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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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[ X ] ANNUAL REPORT PURSUANT TO SECTION L3 OR L5(D)
OF THE SECURITIES EXCHANGE ACT OF L934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
</TABLE>
COMMISSION FILE NUMBER 0-11083
ONE LIBERTY PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
MARYLAND 13-3147497
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
60 CUTTER MILL ROAD, GREAT NECK, NEW YORK 11021
(Address of principal executive offices) (Zip Code)
</TABLE>
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (5L6)466-3L00
Securities registered pursuant to Section l2(b) of the Act:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
Common Stock, par value $1.00................................ American Stock Exchange
$16.50 Cumulative Convertible Preferred Stock, par value
$1.00....................................................... American Stock Exchange
</TABLE>
Securities registered pursuant to Section l2(g) of the Act:
NONE
Indicate by check mark whether the registrant (l) has filed all reports
required to be filed by Section l3 or l5(d) of the Securities Exchange Act of
l934 during the preceding l2 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
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<S> <C> <C> <C>
Yes X No
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</TABLE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ].
As of March l, 1996 the aggregate market value of all voting stock (Common
Stock and Preferred Stock) held by non-affiliates of the Registrant was
approximately $19,000,000.
As of March l, 1996, the Registrant had 1,416,119 shares of Common Stock and
808,776 shares of $16.50 Cumulative Convertible Preferred Stock outstanding.
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DOCUMENTS INCORPORATED BY REFERENCE
The proxy statement for the Registrant's Annual Meeting of Stockholders,
scheduled for June 7, 1996, will be filed with the Securities and Exchange
Commission within 120 days after the end of the Registrant's fiscal year covered
by this Form 10-K. The information required by Part III (Item 10-Directors and
Executive Officers of the Registrant, Item 11 -Executive Compensation, Item 12 -
Security Ownership of Certain Beneficial Owners and Management, and Item 13
- -Certain Relationships and Related Transactions) will be incorporated by
reference from the definitive proxy statement to be filed by the Registrant
pursuant to Regulation 14A under the Securities Exchange Act of 1934.
<PAGE>
PART I
ITEM 1. -- BUSINESS
GENERAL
One Liberty Properties, Inc. (with its wholly-owned subsidiaries being
referred to herein as the "Company" or "One Liberty") is a self managed real
estate investment trust ("REIT") incorporated under the laws of Maryland on
December 20, 1982. The policy of the Company is to invest in improved,
commercial real estate under long-term net lease. Under the typical net lease,
rental and other payments to be made by the lessee are payable without
diminution for any reason. The lessee, in addition to its rent obligation, is
generally responsible for payment of all charges attributable to the property,
such as taxes, assessments, water and sewer rents and charges, governmental
charges, and all utility and other charges incurred in the operation of the
property. The lessee, is also generally responsible for maintaining the
property, including ordinary maintenance and repair and restoration following a
casualty or partial condemnation. The rental provisions in a net lease
transaction may include, but may not be limited to, rent payable on a stepped
basis (rentals increase at specified intervals), an indexed basis (rentals
increase pursuant to a formula such as cost-of-living index), a percentage basis
(minimum rental payments plus additional rentals in the form of participation in
the sales derived from the business conducted at the property), or a combination
of the foregoing.
INVESTMENT POLICY
The Company's investment policies, as presently in effect, are set forth in
Section 17 of Article 3 of the By-Laws of the Company (the By-Laws, as amended
were filed as an exhibit to the Company's Form 10-Q for the quarter ended June
30, 1989 and an amendment thereto was filed as an exhibit to the Company's Form
10-Q for the quarter ended June 30, 1990). The current policy of the Company is
to purchase improved commercial real property which is net leased on a long term
basis. The Company's investment policies, as articulated in its by-laws, are as
follows:
Types of Investments -- The By-Laws, as amended, permit the Company to
invest in any type of real property, mortgage loans (and in both cases in
interests therein) and other investments of any nature, without limitation,
provided such investment does not adversely affect the Company's ability to
qualify as a REIT under the Internal Revenue Code. No limitation is set on the
number of properties or mortgage loans in which the Company may invest, the
amount or percentage of the Company's assets which may be invested in any
specific property or on the concentration of investments in any geographic area
in the United States. The Company will consider investments in any type of real
property and in mortgage loans secured by real property; however as stated
above, the current policy of the Company is to invest in improved, commercial
real estate under long term net lease. The Company does not intend to make
construction loans or loans secured by mortgages on undeveloped land.
Incurrence of Debt -- The By-Laws, as amended, permit the directors of the
Company, in the exercise of their business judgment, to determine the level of
debt and the terms and conditions of any financing or refinancing.
The investment objectives of the Company are (i) to provide current income;
(ii) to provide the opportunity for increases in income and capital
appreciation; and (iii) to protect the Company's capital. In evaluating
potential net lease investments, the Company considers, among other factors (i)
the current and anticipated cash flow of the proposed net lease, (ii) the
intrinsic value of the property, given its location, use and the property's and
the lessee's adequacy to meet operational needs and lease obligations, (iii) the
return on equity to the Company, and (iv) potential for capital appreciation.
From time to time, the Company may invest in shares of another REIT or in
the shares of an entity not involved in real estate investments, provided that
any such investment does not adversely affect the Company's ability to qualify
as a REIT under the Internal Revenue Code.
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Pursuant to current policy, after termination of any lease relating to any
of the Company's properties, the Company will seek to relet or sell such
property in a manner which will maximize the return to the Company, considering
the income and residual potential of such property. The Company may also
consider the sale or other disposition of any of the properties prior to
termination of the relevant leases if such sale or other disposition appears to
be advantageous. The Company may take purchase money obligations as part payment
in lieu of cash in connection with any sales and may take into account local
custom and prevailing market conditions in negotiating the terms of repayment.
It will be the Company's policy to reinvest any cash realized from the sale or
other disposition of properties, net of required distributions to shareholders,
to maintain its REIT status.
CREDIT AGREEMENT
On March 1, 1996 the Company entered into a revolving credit agreement
("Credit Agreement") with Bank Leumi Trust Company of New York ("Bank Leumi").
Borrowings under the Credit Agreement will be used to provide the Company with
funds to acquire properties. The Credit Agreement will mature February 28, 1999
with a right for the Company to extend the Credit Agreement until February 29,
2000. Bank Leumi has agreed to advance up to $5,000,000 on a revolving basis and
has agreed to a total $15,000,000 facility (including the $5,000,000) on a pro
rata participating basis. At this date no other institution has joined in the
Credit Agreement. The Company will pay interest at the rate of prime plus 1/2%
on funds borrowed under the Credit Agreement on an interest only basis, except
that the net proceeds of certain events (e.g. sale of property, financing of
properties) must be applied to reduce the loan.
