Loan Documents.
All losses under the applicable policies shall be payable to Mortgagee
pursuant to a standard first mortgage endorsement substantially equivalent to
the New York standard mortgagee endorsement. Mortgagor shall deliver the
original insurance policy (or policies) to Mortgagee, who shall not be deemed to
have knowledge of the contents of such policies by reason of its custody
thereof. Mortgagor shall deliver to Mortgagee new or renewal policies to replace
expiring policies at least thirty (30) days before their respective expiration
date. Each such new or renewal policy shall bear a notation by the insurer or
its authorized agent evidencing payment of the required premium. Mortgagor will
not permit any condition to exist on the Mortgaged Property that would wholly
or partially invalidate the policies.
(b) No Separate Insurance. Mortgagor shall not procure separate
---------------------
insurance concurrent in form or contributing in the event of loss with that
required to be maintained under this Section, unless Mortgagee is included
thereon as loss payee (pursuant to a standard mortgagee endorsement) or
additional insured, whichever Mortgagee may require. Mortgagor shall immediately
notify Mortgagee whenever any such separate insurance is procured and shall
promptly deliver to Mortgagee the policy or policies of such insurance.
Mortgagee's approval of any insurance described anywhere in this Mortgage shall
not be construed, or relied upon by Mortgagor, as a representation of the
solvency of any insurer or the sufficiency of the amount or scope of the
insurance.
(c) Flood Insurance. If the Mortgaged Property is located in an area
----- ---------
that has been, or at any time is, identified by the Secretary of Housing and
Urban Development (or any other governmental authority performing a similar
function and having jurisdiction over the Mortgaged Property) as a flood hazard
area, Mortgagor shall keep the Improvements insured against loss by flood and
such insurance will name Mortgagee as loss payee. Flood coverage shall equal at
least the lesser of: (i) the principal sum of the Note outstanding from time to
time, plus all interest accrued thereon and all other sums due Mortgagee under
any of the Loan Documents; or (ii) the maximum limit of coverage available for
the Mortgaged Property under the National Flood Insurance Act of 1968 as such
act may be amended, modified or replaced from time to time. All proceeds of any
such insurance shall be payable to Mortgagee and may be applied as set forth in
this Section.
(d) Other Insurance. Mortgagor shall also maintain for the benefit of
---------------
Mortgagee, public liability insurance, including personal injury and property
damage, applicable to the Mortgaged Property and such other insurance as
Mortgagee may request, from time to time and at any time, including, without
limitation, rent and business interruption insurance, all in such amounts as
Mortgagee may require but not less than such amounts as are usually carried by
owners of similar properties in like locations.
(e) Policy Requiremets. All insurance maintained pursuant to this
------------------
Section shall: (i) name Mortgagor and Mortgagee as insured as their respective
interests may appear; (ii) include waivers by all insurers of all rights of
subrogation against any named or additional insured, the indebtedness secured
hereby and the Mortgaged Property; (iii) provide that no cancellation, reduction
in amount or material change in coverage shall be effective until at least
thirty (30) days after receipt by Mortgagee of written notice thereof; and (iv)
Mortgagee shall receive copies of all notices sent under the policy at the same
time such notices are sent to Mortgagor.
7
<PAGE>
(f) Unearned Premiums. Mortgagor hereby assigns to Mortgagee the
-----------------
unearned premiums on all insurance policies furnished hereunder and consents to
the cancellation of such policies (and the refund of all unearned premiums to
Mortgagee) if Mortgagee obtains title to the Mortgaged Property at a foreclosure
sale or by deed in lieu transaction or otherwise. Any such unearned premiums
shall be applied against the sums due to Mortgagee under the Note, the Mortgage
or any other Loan Documents hereunder or as otherwise determined by Mortgagee in
its sole discretion. Upon a foreclosure of this Mortgage or other transfer of
title to the Mortgaged Property in full or partial payment of the Loan, all
right, title, and interest of Mortgagor in and to any insurance policies then in
force shall pass to the purchaser or grantee or other person designated by the
holder of the Note.
(g) Casualty; Application of Insurance Proceeds. Mortgagor shall give
-------------------------------------------
Mortgagee prompt notice of any casualty affecting the Mortgaged Property. All
insurance proceeds shall be paid over to Mortgagee. Mortgagee shall have the
right to join Mortgagor in adjusting any loss in excess of Fifty Thousand
Dollars ($50,000). In the event of any casualty affecting the Mortgaged Property
(other than a casualty that, in Mortgagee's good faith judgment, renders the
Mortgaged Property unsuitable for restoration), Mortgagor shall promptly
commence and diligently complete, at Mortgagor's own expense, the replacement,
repair or restoration of the Mortgaged Property as nearly as practicable to the
value, condition, character and general utility thereof immediately prior to
such casualty, whether or not the insurance proceeds for such casualty shall be
made available to Mortgagor or, if made available, shall be sufficient for such
purpose. The lien of this Mortgage shall continue to apply to the Mortgaged
Property as the same are thereafter restored. Whether or not replacement repairs
or restoration shall have been made, Mortgagee shall have the right to apply
such proceeds first to all its costs in the collection thereof, and second
(except to the extent that Mortgagee agrees otherwise in writing) to the
prepayment in whole or in part of the principal of the Note, Prepayment Charge,
if any, and all accrued interest thereon, and to the payment of any other amount
payable under any Loan Document and secured by this Mortgage, in such order and
priority as the Mortgagee in its sole discretion shall determine. The balance,
if any, of such proceeds shall be paid to whoever may be legally entitled to the
same. The provisions of subsection 4 of Section 254 of the Real Property Law of
the State of New York covering the insurance of buildings against loss by fire
shall not apply to the terms of this Mortgage.
(h) Mortgagee's Right to Obtain Insurance. If at any time Mortgagee is not
-------------------------------------
in receipt of written evidence that all insurance required hereunder is in full
force and effect, Mortgagee shall have the right (but not the obligation),
without notice to Mortgagor, to take such actions as Mortgagee deems necessary
to protect its interest in the Mortgaged Property, including obtaining such
insurance coverage as Mortgagee, in its sole and absolute discretion, deems
appropriate, and all expenses incurred by Mortgagee in connection with such
action shall be paid by Mortgagor to Mortgagee upon demand.
1.9 Advances, Etc., by Mortgagee. If Mortgagor fails to perform any
----------------------------
obligation under any Loan Document, then Mortgagee may (but shall not be
obligated to) perform the same and make such advances therefor as, in
Mortgagee's opinion, may be necessary or appropriate, all for the account and at
the expense of Mortgagor. To the extent of all sums so advanced (including,
without limitation, attorneys' fees and disbursements), Mortgagee shall have a
lien upon the Mortgaged Property which shall be secured by this Mortgage.
Mortgagor shall repay on demand all sums so advanced on Mortgagor's behalf with
interest at the Involuntary Rate on each such sum from the date advanced by
Mortgagee until the date Mortgagee has collected repayment thereof in full.
Mortgagee's exercise of its rights under this Section shall not be deemed to
cure any circumstance that would otherwise constitute an Event of Default.
1.10 Right to Inspect. Mortgagor shall permit Mortgagee and its agents
----------------
and representatives to enter the Mortgaged Property at all reasonable times for
the purpose of: (a) inspecting the same; (b) determining whether Mortgagor is in
compliance with all of Mortgagor's obligations under this Mortgage or any other
Loan Document. No such entry shall ever make Mortgagee a "mortgagee in
possession."
1.11 Escrow Requirements. Mortgagor shall pay to Mortgagee, at the time
-------------------
of each payment of a monthly installment of interest and principal under the
Note, a sum equal to one-
8
<PAGE>
twelfth of the estimated annual amount of all Impositions, and at Mortgagee's
option, a sum equal to one-twelfth of the annual amount of any insurance
premiums with respect to the Mortgaged Property so that at least one month
before the due date of each such Imposition, Mortgagee shall hold sufficient
funds to pay each such charge in full. The determination of the amount so
payable and of the fractional part thereof to be deposited with Mortgagee, so
that the aggregate of such deposit shall be sufficient for this purpose, shall
be made by Mortgagee in its sole discretion. Such amounts collected shall be
held by Mortgagee in an account (the "Accumulation Account"), but not in trust
and without interest, and applied to the payment of such charges in such order
and priority as Mortgagee, at Mortgagee's sole discretion, shall determine, on
or before the respective dates on which the same or any of them would become
delinquent. All monies paid to Mortgagee under this Section may be intermingled
with other monies of Mortgagee, shall constitute additional security hereunder,
and shall earn only such interest as prescribed by law, if any. If at any time
before the date payment of any such Imposition is due Mortgagee determines that
the amounts then on deposit therefor shall be insufficient for the payment of
such Imposition in full, then Mortgagor, within ten days after Mortgagee's
demand, shall deposit the amount of the deficiency with Mortgagee. Mortgagor
shall be responsible for the payment of all penalties and interest assessed by
any municipality for any Imposition, unless same are assessed as a result of
negligence of Mortgagee in making timely payment from the Accumulation Account.
Mortgagor shall promptly deliver to Mortgagee all bills and notices of such
Imposition. Mortgagee may pay such Imposition before or after they become due
and payable but, in any event, before delinquency. This Section does not affect
any right or remedy of Mortgagee under any provisions of this Mortgage or of any
statute or rule of law to pay any such amount and to add the amount so paid,
together with interest at the Involuntary Rate, to the indebtedness secured by
this Mortgage, as more fully described in this Mortgage. Upon the occurrence of
an Event of Default, Mortgagee may, at its option and without notice to
Mortgagor, apply any funds held pursuant to this Section in payment of any of
the Imposition described above or to any unpaid principal or other sum due under
the Note or any other Loan Document. At all times, any negative balance in the
Accumulation Account shall constitute a secured advance made by Mortgagee to
protect its security under this Mortgage, and Mortgagor shall be responsible for
the payment of said deficit, including, but not limited to, taxes, penalties and
interest advanced in accordance with this Mortgage.
1.12 Financial Reporting
-------------------
(a) Mortgagor's Books and Records. Mortgagor shall keep proper books and
-----------------------------
records of account in a manner reasonably satisfactory to Mortgagee. Mortgagor
shall permit Mortgagee, by its agents, accountants and attorneys, to visit and
inspect the Mortgaged Property and examine and copy Mortgagor's books and
records of account, and supporting vouchers, data and other documentation, and
to discuss Mortgagor's affairs, finances and accounts with Mortgagor or such of
its officers, partners, or other principals as Mortgagee may desire, at such
reasonable times as Mortgagee may request.
(b) Financial Statements. Within ninety (90) days of the end of each fiscal
--------------------
year, Mortgagor shall submit to Mortgagee: (i) financial statements, consisting
of a balance sheet, a statement of cash flow and a statement of income and
expenses for Mortgagor with respect to the Premises as of the end of such year,
prepared by independent certified public accountants selected by the Mortgagor
and acceptable to Mortgagee, as prepared in accordance with generally accepted
accounting principles, consistently applied; (ii) copies of the Mortgagor's
federal, state and local income tax returns, or any other income tax that may be
applicable now or hereafter certified by Mortgagor to be in all respects true,
complete and correct; and (iii) a current rent roll for the Premises containing
the names of all parties that have written leases or agreements with respect to
the Premises, the space occupied, the monthly rental payments, the status of the
rent payments on each lease and whether there are any claims, offsets or other
charges by a tenant against Mortgagor with respect to such lease, which rent
roll shall be satisfactory to Mortgagee and certified by Mortgagor as being
true, correct and complete. Each document submitted by Mortgagor pursuant to the
previous sentence shall be accompanied by a certificate signed by a duly
authorized representative of Mortgagor certifying on the date thereof that
either there does (or does not) exist an event which constitutes, or which upon
notice or lapse of time or both would constitute, a default or an Event of
Default under the Note this
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Mortgage or any other Loan Document and if such default or Event of Default
exists, the nature thereof and the period of time it has existed. Mortgagor
shall retain all books and records of account, financial statements and other
data and documentation which relate to the subject matter of this Section for at
least seven years after the expiration of the year to which each such item
pertains. Mortgagor will furnish to Mortgagee, within ten (10) days after
request, such further detailed information concerning the operation of the
Mortgaged Property and the financial affairs of Mortgagor, any affiliate of
Mortgagor or any Guarantor as may be requested by Mortgagee.
(c) Certification of Balance. Mortgagor, within five days after a request
------------------------
is made in person or within ten days after a request made by mail, shall sign,
acknowledge and furnish to Mortgagee a statement certifying the principal amount
then outstanding on the Note, confirming that no offsets, claims, counterclaims,
or defenses exist against the indebtedness secured by this Mortgage, and
containing such other matters as Mortgagee shall reasonably require.
1.13 Maintenance and Operation of Mortgaged Property. Mortgagor shall not
---------------------------- ------------------
commit any waste on the Mortgaged Property or make any change in the use of the
Mortgaged Property that would, in Mortgagee's sole opinion, in any way increase
the likelihood of fire or other hazard, increase any insurance rates for the
Mortgaged Property, or materially reduce the value or utility of the Mortgaged
Property. All repairs made by Mortgagor shall be at least equal in quality as
the original work. Mortgagor shall, at all times, maintain the Mortgaged
Property in good operating order and condition and shall promptly make, from
time to time, all necessary or desirable repairs, renewals, replacements,
additions and improvements thereto. Mortgagor shall comply with all requirements
necessary to preserve and extend any and all rights, licenses, Permits,
privileges, franchises and concessions that apply to the Mortgaged Property or
have been (or subsequently are) granted to or contracted for by Mortgagor in
connection with any existing or proposed use of the Mortgaged Property, provided
as to any rights, licenses, permits, privileges, franchise and concessions
hereafter obtained by Mortgagor, Mortgagee has consented thereto. The
Improvements shall not be removed, demolished or substantially altered without
the prior written consent of Mortgagee. No Chattels shall be removed without
Mortgagee's prior written consent, unless Mortgagor immediately makes
appropriate replacements free of superior title, liens, and claims and of a
quality and value at least equal to that of the Chattels so removed. Except with
Mortgagee's prior written consent, Mortgagor shall not initiate, join in,
execute or consent to any change in any covenant, condition, restriction,
declaration, zoning ordinance, or other public or private restriction limiting,
defining, or otherwise controlling construction on, or use(s) of, all or any
part of the Mortgaged Property. Mortgagor shall at all times strictly comply
with all of the foregoing.
1.14 Condemnation. Mortgagor, immediately upon obtaining knowledge of the
------------
institution of any proceedings for the condemnation of the Mortgaged Property or
any portion thereof, shall notify Mortgagee of the pendency of such proceeding.
Mortgagee may participate in any such proceeding, and Mortgagor from time to
time shall deliver to Mortgagee all instruments that Mortgagee may request to
permit such participation. In any such condemnation proceeding, Mortgagee may be
represented by counsel selected by Mortgagee, whose fees and expenses Mortgagor
shall pay when due. The award or compensation payable in any condemnation
proceedings, or any transfer in lieu thereof, is hereby irrevocably assigned,
and shall be paid, to Mortgagee. Mortgagor hereby irrevocably appoints Mortgagee
as Mortgagor's attorney in fact, coupled with an interest, to collect and
receive the award, appear in any proceeding, and take such other actions as
Mortgagee may consider necessary. Mortgagee shall be under no imposition to
question the amount of any such award or compensation and may accept the same in
the amount in which the same shall be paid. The proceeds of any award or
compensation so received (including any award for change of grade of streets
affecting or abutting the Premises) shall be applied, to reimburse Mortgagee for
all its costs in any such condemnation proceeding, next to the payment of any
Prepayment Charge, next to any other amount payable to Mortgagee under the Note,
this Mortgage, or the other Loan Documents, next to accrued interest as provided
in the Note, regardless of the rate of interest payable on the award by the
condemning authority, and lastly to principal. The balance, if any, shall be
payable to whoever may be legally entitled to the same. Mortgagor shall continue
to pay interest at the rate specified in the Note and shall remain obligated to
repay the entire unpaid indebtedness then outstanding under the Note, this
Mortgage and the other Loan Documents
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except to the extent that Mortgagee has actually received the condemnation award
or compensation.
1.15 Leasing of Mortgaged Property.
-----------------------------
(a) Existing Leases. In addition to the representations and warranties
---------------
set forth in the Absolute Assignment, Mortgagor represents and warrants to
Mortgagee that, as of the date of this Mortgage and as to each existing Lease:
(i) the Lease has been duly executed by the lessor and lessee thereunder, is in
full force and effect and is valid, binding and enforceable against each of said
parties in accordance with its terms; (ii) a complete copy of each commercial
lease has been delivered to the Mortgagee and is a true, correct and complete
copy of the entire Lease; (iii) neither the lessor nor the lessee has failed to
comply with any obligation imposed upon such party thereunder except such
lessees as are listed on Exhibit C annexed to the Absolute Assignment of Rents
and Leases executed on this date by Mortgagor; (iv) neither the Lease, nor any
Rents payable thereunder, have heretofore been sold, assigned, transferred or
set over by any instrument now in force, nor, unless indicated to the contrary
in the Assignment, is the Lease other than a direct lease from Mortgagor, or its
predecessor in interest to a lessee; (v) no installment of Rents has been paid
more than thirty (30) days prior to the due date for such installment; (vi) the
lessee does not have and has not claimed any defense, abatement, deduction,
offset, claim or counterclaim affecting the payment of Rents or compliance with
the lessee's other obligations thereunder, and all Rents provided for in the
Lease are currently being collected free thereof and without any violation of
any law or other governmental regulation or requirement; (vii) the Lease
contains no option to buy or right of first refusal with respect to an offer to
sell the Mortgaged Property or any part thereof; (viii) Mortgagor has the sole
and unconditional right and power to sell, assign, transfer and set over the
Lease to Mortgagee and to confer upon Mortgagee the rights, interests, power and
authority herein granted and conferred; and (ix) the Lease is, by its express
terms, unconditionally subject and subordinate to the lien of this Mortgage or,
in the case of the residential Leases, subject to the provisions of the
Private Housing Finance Law.
(b) Lease Covenants by Mortgagor. Mortgagor covenants that, with
----------------------------
respect to each Lease, it will not, without Mortgagee's prior written consent:
(i) accept prepayment of any installment of Rents payable thereunder other than
prepayment of one month's Rents; (ii) amend or modify the Lease so as to reduce
the unexpired term thereof, decrease the amount of Rents payable thereunder or
otherwise diminish any obligation imposed therein upon the lessee; (iii) unless
the lessee has failed to comply with a material obligation imposed upon it
in the Lease, terminate, accept surrender of or permit cancellation of the Lease
if the unexpired term thereof is one year or longer; (iv) modify, amend, extend,
renew, terminate or accept the surrender of the Lease, except in the ordinary
course of business; (v) pledge, mortgage, assign or otherwise transfer or
encumber the Lease or any interest of Mortgagor therein or all or any portion of
the Rents payable by the lessee thereunder as security for any obligation; (vi)
subordinate the Lease to any mortgage (other than this Mortgage) or other
encumbrance; (vii) sell, assign, transfer or set over the Lease or any interest
therein or Rents thereunder, except in connection with a conveyance of the
Mortgaged Property and then only if expressly made subject to this Mortgage and
if permitted by the express terms of this Mortgage; (viii) consent to, waive or
permit to continue any violation of any obligation imposed upon the lessee under
the Lease; or (ix) consent to or permit the modification, amendment, termination
or surrender of any guaranty of the Lease.
In addition, Mortgagor will not, without Mortgagee's prior written
consent:
(A) enter into a Lease, execute, consent to or permit an assignment of a
Lease, or consent to or permit the subletting, in whole or in part, of any space
leased pursuant to a Lease.
(b) enter into any commercial Leases (x) except for actual occupancy by the
lessee of all of the space demised thereunder, (y) unless the Lease, by its
express terms, (1) is unconditionally subject and subordinate to the lien of
this Mortgage and provides that, in the event Mortgagee or its designee or
nominee succeeds to the interest of Mortgagor under such Lease, the lessee
thereunder shall, at the option of Mortgagee or such designee or nominee,
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promptly attorn to Mortgagee or such successor in interest and recognize such
party as lessor under the Lease and confirm such attornment and recognition in
writing, and (2) requires the lessee upon demand to duly execute, acknowledge
and deliver to Mortgagee a certificate (an "Estoppel Certificate") with respect
to the status of such Lease and such matters relating to the status of such
Lease as any mortgagee may reasonably require, and (z) pursuant to which the
lessee or any other person or entity shall have an option, right of first
refusal or other right with respect to the acquisition by it of the Mortgaged
Property or any part thereof.