As collateral for any advances taken by the Company under the Credit
Agreement, the Company has pledged the stock of each of its subsidiaries and
certain mortgages receivable, including the wrap around mortgage receivable the
Company holds on a property located on East 16th Street in New York City (see
"Mortgages Receivable" below). In order to obtain the senior mortgagees consent
to the assignment of the Company's wrap around mortgage receivable as collateral
security for the loan, the Company agreed to guarantee six months of debt
service on the senior mortgage. In addition the Company's subsidiaries have
guaranteed all loans under the Credit Agreement. The Company has agreed to
maintain at least $250,000 on deposit with Bank Leumi.
The Credit Agreement contains affirmative and negative covenants including a
covenant that (i) through February 28, 1999 the Company's net worth will not be
less than the greater of $28,000,000 and two times (2x) the revolving credit
loans outstanding and thereafter the $28,000,000 increases to $30,000,000; (ii)
that cash flow for each fiscal year through the 1998 fiscal year shall be at
least $3,000,000, increasing to $3,400,000 for the 1997 fiscal year and
thereafter, and (iii) at least two of Fredric H. Gould, Matthew J. Gould and
Jeffrey A. Gould shall be involved in the day to day management of the Company.
The Company has not drawn down any funds under the Credit Agreement.
MORTGAGES RECEIVABLE
In 1992 and 1993 the Company, in order to improve its return on investment,
invested in mortgages and a senior secured note receivable. The material
receivables at December 31, 1995 were as follows:
-In January, 1992 the Company made a first mortgage loan to an entity
substantially owned by Gould Investors L.P. ("Gould"), an affiliated entity
(see below), in the amount of $1,200,000. The mortgage had a maturity date
of January 31, 1995, carried an interest rate of 11% through January 31,
1994 and thereafter at 10% per annum through the maturity date, and
provided for minimum amortization of $5,000 per month. The mortgage was
extended to January 31, 1997 and the interest rate fixed at 11% per annum
for the extended term. The $5,000 monthly amortization continues during the
extended term. The mortgage is secured by a wraparound
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mortgage on the residential portion and a commercial condominium unit
containing approximately 3,600 square feet of retail space in a building
located on East 86th Street in Manhattan, New York. The principal balance
outstanding on this mortgage at December 31, 1995 was $860,000.
-On July 30, 1993, the Federal Deposit Insurance Corporation ("FDIC") sold,
to an entity related to the Company, a $23,000,000 first mortgage secured
by an office building located on East 16th Street in Manhattan, New York.
The sale was made by the FDIC pursuant to public auction. The successful
bidder paid $19,000,300 for the mortgage, which carries an interest rate of
8% per annum. The office building which secures this mortgage is owned by a
partnership in which Gould is general partner and owns substantially all
partnership interests. Simultaneously with the closing an unrelated party
advanced $13,181,000 (balance at December 31, 1995 of $11,527,000), the
Company advanced $6,080,000 (including closing costs), and the mortgage was
severed into a first mortgage of $13,181,000 paying interest at 9 1/2% per
annum held by such unrelated party and a subordinate wrap mortgage of
$9,819,000 held by the Company. Both the first mortgage and wrap mortgage
mature in 2005 at which time the first mortgage will have been fully
amortized and the wrap mortgage will have a principal balance of
approximately $4,000,000. The principal balance of the wrap mortgage held
by the Company was $8,816,652 and the net principal balance was $5,834,234
at December 31, 1995.
The building which secures the first mortgage and the wrap mortgage is
net leased to the City of New York. The lease expires in 2005 with one
renewal option of five years. The City has a limited right to terminate the
lease. The first mortgage and the wrap mortgage are nonrecourse.
-In February, 1993 the Company purchased from an unrelated entity 28.9% of a
16.67% portion of an indebtedness due to various institutions by BRT Realty
Trust ("BRT"), an affiliated entity. Fredric H. Gould, Chairman of the
Board of the Company, and Marshall Rose, Vice Chairman, are Chairman of the
Board (and Chief Executive Officer) and Vice Chairman, respectively, of
BRT, and Matthew Gould, Israel Rosenzweig, Jeffrey Gould, Nathan Kupin,
Simeon Brinberg and David W. Kalish are officers of the Company and BRT. In
addition, Arthur Hurand is a trustee of BRT and a director of the Company.
The Company paid $3,215,142 for a $4,626,720 share of the principal amount
of such indebtedness. The principal earns interest at prime plus 1% and
requires certain annual minimum principal payments. The indebtedness is
senior indebtedness and is collateralized by all of BRT's mortgages
receivable and up-stream guaranties by BRT's subsidiaries. At December 31,
1995 the amount due to the Company on its share of this receivable was
$760,638, and the book value thereof was $528,575.
Gould owns 715,227 shares of the Company's Common Stock, representing
39.3% of the voting stock and 50.5% of the outstanding common stock of the
Company. The individual general partners of Gould, Fredric H. Gould and
Marshall Rose, are Chairman of the Board and Vice Chairman of the Board,
respectively, of the Company, Matthew Gould, President of the Company, is
an officer of the corporate Managing General Partner of Gould, and David W.
Kalish, Simeon Brinberg, Israel Rosenzweig, Jeffrey Gould, Nathan Kupin and
Mark Lundy, officers of the Company, are officers of the Managing General
Partner of Gould.
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EXECUTIVE OFFICERS OF THE COMPANY
The following sets forth information with respect to the executive officers
of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- --------------------- --- -------------------------------------------------------------
<S> <C> <C>
Fredric H. Gould 60 Chairman of the Board of the Company since June, 1989
Marshall Rose 59 Vice Chairman of the Board of the Company since June, 1989
Matthew J. Gould 36 President and Chief Executive Officer of the Company since
June, 1989
Simeon Brinberg 62 Vice President of the Company since June, 1989
Israel Rosenzweig 48 Senior Vice President of the Company since June, 1989
David W. Kalish 48 Vice President and Chief Financial Officer of the Company
since June, 1990
Nathan Kupin 81 Senior Vice President of the Company since June, 1989
Jeffrey A. Gould 30 Vice President of the Company since June, 1989
Mark H. Lundy 33 Secretary of the Company since June, 1993
Seth D. Kobay 41 Vice President and Treasurer of the Company since August,
1994
Karen Dunleavy 37 Vice President, Financial of the Company since August, 1994
</TABLE>
Each of the above listed executive officers will hold office until the next
annual meeting of the Board of Directors, scheduled for June 7, 1996, or until
their respective successors shall be elected and shall qualify. The information
below sets forth the business experience of the officers of the Company for at
least the past five years.
Fredric H. Gould -- In addition to serving as Chairman of the Board of the
Company, Mr. Gould has served as Chairman of the Board of Trustees of BRT Realty
Trust, a real estate investment trust, since 1984 and as Chief Executive Officer
of BRT since March 1995. Since 1985 Mr. Gould has been a principal executive
officer of the managing general partner of Gould Investors L.P., a limited
partnership primarily engaged in the ownership and operation of real properties
and he also serves as an individual general partner of Gould Investors L.P. He
is President of REIT Management Corp., the Advisor to BRT Realty Trust, a
director of BFS Bankorp, Inc. and its subsidiary Bankers Federal Savings and
Loan Association FSB and a director of Sunstone Hotel Investors, Inc., a real
estate investment trust.