Within ten (10) days of the execution, modification, extension, renewal,
surrender, assignment or consent to assignment of a commercial Lease, Mortgagor
shall forward a copy of same to Mortgagee.
(c) Additional Covenants by Mortgagor. Mortgagor covenants that, with
---------------------------------
respect to each Lease, it will: (i) fully, faithfully and punctually comply with
all of the obligations imposed upon the lessor thereunder; (ii) within five (5)
days after request by Mortgagee, (A) deliver to Mortgagee complete copies of
fully executed originals of all Leases and other instruments affecting the
Mortgaged Property, and (B) request an Estoppel Certificate from any commercial
lessee designated by Mortgagee; (iii) give prompt notice to Mortgagee of the
failure by either the lessor or the lessee to comply with any obligation imposed
upon such party under the Lease, with a copy of any notice of default or other
communication with respect thereto given by either the lessor or the lessee to
the other; and (iv) enforce compliance by the lessee with all obligations
imposed upon it therein.
(d) List of Lessees. Mortgagor shall furnish to Mortgagee, within fifteen
---------------
(15) days after Mortgagee's demand, a written lease schedule containing the
names and social security or taxpayer identification numbers of all lessees, the
terms of their respective Leases, the amount of space occupied and the rentals
payable, and security deposited thereunder.
(e) Effect of Separate Absolute Assignment. Any prohibitions and
--------------------------------------
restrictions affecting the leasing of the Mortgaged Property contained in the
Absolute Assignment (which are hereby incorporated in this Mortgage by
reference) shall supplement the prohibitions and restrictions set forth in this
Mortgage. If there is any inconsistency or conflict between the provisions of
this Mortgage and the provisions of the Absolute Assignment, the provisions of
this Mortgage which expand rather than restrict the rights of Mortgagee shall
govern and control in each instance.
(f) Effect of Event of Default. Notwithstanding anything to the contrary
--------------------------
in this Mortgage, and in addition to any other restriction set forth in this
Section or in the Absolute Assignment, during the pendency of any uncured Event
of Default, Mortgagor shall not enter into any Lease, relocate any existing
lessee, or make or permit any modification, amendment, extension or assignment
of an existing Lease or the subletting, in whole or in part, of any space leased
pursuant to an existing Lease without Mortgagee's prior written consent, which
may be withheld for any reason or no reason.
(g) Rights under Section 291. Mortgagor acknowledges that Mortgagee shall
------------------------
have all of the rights against tenants or subtenants of the Mortgaged Property
as the same are set forth in Section 291-f of the Real Property Law of the State
of New York. Nothing contained in this Section shall be construed as imposing
on Mortgagee any of the obligations of the Mortgagor or the lessor under such
leases.
1.16 Interest after Default. In the event of a default under any of the
----------------------
terms, covenants or conditions of the Note, this Mortgage, or any other Loan
Documents, and acceleration by Mortgagee of the indebtedness due thereunder,
interest thereon shall be payable at the Involuntary Rate computed from the date
of default to the date of payment, which sum shall be secured by the lien of
this Mortgage.
1.17 Due on Transfer. Mortgagor shall not:
--------------
(a) sell, assign, lease, convey, mortgage, pledge, hypothecate, make the
subject of any security interest, exchange, subdivide or permit to be divided
into multiple condominium
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or cooperative units, or in any other manner whatsoever, transfer or encumber
all or part of, or any interest in, or any of the Rents derived from, or control
of, the Mortgaged Property, or suffer or permit any of the foregoing to occur,
whether by operation of law or otherwise, except to the extent that Mortgagor
leases residential apartments and commercial space in the ordinary course of
business;
(b) effectuate or permit a reduction in the ownership interests in
Mortgagor held by any Principal(s) of Mortgagor;
(c) effectuate or permit a closing of any public or private offering of
ownership interests in Mortgagor or in any entity directly or indirectly owning
any interest in Mortgagor or the Mortgaged Property;
(d) effectuate or permit a transfer of the controlling interest in
Mortgagor.
If applicable, "transfer of the controlling interest in Mortgagor" includes,
without limitation, the following:
(i) the sale, assignment, issuance, redemption, diminution or pledge,
whether through a single transaction or a series of transactions, of the direct
or indirect ownership interest of or change in the principals in Mortgagor or of
any entity that directly or indirecflyowns or controls Mortgagor;
(ii) the modification of any organizational documents of Mortgagor or
of any entity that directly or indirectly owns or controls Mortgagor, if the
effect of such modification is to transfer ownership or control of such entity
or to limit the liability of Mortgagor of any entity that directly or indirectly
owns or controls Mortgagor;
(iii) the dissolution or termination, whether by operation of law or
otherwise, of Mortgagor or of any entity that directly or indirectly owns or
controls Mortgagor; or
(iv) any other transaction or series of transactions by which any
person(s) other than the Principal(s) of Mortgagor obtain ownership or control
of Mortgagor or the Mortgaged Property; or
(e) Notwithstanding the foregoing, the Mortgagee shall have no right to
accelerate this Mortgage or the indebtedness secured hereby in the event of:
(i) a sale or transfer of the interest of any Principal of Mortgagor
resulting upon the death or incapacity of such Principal of Mortgagor; or
(ii) a transfer by any Principal of Mortgagor of his/their interest in
the Mortgagor, provided the Principals of Mortgagor retain at least a 50%
ownership interest in the Mortgagor subsequent to any such transfer.
In addition, nothing in this Section shall, however, prohibit the entering
into of leases that comply with this Mortgage, the Absolute Assignment and any
other applicable Loan Documents, or in the event Mortgagor is a cooperative
apartment corporation, the transfer and mortgaging from time to time of lease(s)
to individual apartment units and the appurtenant shares. This paragraph shall
apply to each and every such further transaction regardless of whether Mortgagee
has consented to or waived by action or inaction its rights hereunder with
respect to any such further transaction.
1.18 Costs of Litigation and certain Proceedings. If Mortgagee is a party to
-------------------------------------------
any action or proceeding affecting the Mortgaged Property, then Mortgagor shall
pay all costs incurred by Mortgagee in connection with such litigation
(including counsel fees and disbursements). If any action or proceeding of any
kind (including, but not limited to, any bankruptcy, insolvency, arrangement,
reorganization or other debtor relief proceeding) is commenced, or if there
occurs any other event that might affect Mortgagor's or Mortgagee's interest in
the Mortgaged Property
13
<PAGE>
or Mortgagee's right to enforce its security, then Mortgagee may, at Mortgagee's
sole option, and without notice, which notice Mortgagor hereby expressly waives,
make any appearances, disburse any sums and take such actions as Mortgagee under
this Mortgage. If Mortgagee commences any action, by reason of a default or
otherwise, against Mortgagor or appears in any bankruptcy, insolvency,
reorganization or other proceeding for debtor relief to enforce any of the terms
of the Note, this Mortgage or any other Loan Document or because of Mortgagor's
breach under the Note, this Mortgage or any other Loan Document, or for the
recovery of any sum secured by this Mortgage, then Mortgagor shall pay
Mortgagee's reasonable attorneys' fees and disbursements upon demand, and the
right thereto shall be deemed to have accrued from the commencement of such
action, and shall be enforceable whether or not such action is prosecuted to
judgment. Mortgagor shall pay to or reimburse Mortgagee all of Mortgagee's costs
and disbursements (including, without limitation, reasonable attorneys' fees and
disbursements) described in this Section upon demand, which costs and
disbursements shall be deemed secured by this Mortgage, or at Mortgagee's
option, Mortgagor shall pay such costs directly to the billing party.
1.19 Late Charge. If any payment required by the Note, this Mortgage or any
-----------
other Loan Document is not received on or before the tenth day after its due
date, then Mortgagee shall charge a late charge of six percent (6%) of the
amount so overdue to defray expenses incurred in handling such late payment
(which amount Mortgagor agrees is reasonable). Mortgagor shall pay such late
charge upon demand or, if no demand is made, then concurrently with the next
payment due under the Note. In the event a check delivered to Mortgagee in
payment of any sum due under the Note, this Mortgage, or any other Loan Document
is dishonored, a service fee (not to exceed two percent (2%) of the face amount
of the dishonored check) may be charged by Mortgagee for the handling such
check. At the option of Mortgagee, the foregoing may be deducted from the
Accumulation Account.
1.20 Trust Fund. If the Mortgaged Property is situated in New York State, this
----------
Mortgage is made subject to the trust fund provisions of Section 13 of the New
York Lien Law, which Section is incorporated herein by this reference, and
Mortgagor covenants that it shall receive all monies and advances secured hereby
and shall hold the right to receive such advances as a trust fund to be applied
first for the purpose of paying the costs of improvement before using any part
of the same for any other purpose.
1.21 Prepayment. The Note may be prepaid in whole but not in part as
----------
expressly provided in the Note secured hereby.
1.22 Hazardous Substances.
--------------------
(a) Compliance with Environmental Laws. Mortgagor shall at all times
----------------------------------
promptly comply, and shall cause all lessees and other persons and entities
which occupy or enter upon the Mortgaged Property at all times promptly to
comply, with all Environmental Laws insofar as same apply to all or any part of
the Mortgaged Property. Without limiting the generality of the foregoing:
(i) Mortgagor shall cause all Environmental Authorizations to be
maintained in full force and effect;
(ii) Mortgagor shall not cause or permit (or permit any lessee or any
other person to cause or permit) any Hazardous Substance to be used, received,
handled, generated, manufactured, produced, processed, treated, stored,
released, placed, spilled, discharged, disposed of or dispersed at, on, under or
about the Mortgaged Property except pursuant to and in accordance with
Environmental Laws; and
(iii) if other than in accordance with the provisions of the immediately
preceding clause (ii), and Hazardous Substance not disclosed in the
Environmental Audit shall at any time be present at, on or under the Mortgaged
Property, Mortgagor, whether or not so directed by Mortgagee, shall promptly
undertake the appropriate Remedial Work (as defined below ) or take such other
action as shall be necessary in order to cause said Hazardous Substance promptly
to be removed therefrom.
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(b) Liens. If any lien shall be filed against, or imposed upon,
-----
the Mortgaged Property with respect to non-compliance with any Environmental
Law, Mortgagor shall promptly give Mortgagee notice thereof and shall cause such
lien to be discharged or bonded or otherwise secured to Mortgagee's sole
satisfaction within thirty (30) days of such filing.