Marshall Rose -- In addition to serving as Vice Chairman of the Board of
Directors of the Company, Mr. Rose has served as Vice Chairman of the Board of
Trustees of BRT Realty Trust since 1986. He is also a principal executive
officer of the managing general partner of Gould Investors L.P. since 1985 and
an individual general partner of Gould Investors L.P. Mr. Rose is also President
and Chief Executive Officer of Georgetown Equities, Inc., a real estate
consulting firm.
Matthew J. Gould -- In addition to serving as President and Chief Executive
Officer of the Company, Mr. Gould serves as a Vice President of REIT Management
Corp. since 1986.
Simeon Brinberg -- In addition to serving as Vice President of the Company,
Mr. Brinberg has been Secretary of BRT Realty Trust since 1983, a Senior Vice
President of BRT Realty Trust since 1988 and a Vice President of the managing
general partner of Gould Investors L.P. since 1988. He is a director of Witco
Corporation.
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Israel Rosenzweig -- Mr. Rosenzweig has been Executive Vice President of
Bankers Federal Savings & Loan Association FSB since November 1994. He has been
President of BRT Realty since 1984 and served as Chief Executive Officer of BRT
from 1984 until March 1995. Mr. Rosenzweig is a Senior Vice President of the
Company. Mr. Rosenzweig is a director of Nautica Enterprises, Inc.
David W. Kalish -- Mr. Kalish has served as Vice President and Chief
Financial Officer of One Liberty Properties, Inc. since June, 1990. Mr. Kalish
is also a Vice President and Chief Financial Officer of BRT Realty Trust and
REIT Management Corp. and Vice President and Chief Financial Officer of the
managing general partner of Gould Investors L.P. since June, 1990. Mr. Kalish is
a certified public accountant.
Nathan Kupin -- In addition to serving as a Senior Vice President of the
Company, Mr. Kupin has been a Trustee and Vice President of BRT Realty Trust
since 1983.
Jeffrey A. Gould -- In addition to being a Vice President of the Company,
Mr. Gould has been a Vice President of BRT Realty Trust since January 1988 and
Executive Vice President and Chief Operating Officer of BRT since March 1993.
Mark H. Lundy -- In addition to being Secretary of the Company since June,
1993, Mr. Lundy has been a Vice President of BRT since April 1993 and a Vice
President of the managing general partner of Gould Investors L.P. since July
1990.
Seth D. Kobay -- In addition to serving as Vice President and Treasurer of
the Company, Mr. Kobay has been Vice President and Treasurer of BRT Realty Trust
since March 1994 and Vice President of Operations of the managing general
partner of Gould Investors L.P. since 1986. Mr. Kobay is a certified public
accountant.
Karen Dunleavy -- In addition to serving as Vice President, Financial of the
Company, Ms. Dunleavy has been Treasurer of the managing general partner of
Gould Investors L.P. since 1986. Ms. Dunleavy is a certified public accountant.
Fredric H. Gould is Matthew and Jeffrey Gould's father.
ITEM 2. -- PROPERTIES
The Company, at December 31, 1995, owned fee title to thirty-two properties
and a "sandwich" lease position with respect to one property. All properties are
"net leased" to unrelated third parties. The Company obtained title insurance
with respect to all properties owned by it in amounts equal to their respective
purchase prices, insuring that the Company holds fee simple title to each
property owned in fee and the leasehold position to the one lease position the
Company holds, free and clear of all liens and encumbrances, except those
approved by the Company and those which have been created since the Company's
acquisition of the properties, none of which materially impairs the value of the
properties.
The following sets forth information relating to the materially important
properties owned by the Company.
THE MAY PROPERTIES
DESCRIPTION OF MAY PROPERTIES
The eleven May Properties, which are located in eight states, are
freestanding retail stores operated under the trade name Payless Shoe Source, as
discount family shoe stores.
The typical May Property is a freestanding one story building containing
approximately 3,100 square feet of space on a parcel of land containing
approximately 15,000 square feet and located on a major commercial thoroughfare.
Each building contains both storage and retail space.
DESCRIPTION OF MAY LEASES
LEASE TERM. The May Properties have 11 separate but identical leases ("May
Leases"). The primary lease term for the May Properties is ten years ending on
December 31, 1996. May has the
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right to extend each lease for up to four additional terms of five years each.
May has exercised its option to renew with respect to three locations and has
otherwise extended a lease with respect to one location. As to the remaining
locations the Company will seek to extend the lease with May or seek a new
tenant or a buyer for each such property.
AMOUNTS PAYABLE UNDER THE MAY LEASES. From January 1, 1995 through December
31, 1996 the aggregate annual guaranteed minimum rental under the May leases is
$540,201. Other than rentals, the provisions of each May Lease is substantially
the same.
The May Leases are "net leases" and May is required to pay, in addition to
the minimum rent, as additional rent, when due, together with every fine,
penalty, interest and cost which may be added for nonpayment or late payment
thereof, all taxes, assessments, levies, fees, water and sewer rents, charges,
licenses, permit fees and all governmental charges with respect to the May
Properties, and all utility and other charges incurred in the operation of each
of the May Properties.
MAINTENANCE AND MODIFICATIONS. May is required, at its expense to maintain
the May Properties, structural or otherwise, in a neat, clean and orderly
condition, reasonable wear and tear excepted.
May, at its expense, is permitted to make interior nonstructural alterations
and remodelings as it deems necessary or desirable for its purposes. Any
exterior or structural alterations may be made only with the prior written
consent of the Company.
INSURANCE. So long as May has a net worth of $100,000,000 or more, May may
self-insure the May Properties. If its consolidated net worth falls below the
above amount, May will maintain insurance on each May Property at its expense
providing for fire, with extended coverage, comprehensive general public
liability, workman's compensation and other insurance appropriate for properties
similar to the May Properties in the states in which the May Properties are
located.
DAMAGE TO, OR CONDEMNATION OF, A PROPERTY. In the event of a casualty, May
is required at its expense to rebuild, replace or repair the damage to the
Property so as to restore the Property to the condition and market value
immediately prior to the occurrence. The cost thereof is first paid by May and
the Company is then required to pay over to May the insurance proceeds. If,
however, the Property shall be substantially damaged or destroyed so that the
improvements are unsuitable or uneconomic for restoration for continued use and
occupancy in the business of May, then May within time periods set forth in the
leases, may terminate the lease on not less than 90 days notice and the
insurance proceeds shall belong to the Company and the lease shall terminate on
the specified termination date, except with respect to obligations and
liabilities which arose prior to the termination date. The condemnation
provisions of the leases provide in the event of a condemnation which affects
all or a substantial portion of a Property and renders it unsuitable or
uneconomical for restoration for continued use and occupancy in May's business
then May within time periods set forth in the lease may terminate the lease upon
not less than 90 days notice. If May is not entitled to or does not give notice
of termination, then May is required at its expense to rebuild, replace or
repair any damage to the Property, the restoration cost is to be paid initially
by May out of its own funds with the condemnation proceeds then paid over to
May.
MORTGAGE
The Company owns these properties on a free and clear basis.
KROGER PROPERTY
DESCRIPTION OF KROGER PROPERTY
The Kroger Property, located in Houston, Texas, is operated by Kroger as a
supermarket. The Kroger Property is a one story freestanding building containing
38,448 square feet, located on an approximately 116,000 square foot parcel of
land situated on a major commercial thoroughfare. The parcel contains 175
parking spaces.
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DESCRIPTION OF KROGER LEASE
LEASE TERM. The term for the Kroger lease ("Kroger Lease") will expire on
March 31, 2000. Kroger has the right to extend the Kroger Lease for up to five
additional five-year renewal terms.
AMOUNTS PAYABLE UNDER THE KROGER LEASE. The fixed annual rental under the
Kroger Lease is $149,947. During each year of the Kroger Lease, Kroger is also
obligated to pay the Company an amount equal to 1% of Kroger's sales in such
year in excess of $12,000,000. Expenses for taxes, insurance, common area
maintenance and roof and structural repairs are to be credited to Kroger, for
the year in which such expenses are paid, against the additional rent that might
otherwise be due during such year.
Under the Kroger Lease, Kroger is required to pay, in addition to the
minimum rent, all real estate taxes, assessments, water and sewer and other
charges imposed by governmental authorities now or in the future which are
applicable to the Kroger Property.
MAINTENANCE AND MODIFICATIONS. Kroger is required, at its expense, to
maintain and keep in good repair the structure and the exterior of the building,
including all equipment therein and to make all structural and nonstructural
repairs and replacements. The Company is not required to repair or rebuild the
Kroger Property or maintain it.
All remodeling, alterations and additions to the Property which Kroger may
deem necessary are to be made at Kroger's expense. Major structural changes may
only be made with the Company's written consent, which is not to be unreasonably
withheld.
INSURANCE. Kroger is required to maintain insurance at its expense
providing for fire, with extended coverage, in an amount not less than the full
replacement value of the Kroger Property, and public liability insurance. Kroger
may self insure if it has a net worth in excess of $300,000,000.
DAMAGE TO OR CONDEMNATION OF, THE KROGER PROPERTY. Subject to the rights of
any mortgagee, all proceeds of casualty insurance shall be made available to pay
for the cost of restoration and repair if the Kroger Property is damaged or
destroyed in whole or in part by fire or other casualty. The proceeds of any
insurance policy shall be used for the purpose of defraying the cost of
repairing, reconstructing or replacing the damaged or destroyed building or
improvements thereof or the construction of a new building substantially the
same as the damaged or destroyed building and in the event the insurance
proceeds are insufficient to completely repair, reconstruct or replace the
damaged or destroyed improvement substantially to the condition of such
improvement prior to the casualty, and all of the insurance proceeds shall have
been used for such purpose and none of such proceeds shall have been paid or
applied against any mortgage indebtedness, then Kroger is to pay the difference
between the total insurance collected and the total cost of repairing,
reconstructing or replacing the damaged or destroyed building and improvements.
If the Kroger Property is taken in condemnation proceedings, or if a part of
the property is taken in condemnation so that the property is unsatisfactory for
Kroger's business operation, Kroger may cancel the lease, or at its option
remain, in which event the Company is required to restore the property to proper
rentable condition.
MORTGAGE
The Company owns this property on a free and clear basis.
MADISON AVENUE PROPERTY
DESCRIPTION OF MADISON AVENUE PROPERTY
The Madison Avenue Property, located on East 30th Street and Madison Avenue
in New York, New York, is improved with two multi-family properties -- a
thirteen story penthouse elevator building and a seven story elevator building,
containing an aggregate of 126 apartments and ground floor retail stores. The
property is located in mid-Manhattan, in primarily a commercial area, with some
residential and hotels. The two buildings are located on a 13,000 square foot
plot of land, have
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frontage on both Madison Avenue and East 30th Street, and were constructed
separately and subsequently joined. The properties were constructed in about
1910 and substantially renovated in approximately 1988.
DESCRIPTION OF MADISON AVENUE LEASE
LEASE TERM. The Madison Avenue Property is leased to an unaffiliated entity
for a term expiring February 28, 2038. If tenant exercises its right to convert
the property to cooperative ownerships then effective with the assignment of the
lease the lease can be extended for 150 years. To the Company's knowledge, the
tenant is not contemplating a cooperative conversion at the present time.
AMOUNTS PAYABLE UNDER THE MADISON AVENUE PROPERTY LEASE. The basic annual
rental is $550,000 increasing to $600,000 in 1999 and by $50,000 each five years
thereafter. If the conversion option is exercised, the basic annual rent is
fixed for ten years from the date of conversion at the basic annual rental then
being paid, increasing by $75,000 each ten years thereafter. If the conversion
option is exercised, the Company is to receive a conversion premium which the
Company has agreed to divide 50-50 with BRT, provided the conversion takes place
on or before June 14, 2004. The Company acquired this property from BRT, an
affiliated entity in June 1994 (see Form 8-K of the Company dated June 27,
1994).
The lease is a net lease and requires tenant to pay, in addition to basic
annual rent, all real estate taxes and all utility and other charges applicable
to the property during the term.
MAINTENANCE AND MODIFICATIONS. Tenant, at its expense, is required to make
all structural and non-structural repairs and is required to maintain the
property in good repair and condition, reasonable wear and tear excepted.
Tenant is permitted, under the lease, to make structural and non-structural
alterations, improvements and additions provided (i) any such alteration,
improvement or addition does not materially adversely affect the structural
integrity or strength of the buildings or the value of the property, or any
interest of Landlord and does not include structural demolition, and (ii) if the
anticipated cost exceeds a specified amount (currently $150,000, increasing
$50,000 each ten years commencing with 1999) Tenant is to give Landlord prior
notice and furnish Landlord with such information as Landlord may reasonably
request. In any event Tenant can't demolish any structural portions of the
buildings without consent of Landlord. The lease specifies other Tenant
obligations prior to Tenant commencing alterations, improvements or additions.
INSURANCE. Tenant is required to maintain fire insurance, with extended
coverage, in an amount equal to 100% of replacement value, exclusive of footings
and foundations with the deductible not to exceed $25,000, increasing every five
years by the increase in the consumer price index. Tenant is also required to
maintain rent insurance, comprehensive general public liability insurance,
elevator and boiler insurance, and such other insurance, in such amounts, as
reasonably required by Landlord.
DAMAGE TO OR CONDEMNATION OF MADISON AVENUE PROPERTY. In the event of a
casualty, Tenant at its expense, whether or not the insurance proceeds are
sufficient, is required to repair the damage and restore, replace and rebuild
the premises, at least to the extent of the value and as near as possible to the
character prior to the casualty.