(c) Notice to Mortgagee. If Mortgagor shall either obtain knowledge
-------------------
of any fact or circumstance which might render inaccurate any representation or
warranty contained in this Mortgage; or receive any summons, citation,
directive, order, notice or other communication from any governmental authority
having jurisdiction relating to the application of any Environmental Law to the
Mortgaged Property, Mortgagor shall promptly send a copy of same to Mortgagee.
(d) Representations, Etc. Mortgagor shall not take or omit to take
--------------------
(or suffer or permit any lessee or other person or entity occupying all or any
part of the Mortgaged Property to take or omit to take) any action which, if
taken or omitted to be taken, would render inaccurate any representation or
warranty contained in this Mortgage.
(e) Remedial Work. If Mortgagee, acting in its sole and absolute
-------------
discretion, determines that any investigation, site monitoring, environmental
audit and risk assessment, containment, clean-up, encapsulation, removal,
restoration or other remedial work of any kind (any of the foregoing, "Remedial
Work") is necessary or desirable in connection with either the known or
suspected presence at, in, on, under or about the Mortgaged Property of any
Hazardous Substance or the requirements of any Environmental Law or the
suspected violation of any Environmental Law, or if Mortgagee in its sole and
absolute discretion determines that the Mortgaged Property or the validity,
priority or enforceability of the lien of this Mortgage has been or may be
impaired or in any way adversely affected by reason of any failure to comply
with any Environmental Law as the same pertains to the Mortgaged Property or any
other failure by Mortgagor fully to comply with any obligation imposed upon
Mortgagor in this Section or the inaccuracy of any representation or warranty
contained in this Mortgage, then Mortgagor shall, promptly, after written demand
by Mortgagee for performance thereof, either (i) commence to perform and
thereafter diligently prosecute to completion the Remedial Work; or (ii) take
such other action as Mortgagee may, in its sole and absolute discretion,
specify. All Remedial Work shall be performed by contractors working under the
supervision of a consulting engineer (the selection of each of the foregoing
persons to be subject to the prior written consent of Mortgagee).
For the purpose of making a determination pursuant to this Section,
Mortgagee shall be entitled, at any time for cause, and at least once per year
with or without cause, in addition to all of Mortgagee's other rights and
remedies under this Mortgage or applicable law, to cause an environmental audit
and risk assessment of the Mortgaged Property to be conducted by an independent
engineering firm or other environmental audit manager designated by Mortgagee.
Mortgagor shall cooperate with Mortgagee in connection with any such audit or
assessment and shall pay all costs and expenses incured in connection therewith.
In the event Mortgagor fails to timely commence or diligently to prosecute to
completion any Remedial Work or other action required to be undertaken pursuant
to this Section, Mortgagee may, but shall not be required to (and without any
liability or obligation by Mortgagee to Mortgagor with respect thereto), arrange
for same to be performed. All costs and expenses incurred pursuant to, or with
respect to the subject matter of, this Section shall be secured by this Mortgage
and borne by Mortgagor, and all monies paid by Mortgagee and all costs and
expenses incurred by Mortgagee in connection with this Section, together with
interest thereon computed at the Involuntary Rate, shall be repaid to Mortgagee
in accordance with the provisions of this Mortgage and be secured by the lien of
this Mortgage.
(f) Indemnification. Mortgagor shall defend and indemnify the
---------------
Indemnified Parties against, and shall hold the Indemnified Parties harmless
from, and shall reimburse the Indemnified Parties with respect to, any and all
liabilities and expenses incurred by, imposed upon or asserted against the
Indemnified Parties or any of them by reason of, or in connection with the
presence, existence, use, handling, generation, manufacture, production,
processing, treatment, storage, release, placement, spill, discharge, disposal
of property or any threatened
15
<PAGE>
occurrence of any of the foregoing, or any Remedial Work or other action taken
by Mortgagee or any of the Indemnified Parties with respect to any of the
foregoing pursuant to this Section.
(g) Survival of Mortgagor's obligations and liabilities. The obligations
---------------------------------------------------
and liabilities of Mortgagor under this Section shall survive and continue in
full force and effect and shall not be terminated, discharged or released, in
whole or in part, irrespective of whether the debt has been paid in full and
irrespective of any foreclosure of this Mortgage or acceptance by Mortgagee, its
nominee or wholly owned subsidiary of a deed or assignment in lieu of
foreclosure and irrespective of any fact or circumstance.
1.23 Further Assurances. Mortgagor shall, at Mortgagor's own cost and
------------------
without expense to Mortgagee, do, execute, acknowledge and deliver (as may be
required by Mortgagee from time to time and at any time) such further acts,
deeds, conveyances, mortgages, assignments, notices of assignment, transfers,
assurances and opinions of counsel as Mortgagee shall request to better assure,
convey, assign, transfer and confirm unto Mortgagee the property and rights
hereby conveyed or assigned or intended now or hereafter so to be, or which
Mortgagor may be or may hereafter become bound to convey or assign to
Mortgagee, or for carrying out the intention or facilitating the performance of
the terms of this Mortgage, or for filing, registering or recording this
Mortgage. Mortgagor, on demand, shall execute and deliver, and hereby authorizes
Mortgagee, to the extent Mortgagee may lawfully do so, as Mortgagor's attorney-
in fact, coupled with an interest, to execute in Mortgagor's name and to file
one or more Uniform Commercial Code financing statements, chattel mortgages or
comparable security instruments in order to evidence more effectively the lien
of this Mortgage upon the Chattels or any other portion of the Mortgaged
Property. Mortgagor shall promptly upon demand deliver to Mortgagee any and all
affidavits, certifications, or other documentation (such as the affidavit
required by the Foreign Investment in Real Property Tax Act) that Mortgagee
shall require from time to time to satisfy the requirements of any present or
future law or other governmental requirement that controls, restricts,
establishes conditions to, or otherwise burdens or limits Mortgagee's exercise
of Mortgagee's rights under this Mortgage. Upon the failure of Mortgagor to
comply with any of the terms and provisions of this Section, Mortgagee may make,
execute, rescind, file, record or refile any and all instruments, certificates
and documents for and on the name of Mortgagor and the Mortgagor hereby appoints
the Mortgagee the agent and irrevocable power of attorney-in-fact of the
Mortgagor for such purpose, which power shall be coupled with an interest. If
Mortgagee certifies to Mortgagor that the Note has been misplaced or lost and
that Mortgagee has not endorsed, assigned or otherwise transferred the Note,
then: (a) Mortgagor shall, upon Mortgagee's request, execute an original
duplicate note in the same form as the Note; and (b) Mortgagee hereby agrees to
indemnify Mortgagor against any loss or expense (including, without limitation,
reasonable attorneys' fees and disbursements) incurred by Mortgagor as a
consequence of Mortgagor's having delivered a duplicate note.
ARTICLE II
Events of Default and Remedies
------------------------------
2.1 Definition of Event of Default. The occurrence of any one or more of the
------------------------------
following shall constitute an Event of Default:
(a) Nonpayment of Note. If Mortgagor fails to make any monthly payment
------------------
required under the Note when and as the same shall become due and payable, and
such failure continues for ten (10) days; or
(b) Other Failure to Perform. If Mortgagor fails to perform and comply with
------------------------
any other covenant or condition on the part of Mortgagor in any Loan Document
(other than for nonpayment asset forth in Paragraph "2.1(a)") and except as
otherwise set forth herein, such failure continues for thirty (30) days after
Mortgagee has given Mortgagor written notice thereof (unless such default cannot
with due diligence be cured within thirty (30) days but can be cured within a
reasonable period thereafter, in which case no Event of Default shall be deemed
to exist so long as Mortgagor shall have commenced to cure the default within
thirty (30) days after receipt of notice, and thereafter diligently and
continuously prosecutes such cure to completion to the sole satisfaction of
Mortgagee); or
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(c) Misrepresentation, Etc. If any warranty, representation or
----------------------
other statement made either (i) by or on behalf of Mortgagor or by any Principal
of Mortgagor in, pursuant to, or in connection with any Loan Document; (ii) in
connection with any other loan made by Mortgagee to Mortgagor or any Principal
of Mortgagor or any borrower of which a Principal of Mortgagor is a principal;
(iii) by or on behalf of any Guarantor in or pursuant to any guaranty delivered
to Mortgagee in connection with the Loan; or (iv) by or on behalf of the
Mortgagor in the commitment letter issued in connection with the Loan or the
application filed in connection therewith, is false, incorrect or misleading in
any respect; or
(d) Nonpayment of Debts. If Mortgagor shall be generally not
-------------------
paying Mortgagor's debts as they become due; or
(e) Voluntary Adverse Financial Events. If Mortgagor shall make an
----------------------------------
assignment for the benefit of creditors, or shall institute any proceeding to
seek relief on its behalf as debtor, or to adjudicate Mortgagor a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment or composition of
Mortgagor or Mortgagor's debts under any law relating to bankruptcy, insolvency
or reorganization or debtor relief, or seeking appointment of a receiver,
trustee, custodian or other similar official for Mortgagor or for any
substantial part of the Mortgaged Property , or shall consent by answer or
otherwise to the institution of any such proceeding against Mortgagor, or shall
take by itself, or by its partners, directors or shareholders, any action for
the purpose of any of the foregoing; or
(f) Involuntary Adverse Financial Events. If any proceeding is
------------------------------------
instituted against Mortgagor seeking to have an order of relief entered against
Mortgagor as debtor or to adjudicate Mortgagor a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment or composition of Mortgagor or
Mortgagor's debts under any law relating to bankruptcy, insolvency or
reorganization or debtor relief, or seeking appointment of a receiver, trustee,
custodian or other similar official for Mortgagor or the Mortgaged Property or
any portion thereof or any other substantial part of Mortgagor's property, that
either (i) results, without Mortgagor's consent or acquiescence, in any such
entry of an order of relief, adjudication of bankruptcy or insolvency or
issuance or entry of any other order having a similar jar effect; or (ii)
remains undismissed for thirty days; or
(g) Appointment of Trustee, Etc. If a trustee, receiver or other
---------------------------
custodian is appointed, without the consent or acquiescence of Mortgagor, for
any substantial part of the properties of Mortgagor, which appointment is not
vacated within thirty (30) days of the date of such appointment; or
(h) Final Judgment - Liens, Etc. If a final judgment is entered
---------------------------
against Mortgagor in an amount exceeding $50,000, or a lis pendens, mechanic's
lien or other lien is filed against the Mortgaged Property. or any part thereof.