If there is a condemnation of all or substantially all the premises, Tenant
may elect to terminate the lease, and in such event the lease shall terminate on
the date the condemning authority takes title to the property. In the event of a
condemnation of all or substantially all the property, the award is to be
divided between Landlord and Tenant in the proportion each party's interest in
the premises bears to the aggregate value of both party's interest in the
property, as determined by arbitration, provided the Landlord is to receive as a
priority payment an amount equal to the fixed annual rent then being paid under
the lease multiplied by 10, with interest from the date of taking and then
Tenant is to
8
<PAGE>
receive the greater of (i) the sum of all amounts paid by Tenant for capital
improvements, not to exceed $3,000,000 and (ii) all unpaid principal and
interest and other sums due on any leasehold mortgage.
If there is a partial taking Tenant, at its sole expense, is to repair and
reconstruct the premises. Any award is to be applied to such repair and
reconstruction, and if the award exceeds the cost of repair and reconstruction,
the excess is divided between Landlord and Tenant as provided in the Lease.
MORTGAGE
Simultaneously with its purchase of the property in June, 1994 for a
consideration of $5,525,000 (plus closing costs) the Company obtained a
$4,250,000 non-recourse first mortgage loan from East New York Savings Bank. The
mortgage bears interest at 8.75% per annum during the initial 5 year term. The
Company has an option to renew the mortgage for an additional five year term
upon payment of a 1% extension fee. The interest rate during the extension
period will be the greater of 8.75% or 275 basis points above U.S. Treasuries as
defined in the mortgage agreement. The mortgage is being amortized based on a 25
year amortization schedule.
The Tenant has the right to mortgage the lease under terms and conditions
set forth in the lease. Any fee mortgage on the premises is superior to any
leasehold mortgage.
* * * * * * * * * * *
1995 TRANSACTION
On January 19, 1995 the Company acquired sixteen net lease investments and
one mortgage receivable from Gould Investors L.P., an affiliated entity, i.e.
the Kroger Freezer Warehouse - Columbus, Ohio, 13 Total Petroleum service
stations-all located in the State of Michigan, the United Artists Theater -
Seattle, Washington (and a second mortgage secured by this property) and the
Zero City Frozen Food Warehouse - Miami, Florida. For a more detailed
description of materially important properties acquired in the 1995 Transaction
see the discussion below. In consideration of the acquisition of these
properties, the Company transferred to Gould 1,030,000 shares of BRT Preferred
Stock and 173,719 shares of beneficial interest of BRT, the Company took title
to the 13 Total Petroleum service stations subject to a $6,850,000 blanket first
mortgage (held by the Company and cancelled as a matter of law in the
transaction) and the Company paid Gould $3.29 in cash. The Company recorded the
assets acquired at the carrying amount of the assets exchanged, plus transaction
costs.
DESCRIPTION OF MATERIAL PROPERTIES ACQUIRED IN 1995 TRANSACTION
ZERO CITY FROZEN FOOD WAREHOUSE
DESCRIPTION OF ZERO CITY FROZEN FOOD WAREHOUSE
This property, located in Miami, Florida, is improved with a one story
industrial building, with a partial mezzanine, cold rooms, freezers and
processing area constructed on a 12 1/2 acre site. The Company is the tenant
under a ground lease and landlord under an operating lease (holding what is
commonly referred to in the real estate industry as a "sandwich position").
GROUND LEASE
An unrelated third party owns the fee title to this property, which is
leased to the Company for a term which expires April 30, 2010, with three
remaining 15 year renewal options and one 14 year renewal option. Through April
30, 1995 the Company paid rent at the annual rate of $322,300 and from May 1,
1995 to April 30, 2010 the Company will pay annual rent at the rate of $288,833.
If the Company exercises the remaining renewal options the rental will be the
greater of $288,833 and 7.5% of the value of the land and its improvements. If
the fee owner refinances the mortgage on this property the Company is to receive
1/3 of the net proceeds thereof and/or 1/3 of any reduction in debt service, and
will be obligated for 1/3 of the debt service obligation. The Company, pursuant
to this ground lease, is obligated to pay all taxes and insurance and is
responsible for structural repairs.
9
<PAGE>
OPERATING LEASE
LEASE TERM. The Company is lessee of the ground lease which it holds
subject to an operating lease with United States Cold Storage, Inc. The
operating lease is for a term expiring April 30, 2010 with one remaining 15 year
renewal option.
AMOUNT PAYABLE UNDER THE OPERATING LEASE. The tenant under the operating
lease paid to the Company annual fixed rent of $475,200 to April 30, 1995 and
will pay $425,000 thereafter through April 30, 2010 and the renewal term, if the
option to renew is exercised. The operating lease is net to Landlord and Tenant
is required to pay all taxes, insurance premiums and utility costs.
MAINTENANCE AND MODIFICATIONS. Tenant is to take good care of the premises
and at its expense, make all repairs, structural and non-structural.
Tenant has the right during the lease to make alterations to the premises,
but it requires the consent of Landlord if it substantially alters the basic
structure or value of the improvements and any repair in excess of $50,000
requires Landlord's approval. Tenant cannot demolish any improvements to the
premises without Landlord's consent. Tenant can construct an addition to any
building or construct a new building on the property, but it requires Landlord's
consent if the cost exceeds $50,000 and such addition or new construction, in
any event, cannot detract from the existing improvements.
INSURANCE. Tenant, at its cost, is required to maintain fire insurance,
with extended coverage in an amount not less than 80% of full repair and
replacement value, boiler insurance and liability insurance. Tenant is also
required to maintain insurance, in such amounts, as Landlord shall reasonably
require against other insurable hazards.
DAMAGE TO OR CONDEMNATION OF ZERO CITY FROZEN FOOD WAREHOUSE. In the event
of damage or destruction of the premises as a result of fire or other casualty,
Tenant can not terminate the lease and at its cost and expense, is to repair and
restore the improvements to at least as good a condition as existed immediately
prior to the casualty.
If there is a total condemnation of the property, the lease terminates as of
the date of taking and any award is allocated as follows: (i) to Landlord such
portion as is necessary to discharge all mortgages, provided such mortgages do
not exceed $6,700,000, (ii) to Landlord the difference, if any between
$6,700,000 and the amount received by Landlord to discharge mortgages, (iii) to
Tenant an amount equal to the book value of Tenant's property, and (iv) the
balance 50-50 to Landlord and Tenant.
MORTGAGE
The Company holds its leasehold position on a free and clear basis.
TOTAL PETROLEUM PROPERTIES
DESCRIPTION OF TOTAL PETROLEUM PROPERTIES
The Total Petroleum Properties, which are located in the State of Michigan,
are all service stations and include gasoline pumping islands, a service area
and a retail building used as a convenience store. The Total Petroleum
Properties are on parcels of land ranging from 45,000 square feet to 183,000
square feet and the buildings on the properties range from 6,000 square feet to
13,000 square feet.
DESCRIPTION OF TOTAL PETROLEUM LEASES
LEASE TERM. The Total Petroleum Properties have 13 separate but identical
leases dated as of May 15, 1991 (Total Petroleum Leases). The primary lease term
for the Total Petroleum Properties is 20 years ending on May 31, 2011. Total
Petroleum has the right to extend the leases for two 10 year renewal terms, but
the renewal option can only be exercised on an all or none basis. The Total
Petroleum Leases contain a cross default provision which provides that on a
monetary default resulting in the termination of a lease, the Landlord has a
right to terminate any or all of the other leases.