and within thirty (30) days after its entry, such judgment, lis pendens or lien
has not been discharged or execution thereof stayed pending appeal, or if,
within thirty (30) days after the expiration of any such stay, such judgment,
lis pendens or lien has not been discharged; or
(i) Certain Taxes. If it is or becomes illegal for Mortgagor to
-------------
pay any tax required to be paid by Mortgagor pursuant to this Mortgage or if
Mortgagor's payment of such tax would violate any applicable law or regulation,
provided that this provision shall not apply to the mortgage recording tax or
any other tax which is not required to be paid at all by reason of Mortgagor's
status under the Private Housing Finance Law or any other law or regulation; or
(j) Prohibited Transfer. If any transfer of the Mortgaged Property,
-------------------
or any interest in Mortgagor, prohibited by this Mortgage occurs without
Mortgagee's prior written consent; or
(k) Other Instruments. If Mortgagor fails to perform or discharge
-----------------
any agreement, obligation undertaking created or agreed to by Mortgagor in any
Loan Document or any other note or mortgage executed by Mortgagor with Mortgagee
and any applicable cure periods expire; or
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(l) Other Mortgages. If any fact or circumstance occurs that would
---------------
permit the holder of any other mortgage encumbering the Mortgaged Property, or
any part thereof, senior or junior to this Mortgage, to declare a default or
exercise any other remedy available tinder such other mortgage. If such other
mortgage provides for a grace period and opportunity to cure, an Event of
Default shall not be deemed to have occurred hereunder unless and until such
grace period has expired. Concurrently with the expiration of such grace period,
an Event of Default shall be deemed to have occurred tinder this Mortgage, and
Mortgagor shall have no right under this Mortgage to receive notice of or any
opportunity to cure such Event of Default. Nothing hereunder shall limit in any
way Mortgagor's obligations under this Mortgage or Mortgagee's rights and
remedies tinder this Mortgage; or
(m) Cancellation of Insurance. If, after cancellation or termination
-------------------------
by an existing insurer, or notice thereof, on the application of Mortgagee, two
(2) or more fire insurance companies, lawfully doing business in the state in
which the Mortgaged Property is situated, refuse to issue policies insuring the
Mortgaged Property; or
(n) Default Under Other Indebtedness. If Mortgagor defaults in the
--------------------------------
payment of any indebtedness of borrowed money or in the performance of any term,
covenant, condition or agreement of any such indebtedness, and the effect of
such default would be to permit the holder of any such indebtedness to
accelerate its maturity.
2.2 Effect of Event of Default. Upon and after the occurrence of
--------------------------
an Event of Default, the remedies described below shall be available to
Mortgagee. In those instances in which Mortgagee is entitled to take action with
respect to the subject matter of this Section, such action may be taken by
Mortgagee personally or by its agents or attorneys and, in any such instance,
with or without entry upon the Mortgaged Property:
(a) Optional Acceleration of Note. Mortgagee, by written notice to
-----------------------------
Mortgagor, may declare the entire principal of the Note then outstanding,
together with the Prepayment Charge, if any, thereon, all other indebtedness
secured hereby and all accrued and unpaid interest thereon, including, without
limitation, interest at the Involuntary Rate to be due and payable immediately.
Upon any such declaration, the same shall become immediately due and payable,
despite anything to the contrary in any Loan Document.
(b) Entry upon Mortgaged Property. Subject to any applicable provision
-----------------------------
of tile Private Housing Finance Law, Mortgagee may , without notice, enter into
or upon the Mortgaged Property by summary proceeding, ejectment or otherwise,
and may exclude Mortgagor, Mortgagor's agents, servants, employees and all other
persons therefrom; and may use, operate, manage and control the Mortgaged
Property and conduct the business thereof. Upon any such entry, Mortgagee, at
Mortgagor's expense, may (but shall not be obligated to) make all necessary or
proper repairs, renewals arid replacements and such alterations, additions,
betterments and improvements thereto and thereon as deemed appropriate by
Mortgagee; and Mortgagee shall be entitled to collect and receive all Rents
derived from the Mortgaged Property. No such entry or action by Mortgagee shall
create any liability to Mortgagor or to any party holding or claiming by,
through or under Mortgagor, nor shall such entry or action be deemed an eviction
of any lessee of the Mortgaged Property or any part thereof. After deducting the
expenses of conducting the business thereof and of all maintenance, repairs,
renewals, replacements, alterations, additions, betterments and improvements and
all amounts necessary to pay Impositions, as well as all other costs and
expenses of, and reasonable compensation for the services of, Mortgagee and its
attorneys, agents, and employees, Mortgagee shall apply the monies arising as
aforesaid, first, to the payment of the principal due under the Note.
(c) Sale of Mortgaged Property. Mortgagee may sell the Mortgaged Property and
all estate, right, title, interest, claim and demand therein, and right of
redemption thereof, at one or more sales as an entirety or in parcels, in
such manner, at such time and place, upon such
18
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terms and for such price, and afler such notice thereof as Mortgagee may in its
sole discretion determine or as may be acquired by law.
(d) Foreclosure. Mortgagee may institute proceedings for the complete or
-----------
partial foreclosure of this Mortgage.
(e) Rights as Secured Party. Mortgagee may exercise the rights and remedies
-----------------------
available to a secured party under the Uniform Commercial Code of the state in
which the Mortgaged Property is situated with respect to all personal property
in which Mortgagee has a security interest under this Mortgage. Upon the
occurrence of any Event of Default, Mortgagee shall have the right to cause any
of the Chattels to be sold at any one or more public or private sales as
permitted by applicable law, and Mortgagee shall further have all other rights
and remedies, whether at law, in equity, or by statute, as are available to
secured creditors. Any such sale may be conducted by an employee or agent of
Mortgagee. Any person, including both Mortgagee and Mortgagor, shall be eligible
to purchase all or any part of such personal property at any such sale. Any and
all expenses incurred by Mortgagee for retaking, holding, preparing for sale,
selling or the like (including reasonable attorneys' fees and disbursements)
shall be borne by Mortgagor. Mortgagor, upon Mortgagee's demand and at
Mortgagor's expense, shall assemble the personal property and make it available
to Mortgagee wherever Mortgagee requires. Mortgagee shall give Mortgagor such
notice of the time and place of any public sale or other disposition of the
personal property or of the time on or after which Mortgagee intends to make any
private sale or other disposition as required by applicable law. If Mortgagee
gives Mortgagor such notice in accordance with the notice requirements of this
Mortgage, then such notice shall be deemed reasonable notice to Mortgagor and in
compliance with applicable law.
(f) Other Remedies. Mortgagee may take such steps to protect and enforce
--------------
its rights, whether by action, suit or proceeding in equity or at law, for the
specific performance of any covenant, condition or agreement in the Note or in
this Mortgage, or in aid of the execution of any power herein granted, or for
any foreclosure hereunder, or for the enforcement of any other appropriate legal
or equitable remedy as Mortgagee shall elect, all at Mortgagor's sole cost and
expense.
2.3 Foreclosure Sale Implementation.
-------------------------------
(a) Deeds. Etc. To effectuate any sale(s) made under or by virtue of this
----------
Article II, Mortgagor, Mortgagee, or an officer of any court empowered to do so
shall execute and deliver a good and sufficient instrument or instruments,
conveying, assigning and transferring all estate, right, title and interest in
and to the property rights sold. Mortgagor hereby irrevocably appoints
Mortgagee as Mortgagor's true and lawful attorney in fact, coupled with an
interest, in Mortgagor's name and stead, to make all necessary conveyances,
assignments, transfers and deliveries of the Mortgaged Property and the
properties and rights so sold. For that purpose, Mortgagee may execute all
necessary instruments of conveyance, assignment and transfer, and may substitute
one or more persons with like power. Mortgagor hereby ratifies and confirms all
that Mortgagor's said attorney or such substitute(s) shall lawfully do by virtue
hereof. Nevertheless, Mortgagor, if so requested by Mortgagee or any purchaser,
shall ratify and confirm any such sale or sales by executing and delivering to
Mortgagee or to such purchaser all such instruments as may be designated in such
request. Any such sale or sales made under or by virtue of this Article II,
whether made under the power of sale herein granted or under or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, shall
operate to divest all the estate, right, title, interest, claim and demand
whatsoever, whether at law or in equity, of Mortgagor in and to the properties
and rights so sold, and shall be a perpetual bar both at law and in equity
against Mortgagor and against any and all persons claiming or who may claim
from, through or under Mortgagor.
(b) Acceleration upon Sale. In the event of any sale made under or by
----------------------
virtue of this Article II (whether made under the power of sale herein granted
or under or by virtue of judicial proceedings or of a judgment or decree of
foreclosure and sale), the entire principal of, and interest on, the Note,
together with all other sums due thereunder or hereunder or under any other Loan
Document, shall immediately thereupon, despite anything in any Loan Document to
the contrary, become due and payable.
19
<PAGE>
(c) Application of Proceeds. The proceeds of any sale made under or by
-----------------------
virtue of this Article II, together with any other sums that Mortgagee may then
hold under any provision of any Loan Document, shall be applied in the following
order of priority:
(i) Sale Costs. To the payment of the costs and expenses of such sale,
----------
including reasonable compensation to Mortgagee, its agents and counsel, and of
any judicial proceedings wherein the same may be made, the costs and expenses of
any receiver, and all expenses, liabilities and advances made or incurred by
Mortgagee under this Mortgage, including the costs of taking possession of,
maintaining and preserving the Mortgaged Property, together with interest at the
Involuntary Rate on all advances made by Mortgagee and all Impositions then due
and payable with respect to the Mortgaged Property except any Impositions
subject to which the Mortgaged Property shall have been sold;
(ii) Principal, Prepayment Charge and Interest. To the payment of the
-----------------------------------------
whole amount then due, owing or unpaid under the Note as follows: first for the
payment of the Prepayment Charge, if any, next to the payment of interest at the
Involuntary Rate, then to the payment of all late charges and accrued, unpaid
interest on the unpaid principal, then to the payment of any other sums required
to be paid by Mortgagor pursuant to any provision of any Loan Document, and the
balance to the unpaid principal balance of the Note; and
(iii) Application of Surplus. To the payment of the surplus, if any,
----------------------
to whosoever may be lawfully entitled to receive the same.
(d) Bids by Mortgagee. Upon any sale made under or by virtue of this
-----------------
Article II, however made, Mortgagee may bid for and acquire the Mortgaged
Property or any part thereof and in lieu of paying cash therefor may make
settlement for the purchase price by crediting upon the indebtedness of
Mortgagor secured by this Mortgage the net sales price after such
deductions therefrom as Mortgagee is authorized to deduct under this
Mortgage.
2.4 Collection of Debt.
------------------
(a) Payments Due upon Acceleration. Upon the occurrence of an Event
------------------------------
of Default and acceleration of the Note as more fully described herein,
Mortgagor shall also pay to Mortgagee interest at the Involuntary Rate on
the then unpaid principal of the Note, and all sums required to be paid by
Mortgagor pursuant to any provision of any Loan Document, and in addition
thereto such further amount as shall be sufficient to cover the costs and
expenses of collection, including reasonable compensation to Mortgagee,
its agents and counsel, and any expenses incurred by Mortgagee or its
agents and counsel hereunder. If Mortgagor fails to pay such amounts upon
demand, Mortgagee shall be entitled and empowered to institute actions or
proceedings at law or in equity for the collection of such sums, and may
prosecute any such actions or proceedings to judgment or final decree, and
may enforce any such judgment or final decree against Mortgagor and
collect, out of the property of Mortgagor, wherever situated, as well as
out of the Mortgaged Property, in any manner provided by law, monies
adjudged or decreed to be payable.
(b) Effect of Foreclosure, Etc. Mortgagee shall be entitled to
--------------------------
recover judgment as aforesaid either before, after or during the pendency
of any proceedings for the enforcement of the provisions of this Mortgage;
and the right of Mortgagee to recover such judgment shall not be affected
by any entry or sale hereunder, or by the exercise of any other right,
power or remedy for the enforcement of the provisions of this Mortgage, or
the foreclosure of the lien hereof; and in the event of a sale of the
Mortgaged Property, and of the application of the proceeds of sale, as
provided in this Mortgage, to the payment of the debt hereby secured,
Mortgagee shall be entitled to enforce payment of, and to receive all
amounts then remaining due and unpaid upon the Note, and to enforce
payment of all other charges, payments and costs due under this Mortgage,
and shall be entitled to recover judgment for any portion of the debt
remaining unpaid, with interest at the maximum rate permitted by law. In
case of proceedings against Mortgagor in insolvency or bankruptcy or any
proceedings for Mortgagor's reorganization or involving the liquidation of
Mortgagor's assets, then Mortgagee shall be entitled to prove the whole
amount of principal, Prepayment Charge and interest due upon the Note to
the full amount thereof, and all other payments, charges and costs due
under this
20
<PAGE>
Mortgage (including, without limitation, Mortgagee's attorneys' fees and
disbursements in connection with such proceedings), without deducting therefrom
any proceeds obtained from the sale of the whole or any part of the Mortgaged
Property, provided, however, that in no case shall Mortgagee receive a greater
amount than such principal, Prepayment Charge and interest and such other
payments, charges and costs from the aggregate amount of the proceeds of the
sale of the Mortgaged Property and the distribution from the estate of
Mortgagor.
(c) Effect of Judgment. No recovery of any judgment by Mortgagee and
--------- --------
no levy of any execution under any judgment upon the Mortgaged Property or upon
any other property of Mortgagor shall affect in any manner or to any extent, the
lien of this Mortgage upon the Mortgaged Property or any part thereof, or any
liens, rights, powers or remedies of Mortgagee hereunder, but such liens,
rights, powers and remedies of Mortgagee shall continue unimpaired as before.
(d) Application of Sums Collected. Any monies collected by Mortgagee
-----------------------------
under this Section shall be applied by Mortgagee in accordance with the
provisions of this Mortgage.
2.5 Appointment of Receiver. During the continuance of any Event of
-----------------------
Default, whether incidental to any proceedings to foreclose this Mortgage or to
enforce the specific performance hereof or to any other judicial proceeding to
enforce any right of Mortgagee or otherwise, Mortgagee shall be entitled, as a
matter of right, without the giving of notice to any other party and without
regard to the adequacy or inadequacy of any security for the Mortgage
indebtedness, either before or after declaring the unpaid principal of the Note
to be due and payable, to the appointment of a receiver or receivers of the
Mortgaged Property and of all the earnings, rents, issues, profits, use and
occupancy payments, and income thereof. Mortgagor hereby consents to the
appointment of such receiver or receivers.
2.6 Possession by Mortgagee. Notwithstanding the appointment of any
-----------------------
receiver, liquidator or trustee of Mortgagor, or of any of Mortgagor's property,
or of the Mortgaged Property or any part thereof, Mortgagee shall be entitled to
retain possession and control of all property now or hereafter held under this
Mortgage.
2.7 Remedies Cumulative. No remedy herein conferred upon or reserved
-------------------
to Mortgagee is intended to be exclusive of any other remedy or remedies, and
each and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity.
No delay or failure of Mortgagee to exercise any right, power or remedy
hereunder or under the Note shall impair any such right, power or remedy or
shall be constituted to be a waiver thereof and Mortgagor shall not thereby be
relieved of its obligations. Mortgagee shall be deemed to have waived any such
right, power or remedy only if such waiver is expressly set forth in a written
instrument executed by Mortgagee. No waiver of any breach shall constitute a
waiver of any other then existing or subsequent breach.
2.8 Right to Withdraw Proceeding, Etc. Any action, suit or proceeding
---------------------------------
brought by Mortgagee pursuant to any of the terms of this Mortgage or otherwise,
and any claim made by Mortgagee hereunder may be compromised, withdrawn or
otherwise dealt with by Mortgagee without any notice to or approval of
Mortgagor.
2.9 Waiver. Mortgagor hereby waives, to the fullest extent Mortgagor
------
may lawfully do so, the benefit of all appraisement, valuation, stay, extension
and redemption laws now or hereinafter in force and all rights of marshalling in
the event of any sale of the Mortgaged Property or any part thereof or any
interest therein.
2.10 Use and Occupancy of Mortgaged Property. During the continuance of
----------------------------------------
any Event of Default and pending the exercise by Mortgagee of its right to
exclude Mortgagor from all or any part of the Mortgaged Property, Mortgagor, its
agents servants, associates and affiliates agree to pay to the Mortgagee, or any
receiver, the fair and reasonable rental value for the use and occupancy of the
Mortgaged Property, or any portion thereof, which is in Mortgagor's possession
for such period and, upon default of any such payment, shall vacate and
surrender possession of the Mortgaged Property to Mortgagee or to receiver, if
any, and in default
21
<PAGE>
thereof Mortgagor may be evicted by summary proceeding for the recovery of
possession of premises for nonpayment of rent.
2.11 Effect of Mortgagor's tender. If after the occurrence of an Event
----------------------------
of Default and the acceleration of the principal sum secured by this Mortgage,
Mortgagor, before the sale of the Mortgaged Property, tenders payment of the
amount necessary to pay all sums then due hereunder, then such tender shall
constitute a voluntary prepayment of the Note and Mortgagor shall pay Mortgagee,
together with all other sums then due, the Prepayment Charge computed in
accordance with the Note and this Mortgage.
2.12 Mortgagee's Failure to Allow Cure Period. Notwithstanding
----------------------------------------
anything to the contrary contained in any Loan Document, wherever any definition
of "Event of Default" provides that an Event of Default occurs only after
Mortgagee has given notice (a "Cure Notice") of specified circumstances (an
"Unmatured Default") and a specified period of time (the "Cure Period") has
passed, if Mortgagee fails to give the required Cure Notice and commences
foreclosure proceedings under this Mortgage, then: (a) if, within the Cure
Period, as measured from the commencement of the foreclosure proceedings,
Mortgagor cures the applicable Unmatured Default, and reimburses Mortgagee for
the cost of such foreclosure proceeding, including, without limitation,
reasonable attorneys fees, then Mortgagee shall discontinue such foreclosure
proceedings and reinstate the Loan, on the same terms and conditions, as if the
Note had never been accelerated; (b) such discontinuance of foreclosure
proceedings shall constitute Mortgagor's sole remedy for Mortgagee's failure to
have given the required Cure Notice; and (c) Mortgagee's failure to give the
Cure Notice shall not invalidate, nullify, or constitute a defense in any
foreclosure proceedings that are otherwise properly commenced.
ARTICLE III
Representations and Warranties
------------------------------
As an inducement to Mortgagee to accept this Mortgage, and with the
knowledge that Mortgagee has relied upon the same in making the Loan, Mortgagor
represents and warrants that, as of the date of the delivery of this Mortgage
and as of each date Mortgagor is required to make any payment under the Note:
3.1 Title, Etc. Mortgagor has good and marketable title to an
----------
indefeasible fee estate in the Mortgaged Property, subject to no lien, charge or
encumbrance except: (a) matters listed as typewritten exceptions to title in
Schedule B of Mortgagee's title policy issued by Fidelity National Title
Insurance Company of New York, pursuant to title order number RAP-NY-1 341,
insuring the priority and lien of this Mortgage; and (b) Leases that comply with
this Mortgage and with the Absolute Assignment. Mortgagor owns the Chattels and
all other Mortgaged Property free and clear of liens and claims.
3.2 Due Execution. The Loan Documents have been duly executed and
-------------
delivered and constitute the legal, valid and binding obligations of Mortgagor,
enforceable in accordance with their terms.
3.3 No Violation. The execution, delivery, recordation and
------------
performance of this Mortgage and the consummation of the transactions
contemplated hereby, including, without limitation, the execution of the Loan
Documents, will not result in any violation of any term or condition of any
contract, agreement, lease, instrument, judgment, decree, order, statute, rule,
regulation, ordinance, franchise, certificate, permit or the like applicable to
Mortgagor or by which Mortgagor or Mortgagor's properties or assets are bound or
affected.
3.4 Pending Litigation. There is no action, suit, proceeding or
------------------
investigation pending or threatened, or any basis therefor known to Mortgagor,
that will question the validity of any of the Loan Documents when executed, or
any action taken or to be taken pursuant thereto, or in any way affecting
Mortgagor or the Mortgaged Property or any means of access thereto. No notice
has been given by any governmental authority of any proceeding to condemn,
purchase or otherwise acquire the Mortgaged Property, or any part thereof, or
interest therein and, to the best of Mortgagor's knowledge, no such proceeding
is contemplated. Mortgagor hereby
22
<PAGE>
covenants to notify Mortgagee of any action, suit, proceeding or investigation
commenced with respect to Mortgagor or the Mortgaged Property, other than
landlord-tenant dispossess and holdover matters commenced in the ordinary course
of business.