10
<PAGE>
AMOUNTS PAYABLE UNDER THE TOTAL PETROLEUM LEASES. The combined annual rent
for all 13 properties is $860,075 through May 14, 1996, increasing by 3% each
May 15th throughout the term of the lease. The leases are net leases, which
requires Total to pay all real estate taxes, assessments, and all utility
charges.
MAINTENANCE AND MODIFICATIONS. Total Petroleum is required, at its expense,
to maintain the Total Petroleum Properties in good repair and is responsible to
keep each property in reasonably clean condition. The Tenant at its sole expense
may make any non-structural alterations, additions, replacements or improvements
to the property without the Landlord's consent. The lessee is required to obtain
the Landlord's prior written consent for structural alterations, additions,
replacements or improvements which consent will not be unreasonably withheld.
INSURANCE. Total Petroleum is required to maintain insurance at its expense
providing for fire with standard extended risk coverage to the extent of the
full replacement cost. So long as the Tenant's net worth exceeds $100,000,000
the deductible may be that which is provided in Total Petroleum's master
corporate insurance policy, and if its net worth falls below $100,000,000 then
the deductible shall not exceed $250,000 without Landlord's consent.
DAMAGE TO OR CONDEMNATION OF PROPERTY. If the premises are damaged or
destroyed by fire or other casualty there is to be no rent abatement and Total
Petroleum is required to repair and restore the premises in a reasonable
diligent manner. If, however, the premises are rendered untenantable Total
Petroleum may terminate the lease in which event it shall pay to the Company an
amount sufficient to restore the premises to the condition existing as of the
date the lease was executed, reasonable wear and tear excepted.
If all or any part of any of the properties is taken by condemnation so as
to render the remaining portion of the property unsuitable for lessee's
business, then the rent due under the lease shall be equitably adjusted until
such time as the Tenant provides Landlord with written notice that it is
electing to terminate the lease. If however, the Tenant does not vacate the
property within ninety days of such taking then it is conclusively presumed that
such taking is not extensive enough to render the premises unsuitable for Total
Petroleum business. In the event of a taking, damages awarded are payable as
follows: (i) Total Petroleum is entitled to the portion of the award
attributable to the value of its leasehold and (ii) Landlord is entitled to the
value of its reversion. In allocating between the value of the leasehold and the
reversion, the value of improvements and betterments made by the lessee is to be
equitably divided between leasehold and reversion. Each party is entitled to
file a claim in any condemnation proceeding.
OPTION TO PURCHASE. Total Petroleum has been granted an option to purchase
all locations at fair market value, excluding the value of the improvements made
by it. This option may be exercised during the last six months of the term of
the lease. Fair market value is to be determined by an appraisal process.
RIGHT OF FIRST REFUSAL. Total Petroleum has been granted a right of first
refusal to purchase a Total Petroleum Property from the Landlord for the same
purchase price and on the same terms and conditions as a bonafide offer to
purchase received by the Landlord from an unrelated party which is engaged in,
or plans to engage in the business of selling petroleum products, which offer
the Landlord intends to accept.
MORTGAGE
The Total Petroleum Properties are owned free and clear of mortgages.
* * * * * * * * * * *
11
<PAGE>
ADDITIONAL 1995 ACQUISITIONS
In fiscal 1995 the Company acquired fee title to three additional net lease
investments, described more particularly below.
KILLEEN, TEXAS PROPERTY
DESCRIPTION OF KILLEEN, TEXAS PROPERTY
The Killeen, Texas property is one of two front out-parcels of a newly
developed shopping center anchored by an Albertson's supermarket, located at 900
West Central Texas Expressway, Killeen, Texas. The property is improved with a
one story, free standing building having approximately 8,000 square feet of
space and 39 parking spaces located on a parcel of land of approximately 1.106
acres. The building, a prototypical Hollywood Video Store, was built in 1995.
DESCRIPTION OF HOLLYWOOD VIDEO LEASE
LEASE TERM. The property is leased to Hollywood Entertainment Corporation
d/b/a/ Hollywood Video pursuant to a "net lease" which has an initial term of
approximately fifteen years ending June 30, 2010. The tenant has the right to
extend the lease for two additional five year terms.
AMOUNTS PAYABLE UNDER THE LEASE. The annual basic rent payable under the
lease is $141,200, increasing to $162,380 in July, 2000. Tenant is required to
pay all real estate taxes, assessments, water and sewer charges and other
governmental charges.
MAINTENANCE AND MODIFICATIONS. Tenant at its expense is required to
maintain (and where necessary replace) the premises, including all structural
systems, load bearing walls, floor slabs and HVAC systems and equipment. The
Landlord warranted and guaranteed that the building was constructed in a first
class manner for a period of 12 months from the commencement date of the lease
and after the expiration of said 12 month period Landlord is to assign to the
Tenant any and all warranties and guaranties of third parties held by the
Landlord, except in the event such warranties and guaranties are not assignable,
the Landlord is to enforce the warranties and guaranties for the benefit of the
Tenant.
The Tenant is not to make any exterior or structural alterations to the
premises without the prior written consent of the Landlord which is not to
unreasonably withheld. Tenant is permitted to make interior non structural
alterations, additions and improvements costing less than $50,000 without the
Landlord's prior written consent.
INSURANCE. Landlord is to obtain general liability insurance with coverage
of not less than $3,000,000, all risk property insurance covering fire and
extended coverage for the replacement value thereof and rental interruption
insurance covering a period not to exceed one year. The Tenant is to reimburse
the Landlord for Landlord's annual costs for premiums for such insurance. The
Tenant has the right to elect to carry some or all of such insurance upon ten
days prior written notice to Landlord and if Tenant gives such notice, the
Landlord is relieved of its obligations to obtain and maintain the insurance.
DAMAGE TO OR CONDEMNATION OF PROPERTY. If the premises are damaged or
destroyed by fire or other casualty the Landlord is to repair, restore or
rebuild as is necessary to substantially return the premises to the condition
existing immediately prior to such damage or destruction and the lease remains
in full force and effect. If however, any repair, restoration or reconstruction
may not commence within 90 days from the date of the casualty and are not
repaired, restored or reconstructed within eight months of the date of the
casualty, the Tenant may terminate the lease on 30 days prior written notice to
the Landlord. The Landlord is not required to expend funds in excess of the
insurance proceeds for such repairing, restoring, and rebuilding.
If the premises or any portion thereof are taken by condemnation, the lease
terminates as to the portion taken as of the date the condemning authority takes
title or possession. If more than 5% of the floor area of the building, or more
than 20% of the common area designated as parking is taken by condemnation
Tenant at its option may terminate the lease. If the tenant does not terminate
the lease,
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<PAGE>
the lease remains in full force and effect as to the portion of the premises
remaining except that the rent shall be reduced in the proportion that the floor
area of the premises so taken bears to the total floor area of the premises. Any
condemnation award shall be the property of the Landlord, but Tenant is entitled
to any award for loss or damage to Tenant's property and relocation expenses.