3.5 Compliance with Law. Mortgagor is in compliance with all
-------------------
governmental laws, rules and regulations and other requirements which are
applicable to Mortgagor or to the Mortgaged Property or any part thereof.
Mortgagor has no knowledge of any uncured violation of any zoning, health,
safety, building, environmental, or other statute, ordinance, rule, regulation
or restriction applicable to the Mortgaged Property or any part or use thereof
except as disclosed in the title report referred to paragraph 3.1 above and
except as disclosed in the Environmental Audit.
3.6 Rent Roll. Mortgagor has simultaneously herewith delivered to
---------
Mortgagee a certified rent roll listing, among other things, the Rents payable
under all Leases affecting the Mortgaged Property. All Rents shown in the rent
roll are legal and enforceable Rents and are in compliance with all applicable
Requirements.
3.7 Easements, Etc. Mortgagor is the beneficiary of all easements,
--------------
including those for use, maintenance, and access necessary, appropriate, or
convenient for the full and proper operation, repair, maintenance, occupancy and
use of every portion of the Mortgaged Property. The Mortgaged Property is
adequately served by all utilities necessary, appropriate, or convenient for the
full and proper operation, repair, maintenance, occupancy and use of every
portion of the Mortgaged Property.
3.8 No Misrepresentations. Neither this Mortgage, any other Loan
---------------------
Document, nor any other document or certificate furnished to Mortgagee or to
legal counsel for Mortgagee in connection with the transactions contemplated
hereby contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements contained therein or
herein not misleading.
3.9 Governmental Approvals. All Authorizations necessary or
----------------------
appropriate to permit the use and occupancy of the Mortgaged Property and which
are required to be obtained from any board, agency or department having
jurisdiction over the Mortgaged Property have been duly obtained and are in full
force and effect.
3.10 Approvals of Loan Documents. No consent, approval or
-----------------------------
authorization of, or registration, declaration or filing with, any governmental
or public authority, body or agency is required in connection with the
execution, delivery and performance of the Loan Documents or the carrying out of
any of the transactions contemplated thereby, except to the extent that the
approval of the New York State Division of Housing and Community Renewal is
required pursuant to the Private Housing Finance Law.
3.11 Other Documents. All certifications, representations and
---------------
warranties made in the Loan Documents are true and correct.
3.12 Hazardous Substances. Without limiting the generality of any
--------------------
other representation or warranty contained in this Mortgage, except as disclosed
in the Environmental Audit, the Mortgaged Property and the existing uses thereof
comply and, to the best of Mortgagor's knowledge, at all times have complied, in
all respects with all Environmental Laws in effect on the date of this Mortgage;
all Environmental Authorizations have been duly issued or granted and are in
full force and effect; and Mortgagor is not, and at no time since Mortgagor
acquired ownership or possession of the Mortgaged Property or any portion
thereof has Mortgagor been, in violation of any Environmental Law with respect
to the Mortgaged Property. Without limiting the generality of the foregoing.
(a) Except as disclosed in the Environmental Audit, no Hazardous
Substances are being, or are intended or threatened to be, and, to the best of
Mortgagor's knowledge, no Hazardous Substances have ever been, used, received,
handled, generated, manufactured, produced, processed, treated, stored,
released, placed, spilled, discharged, disposed of or dispersed at, or otherwise
caused to become situated, at, in, on, under or about the Mortgaged
23
<PAGE>
Property, and no portion of the Mortgaged Property has been used at any time as
a landfill or as a waste treatment, storage or disposal facility;
(b) Except as disclosed in the Environmental Audit, none of the
Improvements contain and, to the best of Mortgagor's knowledge, none of the
Improvements which at any time were a part of, or were situated at, in, on or
under, the Mortgaged Property contained, any Hazardous Substances;
(c) No underground storage tanks or other underground storage facilities
are, or, to the best of Mortgagor's knowledge, have ever been, situated at, in,
on, under or about the Mortgaged Property;
(d) To the best of Mortgagor's knowledge, (i) the ambient air quality at
the Mortgaged Property complies with the requirements of all Environmental Laws;
and, except as disclosed in the Environmental Audit, (ii) the present levels of
radon, formaldehyde, asbestos and all other Hazardous Substances, to the extent
any such Hazardous Substances exist at, in, on, under or about the Mortgaged
Property, are within the limits prescribed by all Environmental Laws;
(e) Neither the Mortgaged Property nor, to the best of Mortgagor's
knowledge, any land which adjoins any portion of the Mortgaged Property,
contains or is affected by any dam, well, reservoir, inland wetland, watercourse
or water discharge;
(f) Mortgagor has not received or had served upon it any summons, citation,
directive, order, notice or other communication, oral or written, which either:
(i) claims or alleges any failure to comply with any Environmental Law with
respect to the Mortgaged Property; or (ii) contains any statement(s) or fact(s)
which, if true, would signify that any representation, warranty or statement
contained in this Mortgage is other than complete and correct;
(g) With respect to the ownership, use, operation or maintenance of the
Mortgaged Property or the conduct of Mortgagor's business thereon; (y) no writ,
injunction, decree, order or judgment is outstanding; and (z) no suit, claim,
action, proceeding or investigation has been instituted or filed with respect to
any Environmental Law (and, to the best of Mortgagor's knowledge, except as
disclosed in the Environmental Audit, no basis for any of the foregoing exists);
and
(h) No lien has been filed against or imposed upon any of the Mortgaged
Property with respect to any Environmental Law.
3.13 Split Tax Lots. The tax lot or lots that contain the Mortgaged
---------------
Property include no real property other than the Mortgaged Property and
constitute one or more discrete, salable Parcels.
ARTICLE IV
Miscellaneous
-------------
4.1 Partial Invalidity. If any provision of any Loan Document, including
------------------
this Mortgage, is determined to be invalid, illegal or unenforceable in any
respect, then such invalidity, illegality or unenforceability shall not affect
any other provision of such instrument and such instrument shall be construed as
if it had never contained such invalid, illegal or unenforceable provision.
4.2 Notices. (a) All notices hereunder shall be in writing, shall be effective
-------
upon the earlier of either: (i) receipt, if personally delivered; or (ii) three
(3) days after the date of mailing, and shall be deemed sufficiently given or
served for all purposes when delivered personally or sent by mail to any party
hereto at such party's address above stated (in the case of Mortgagee,
Attention: Michael R. Barrett, Senior Vice President), or at such other address
as such party shall have notified the other party in writing. Upon receipt of
any notice from an attorney purporting to act for Mortgagee, Mortgagor shall
have the right, by notice to Mortgagee
24
<PAGE>
in compliance with this Mortgage, to require Mortgagee to deliver prompt written
proof of the attorney's authority. Such a request, shall not delay or suspend
the effectiveness of Mortgagee's notice to Mortgagor.
(b) In the event Mortgagee sends notice to Mortgagor of an Event of
Default hereunder, Mortgagee shall send a copy of such notice to: Commissioner,
New York State Division of Housing, One Fordham Plaza, Bronx, New York 10458.
4.3 Waiver of Notice. Whenever in this Mortgage the giving of
----------------
notice by mail or otherwise is required, the giving of such notice may be waived
in writing by the person or persons entitled to receive such notice.
4.4 Successors and Assigns. All the grants, covenants, terms,
----------------------
provisions and conditions of this Mortgage shall run with the land, shall apply
to and bind the successors and permitted assigns of Mortgagor (and Mortgagor's
heirs, if Mortgagor is an individual) and all subsequent owners, tenants or
subtenants of the Mortgaged Property and shall inure to the benefit of the
successors and assigns of Mortgagee and all subsequent holders of this Mortgage.
Nothing in this Section limits the prohibitions of any other provision of this
Mortgage.
4.5 Usury Savings. Nothing in any Loan Document shall require the
-------------
payment by Mortgagor or permit the collection by Mortgagee of interest in an
amount exceeding the maximum amount permitted under applicable law in commercial
mortgage loan transactions between parties of the character of the parties
hereto (the "Maximum Interest Amount"). Mortgagor shall not he obligated to pay
-----------------------
to Mortgagee any interest in excess of the Maximum Interest Amount, and the
amount of interest payable to Mortgagee under the Loan Documents shall under no
circumstance be deemed to exceed the Maximum Interest Amount. To the extent that
any payment made to Mortgagee under the Loan Documents would cause the amount of
interest charged to exceed the Maximum Interest Amount, such payment shall be
deemed a prepayment of principal as to which no Prepayment Charge or notice
shall be required, notwithstanding anything to the contrary in any Loan
Document, or, if the amount of excess interest exceeds the unpaid principal
balance of the Note, such excess over the unpaid principal balance of the Note
shall be refunded to Mortgagor.
4.6 Governing Law. This Mortgage shall be construed and enforced
-------------
in accordance with and shall be governed by, the laws of the State of New York,
without regard to its conflicts of law principles.
4.7 Written Amendments. This Mortgage may be amended, modified,
------------------
discharged or terminated only by a written instrument executed by Mortgagee and
Mortgagor.
4.8 Actions and Approvals. Wherever in any Loan Document
---------------------
Mortgagee, Mortgagee's counsel, or anyone else acting on Mortgagee's behalf is
entitled to approve or disapprove any matter, and such approval or disapproval
is either expressly or pursuant to a judicial determination not wholly
discretionary (for example, Mortgagee's approval is "not to be unreasonably
withheld"), if a court determines, without right to further appeal, that such
consent or approval was withheld in violation of the applicable standard, then:
(a) the consent or approval shall be deemed granted; (b) the granting of the
consent or approval shall be the only remedy available to Mortgagor and no
action for monetary damages shall be maintained against Mortgagee; (c) neither
Mortgagee, Mortgagee's counsel, nor anyone else acting on Mortgagee's behalf
shall have any liability, in damages or otherwise, for having withheld consent
or approval; and (d) Mortgagor's obligations under the Loan Documents shall not
be diminished in any way. If, after the execution and delivery of this Mortgage,
Mortgagor requests that Mortgagee take any action or issue any approval, then
Mortgagee's obligation to take such action or to consider the matter requiring
such approval shall be conditioned on Mortgagor's having paid all fees and
expenses (including, without limitation, attorneys' fees and disbursements) of
Mortgagee in connection with such action or approval.