MORTGAGE
The property is encumbered by a first mortgage held by Bank One, Texas, N.A.
in the original principal amount of $731,250. The loan bears interest at 9.1%
per annum, is amortizing over a 25 year period and is due on August 14, 2002. At
December 31, 1995 $729,311 was due and owing on this mortgage.
ROSENBERG, TEXAS PROPERTY
DESCRIPTION OF ROSENBERG, TEXAS PROPERTY
The Rosenberg, Texas property, constructed in 1995, is located on an out
parcel of a recently developed free standing Super Kmart in Rosenberg, Texas (a
suburb of Houston, Texas). There are other out parcels occupied by a
Jack-in-the-Box, Payless Shoe Source, Peppermill Restaurant and
Texaco/McDonalds. The property is improved with a free standing prototypical
Hollywood Video store, having approximately 8,000 square feet of space and 44
parking spaces.
DESCRIPTION OF HOLLYWOOD VIDEO LEASE
The property is leased to Hollywood Entertainment Corp. d/b/a Hollywood
Video pursuant to a "net lease" which has an initial term of approximately
fifteen years ending January 31, 2010. The Tenant has the right to extend the
lease for two additional five year terms.
AMOUNTS PAYABLE UNDER THE LEASE. The annual basic rent under the lease is
$111,800, increasing to $128,750 in January 2000. The lease requires the Tenant
to pay all real estate taxes, assessments, water and sewer charges and other
governmental charges.
MAINTENANCE AND MODIFICATIONS. Tenant at its expense is required to
maintain (and where necessary replace) the premises, including all structural
systems, load bearing walls, floor slabs and HVAC systems and equipment. The
Landlord warranted and guaranteed that the building was constructed in a first
class manner for a period of 12 months from the commencement date of the lease
and after the expiration of said 12 month period Landlord is to assign to the
Tenant any and all warranties and guaranties of third parties held by the
Landlord except in the event such warranties and guaranties are not assignable,
the Landlord is to enforce the warranties and guaranties for the benefit of the
Tenant.
The Tenant is not to make any exterior or structural alterations to the
premises without the prior written consent of the Landlord which is not to
unreasonably withheld. Tenant is permitted to make interior non structural
alterations, additions and improvements costing less than $50,000 without the
Landlord's prior written consent.
INSURANCE. Landlord is to obtain general liability insurance with coverage
of not less than $3,000,000, all risk property insurance covering fire and
extended coverage for the replacement value thereof and rental interruption
insurance covering a period not to exceed one year and the Tenant is to
reimburse the Landlord for Landlord's annual costs for premiums for such
insurance. The Tenant has the right to elect to carry some or all of such
insurance upon ten days prior written notice to Landlord and if Tenant gives
such notice, the Landlord is relieved of its obligations to obtain and maintain
the insurance.
DAMAGE TO OR CONDEMNATION OF PROPERTY. If the premises are damaged or
destroyed by fire or other casualty the Landlord is to repair, restore or
rebuild as is necessary to substantially return the premises to the condition
existing immediately prior to such damage or destruction and the lease remains
in full force and effect. If however, any repair, restoration or reconstruction
may not commence within 90 days from the date of the casualty and are not
repaired, restored or reconstructed
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within eight months of the date of the casualty, the Tenant may terminate the
lease on 30 days prior written notice to the Landlord. The Landlord is not
required to expend funds in excess of the insurance proceeds for such repairing,
restoring, rebuilding.
If the premises or any portion thereof are taken by condemnation, the lease
terminates as to the parcel taken as of the date the condemning authority takes
title or possession. If more than 5% of the floor area of the building, or more
than 20% of the common area designated as parking is taken by condemnation,
Tenant, at its option may terminate the lease. If the tenant does not terminate
the lease, the lease remains in full force and effect as to the portion of the
premises remaining except that the rent shall be reduced in the proportion that
the floor area of the premises so taken bears to the total floor area of the
premises. Any condemnation award shall be the property of the Landlord, but
Tenant is entitled to any award for loss or damage to Tenant's property and
relocation expenses.
MORTGAGE
The property is encumbered by a first mortgage held by Bank One, Texas, N.A.
in the original principal amount of $692,100. The loan bears interest of 8.55%
per annum, is amortizing over 25 years and is due on December 5, 2002. The
entire original principal amount was outstanding on December 31, 1995.
CEDAR RAPIDS, IOWA PROPERTY
DESCRIPTION OF CEDAR RAPIDS, IOWA PROPERTY
The Cedar Rapids property is located at 4701 First Avenue, S.E., a major
commercial thoroughfare in Cedar Rapids, Iowa. The property, contains
approximately 1.52 acres, is improved with a 15,400 square foot single story
retail store completed in 1995, and has 77 parking spaces.
DESCRIPTION OF AUDIO KING LEASE
LEASE TERM. The property is leased to Audio King Corporation pursuant to a
net lease which has an initial term of approximately twenty years expiring June
30, 2015. The Tenant has the right to extend the lease for four additional 5
year terms.
AMOUNTS PAYABLE UNDER THE LEASE. The annual basic rent under the lease is
$157,850, increasing to $180,950 in July 2000, $204,050 in July 2005 and
$227,150 in July 2010. The lease requires Tenant to pay all real estate taxes,
assessments and other government charges.
MAINTENANCE AND MODIFICATION. The Tenant is required to keep the premises,
including the foundation, exterior walls, roof and heating and ventilating and
air conditioning systems and any equipment serving the premises in good order,
condition and repair and in a clean and safe condition; provided however, during
the last 5 years of the initial term and during any extension term the Landlord
is responsible for replacement of the foundation, exterior walls, roof and HVAC
systems.
The Tenant is not to make any alterations or additions to the premises in
excess of $25,000 without first obtaining the Landlord's consent.
INSURANCE. The Tenant is required to maintain general liability insurance
in the initial amount of $1,000,000 per occurrence and the Landlord is to
maintain casualty insurance covering loss of or damage to the property in the
full amount of its replacement value. With respect to the casualty insurance
maintained by the Landlord, the Tenant is to pay to the Landlord, as additional
rent, the premiums for such policy within 15 days of receiving the statement
therefor. The casualty insurance provides protection against all risks including
fire, vandalism, malicious mischief, special extended perils, sprinkler leakage,
etc.
DAMAGE TO OR CONDEMNATION PROPERTY. If the premises or any portion of the
building is damaged by fire or other casualty the Landlord is to promptly repair
the damage if the repair, in Landlord's opinion, can be completed within 90
days. The Landlord does not have any obligation to repair in the event that the
insurance proceeds it receives are insufficient to cover the expected cost of
the repairs. If in Landlord's opinion the repairs cannot be completed within 90
days, the Landlord may elect to
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repair the damage in which event the lease continues in full force and effect,
but the rent is partially abated to the extent Tenant's use of the premises is
impaired. If Landlord does not elect to make the repairs, the lease terminates
as of the date of the casualty.