4.9 Modifications, Release, Etc. From time to time, Mortgagee may, at
---------------------------
Mortgagee's option, without notice to or consent by Mortgagor, any Principal of
Mortgagor, any Guarantor, any junior lienholder, or any other person, without
liability and despite Mortgagor's breach under any of the Loan Documents, do any
of the following: (a) take or release other or additional security; (b) join in
any subordination agreement; or (c) agree in writing with
25
<PAGE>
Mortgagor to modify the interest rate, amortization period, payment amount, or
any other provision of the Note. Any action described in the preceding sentence
shall not affect the lien or priority of lien of this Mortgage, Mortgagor's
obligations under the Loan Documents (except as Mortgagee may agree in writing),
or the obligations of any Guarantor. Mortgagor shall pay Mortgagee a reasonable
service charge, together with such title insurance premiums, attorneys' fees and
disbursements and other costs as Mortgagee may incur in connection with any such
action. Mortgagee shall be under no obligation whatever to take any such actions
in any event.
4.10 Construction. The Loan Documents shall be construed without regard to
------------
section headings, which are provided for convenience only and shall not be
deemed to modify, or be used to interpret, the provisions of this Mortgage.
References to a section are references to a section within this Mortgage unless
otherwise expressly stated or necessarily implied by the context. The Loan
Documents shall be construed without regard to New York Real Property Law
Section 254 and without regard to any presumption or other rule requiring
construction against the party which caused the Loan Documents to be drafted.
Nothing herein is intended or shall be deemed to create a joint venture or
partnership or any fiduciary relationship or other relationship between
Mortgagor and Mortgagee or any relationship other than that of mortgagor and
mortgagee. Mortgagor acknowledges that: (i) Mortgagor has complete control over
the Mortgaged Property; (ii) Mortgagor has the sole responsibility for the
control and management of the Mortgaged Property; and (iii) Mortgagee performs
no function with respect to the Mortgaged Property in terms of its management or
control.
4.11 Consent to Jurisdiction; No Right to Jury Trial. The Mortgagor, its
-----------------------------------------------
successors and assigns, irrevocably and unconditionally: (a) agrees that any
suit, action or other legal proceeding arising out of this Mortgage may be
brought in the Supreme Court of the State of New York, situated in the County of
New York or the District Court of the United States in which the Mortgaged
Property is located and that such courts shall have in personam jurisdiction
-----------
of the Mortgagor in any such suit, action or other legal proceeding; (b)
consents to the jurisdiction of each such court in any such suit, action or
other legal proceeding; (c) waives any objection which it may have to the laying
of venue of any such suit, action or proceeding in any of such courts; and (d)
waives the right to a trial by jury in any action or proceeding arising out of
or relating to this Mortgage, the Note or any other Loan Documents.
4.12 Type of Property. Mortgagor represents and warrants to Mortgagee that
----------------
this Mortgage does not cover real property principally improved or to be
improved by one or more structures containing in the aggregate not more than six
residential dwelling units, each having its own separate cooking facilities.
4.13 Changes in Laws Regarding Taxation. In the event of the passage, after
----------------------------------
the date of this Mortgage, of any law of the state where the Mortgaged Property
is located which deducts from the value of real property (for the purpose of
taxation) any lien or encumbrance thereon or changing in any way the laws for
the taxation of mortgages or debts secured by mortgages for state or local
purposes or the manner of the collection of any such taxes, and imposing a tax,
either directly or indirectly, on this Mortgage, the Note, or the debt secured
by this Mortgage, Mortgagor shall, if permitted by law, pay any such tax imposed
within the statutory period or within fifteen (15) days after demand by
Mortgagee, whichever is less, provided, however, that if, in the opinion of the
attorneys for Mortgagee, Mortgagor is not permitted by law to pay such taxes,
Mortgagee shall have the right, at its option, to declare the Loan, including
all accrued interest, due and payable on a date specified in a notice given to
Mortgagor not less than thirty (30) days prior to such specified date.
4.14 No Waiver. Mortgagor acknowledges and agrees that the rights,
---------
powers, privileges, or remedies and interest conferred upon the Mortgagee in
respect of the Mortgaged Property by this Mortgage or any other document
pertaining to the Loan are solely to enable the Mortgagee to protect and
preserve its security interest therein as well as to realize upon it in
accordance with this Mortgage and the other Loan Documents in such manner as the
Mortgagee, in its sole and absolute discretion, may elect. No action or inaction
by the Mortgagee shall affect the Mortgagee's security interest in the Mortgaged
Property or in any way impair or affect the lien or the priority of this
Mortgage over any subordinate lien or encumbrance.
26
<PAGE>
4.15 Authority. Mortgagor (and the undersigned representative of Mortgagor)
---------
represents to the Mortgagee that it has full power, authority and the legal
right to execute this Mortgage and to mortgage, grant, sell, convey and assign
to the Mortgagee the Mortgaged Property pursuant to the terms hereof and to
perform all of the other terms of this Mortgage.
4.16 Liability. If the Mortgagor consists of more than one person, the
---------
obligations and liabilities of each such person shall be joint and several.
4.17 Actions and Proceedings. Mortgagee shall have the right to appear in and
-----------------------
defend any action and proceeding brought with respect to the Mortgaged Property
and to bring any action or proceeding, in the name or on behalf of the
Mortgagor, which Mortgagee in its sole and absolute discretion, determines to be
brought to protect its interest in the Mortgaged Property. The Mortgagee may
take such action by an attorney selected by the Mortgagee. Mortgagor agrees to
pay on demand all costs and expenses, including, but not limited to, the cost of
reasonable attorneys' fees and disbursements, incurred by Mortgagee in
connection with any such action or proceeding, which costs and disbursements are
hereby secured by this Mortgage.
4.18 Notice of Litigation. Mortgagor hereby covenants to advise Mortgagee in
--------------------
writing within three (3) days of the date that Mortgagor is made a party to any
litigation, proceeding or any other event which may result in liability to the
Mortgagor, whether or not the same is or may be covered by insurance.
4.19 Subject to Private Housing Finance Law. The parties hereto acknowledge
--------------------------------------
that this instrument is subject to the provisions of and limited by the Private
Housing Finance Law in general and in particular by Sections 81(2) and 94(2)
thereof.
27
<PAGE>
EXHIBIT 10.2
EXTENSION OF CONTRACT FOR MANAGING AGENT
Agreement made as of the first day of July 1996 by and between Knickerbocker
----------------
Village, Inc. .
- ------------------------
Owner, and Cherry Green Property Corp. Managing Agent for the
--------------------------------------------
premises known as Knickerbocker Village 10 - 40 Monroe Street, New York, NY
10002
- --------------------------------------------------------------------------------
(Address and Location) Project#
Thereas, the parties have previously entered into a Contract for Managing
Agents as of July 1, 1983 with subsequent extensions to June 30, 1996, and
------------ -------------
wish to extend further the Contract, it is agreed that:
1. The Contract is extended for twelve (12) months, from July 1, 1996 to
June 30, 1997.
2. Article 5.1(a) of the Owner-Agent Agreement is amended as follows:
Managing Agent Fee - $ 68,663.00 per month. This amount
represents the sum of:
$61,687.00 the Projects Base Rate; plus
----------
$ 6,976.00 the Project's Administrative Expense Fee.
----------
3. Article 5.1(e) of the Owner-Agent Agreement is amended as follows:
Site Manager Reimbursement for the year ending June 30, 1997 is
$56,952.50 per year payable in equal monthly installments, in accordance
with the attached schedule of salary and fringe benefits.
4. The Management Plan [ ] has [XX] has not been amended. If amended, the
pages on which changes have been made are attached.
5. Unless thirty (30) days prior to the expiration of this contract, either
the owner or the agent gives thirty (30) days written notice to the
other party and DHCR of its intention not to renew, or DHCR gives such
thirty (30) days written notice to both parties, this contract shall be
extended on the same terms and conditions for an additional 12 months
ending June 30, 1998. The monthly managing agent fee for the extended
year shall be the fee agreed to in Article 5.1(a) above, modified by any
DHCR authorized increments or by any lesser amount agreed to by the
owner and the agent, or by other adjustments provided for by DHCR.
6. Other (Use attachments if necessary).
-----------------------------------
================================================================================
We hereby certify that the information listed below is true and correct.
a. There is a Fidelity Bond for at least 25% of the annual rent roll
insuring both the Owner and the Managing Agent.
b. There is a current Broker's License in the name of the Managing Agent.
c. The Site Manager was hired on January 1987 and [XX] is currently
certified by NAHB or [ ] is not certified
------------------------------
(name of organization)
As Registered Apartment Manager
OWNER: Knickerbocker Village, Inc. AGENT: Cherry Green Property Corp.
-------------------------------- -----------------------------
/s/Robert Gershon 10/17/96 /s/Robert Gershon 10/17/96
- --------------------------------------- -----------------------------------
Signature Date Signature Date
Robert Gershon - Treasurer Robert Gershon - vice President
- --------------------------------------- ------------------------------------
Name/Title (Please Type) Name/Title (Please Type)
===============================================================================
Approved: New York State Division of Date: 10/24/96
Housing & Community Renewal ----------------
By: /s/
--------------------------------------------
Assistant Director of Management
--------------------------------------------
Name and Title
Distribution: HC Pres., MGP, Man. Agt., HMR, Admin., HAA
================================================================================
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-KSB OF KNICKERBOCKER VILLAGE INC., FOR THE YEAR ENDED DECEMBER 31, 1996 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 415
<SECURITIES> 0
<RECEIVABLES> 467999
<ALLOWANCES> (260000)
<INVENTORY> 0
<CURRENT-ASSETS> 1925722
<PP&E> 18360249
<DEPRECIATION> (10898301)
<TOTAL-ASSETS> 10217412
<CURRENT-LIABILITIES> 2183942
<BONDS> 0
0
0
<COMMON> 317048
<OTHER-SE> 943164
<TOTAL-LIABILITY-AND-EQUITY> 10217412
<SALES> 0
<TOTAL-REVENUES> 9578277
<CGS> 0
<TOTAL-COSTS> 9582072
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 88000
<INTEREST-EXPENSE> 623879
<INCOME-PRETAX> (3795)
<INCOME-TAX> 38000
<INCOME-CONTINUING> (41795)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (41795)
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