If the whole of the building is taken by condemnation the lease will
terminate as of the date of taking. If less than the whole building is taken,
the lease shall be unaffected by the taking, provided that the Tenant has the
right to terminate the lease if 20% or more of the premises is taken and the
remaining area of the premises is not reasonably sufficient for Tenant to
continue to operate its business. In the event of a partial taking which does
not result in a termination of the lease, the Landlord is to restore the
remaining portion of the premises as nearly as practicable to its condition
prior to the condemnation. All damages awarded for any taking and condemnation
shall be the property of the Landlord except for value allocated to alterations
and additions made by Tenant after the lease was entered into. Tenant is also
entitled to a separate award for loss of business, depreciation, and removal of
stock and fixtures.
MORTGAGE
The property is encumbered by a first mortgage held by Firstar Bank Cedar
Rapids, N.A. in the original principal amount of $990,000. The loan bears
interest at 8 1/2% per annum and matures December 21, 2000. The loan provides
for amortization over 20 years. The entire principal balance was outstanding on
December 31, 1995.
ITEM 3. -- LEGAL PROCEEDINGS
There are no pending material legal proceedings to which the Company is a
party.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this Form 10-K.
PART II
ITEM 5. -- MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The following table sets forth the high and low prices for the Common Stock
of the Company as reported by the American Stock Exchange, and the per share
cash distributions paid by the Company on the Common Stock during each quarter
of the years ended December 31, 1994 and 1995:
<TABLE>
<CAPTION>
HIGH LOW DIVIDEND
------- ------- -----------
<S> <C> <C> <C>
L994
First Quarter....................................................... 10 7/8 10 1/8 $ .10
Second Quarter...................................................... 10 3/8 9 1/8 $ .125
Third Quarter....................................................... 11 1/4 10 3/8 $ .505
Fourth Quarter...................................................... 11 1/4 10 1/2 $ .125*
L995
First Quarter....................................................... 10 7/8 10 1/4 $ .125
Second Quarter...................................................... 12 3/4 10 1/4 $ .30
Third Quarter....................................................... 13 3/4 12 1/4 $ .30
Fourth Quarter...................................................... 14 1/8 12 3/4 $ .30*
</TABLE>
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<PAGE>
The following table sets forth the high and low prices for the $16.50
Cumulative Convertible Preferred Stock of the Company as reported by the
American Stock Exchange and the per share cash distributions paid by the Company
on the Preferred Stock during each quarter of the years ended December 31, 1994
and 1995:
<TABLE>
<CAPTION>
HIGH LOW DIVIDEND
------- ------- ------------
<S> <C> <C> <C>
L994
First Quarter....................................................... 17 1/8 16 1/2 $ .40
Second Quarter...................................................... 17 1/2 16 1/2 $ .40
Third Quarter....................................................... 17 16 1/2 $ .40
Fourth Quarter...................................................... 16 7/8 15 7/8 $ .40**
1995
First Quarter....................................................... 16 7/8 15 3/4 $ .40
Second Quarter...................................................... 17 1/8 15 3/4 $ .40
Third Quarter....................................................... 16 7/8 16 1/8 $ .40
Fourth Quarter...................................................... 16 7/8 16 1/4 $ .40**
</TABLE>
- ------------------------
* Cash distributions of $.30 and $.12 1/2 per share were paid on the Common
Stock on January 3, 1996 and January 2, 1995. These two distributions are
reflected as being paid in the 1995 and 1994 fourth quarters, respectively.
** A cash distribution of $.40 per share was paid on the Preferred Stock on
January 3, 1996 and January 2, 1995. These two distributions are reflected
as being paid in the fourth quarter of 1995 and 1994, respectively.
The Common Stock and Preferred Stock of the Company trade on the American
Stock Exchange, under the symbols OLP and OLP Pr, respectively. As of March 1,
1996 there were 350 common and 200 preferred stockholders of record and the
Company estimates that at such date there were approximately 1,600 and 725
beneficial owners of the Company's Common and Preferred Stock, respectively.
16
<PAGE>
ITEM 6. -- SELECTED FINANCIAL DATA
The following are highlights of the Company's operations which are derived
from the audited financial statements of the Company for the years ended
December 31, 1995, 1994, 1993, 1992 and 1991.
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991
-------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Revenues................................ $ 4,890,962 $ 4,041,378 $ 3,348,419 $ 2,967,919 $ 2,475,952
Gain on sales of real estate............ -- -- -- 8,528,684(a)
Gain on sale of investments............. -- -- 168,631 303,130 --
Provision for valuation adjustment and
impairment............................. -- -- (258,744) -- (4,090,000)
Net income.............................. 3,096,302 2,861,137 2,435,269 2,436,315 5,782,678
Calculation of net income applicable to
common stockholders:
Net income............................ 3,096,302 2,861,137 2,435,269 2,436,315 5,782,678
Less: dividends and accretion on
preferred stock........................ 1,446,519 1,444,703 1,442,907 1,442,372 1,538,935
Net income applicable to common
stockholders........................... $ 1,649,783 $ 1,416,434 $ 992,362 $ 993,943 $ 4,243,743
Weighted average number of common shares
outstanding............................ 1,409,371 1,356,989 1,338,619 1,338,619 1,338,619
Net income per common share............. $ 1.17 $ 1.04 $ .74 $ .74 $ 3.17
Cash distributions per share of:
Common Stock.......................... $ 1.03 $ .86 $ .94 $ .70 $ 2.25
Preferred Stock....................... 1.60 1.60 1.60 1.60 1.60
BALANCE SHEET DATA
Total real estate investments, net...... $ 24,253,765 $ 10,996,534 $ 5,627,909 $ 6,271,828 $ 6,375,043
Investments in U.S. Government
obligations and securities............. 1,274,747 3,972,256 4,856,453 13,954,329 19,888,950
Mortgages and note receivables.......... 7,564,716 16,096,224 17,274,039 10,614,040 7,180,387
Total assets............................ 38,040,246 37,652,773 32,383,674 32,339,558 36,019,492
Total liabilities....................... 7,532,267 7,680,937 3,360,236 3,199,045 6,377,989
Redeemable convertible preferred
stock.................................. 12,796,475 12,643,998 12,493,337 12,344,472 13,041,045
Total stockholders' equity.............. 17,711,504 17,327,838 16,530,101 16,796,041 16,600,458
</TABLE>
- ------------------------
Notes:
(a) Represents primarily a gain on sale of properties net leased to Firestone
Tire & Rubber Company.
ITEM 7. -- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company's primary source of liquidity was
approximately $3,844,000 in cash and $1,275,000 in investments in U.S.
Government obligations and securities. Long term debt at December 31, 1995
consisted of $6,590,154 of mortgages payable which is secured by certain real
estate investments.
The Company is currently in discussions concerning the acquisition of other
net leased properties. In management's judgement, cash provided from operations,
the Company's cash position and holdings in marketable government securities
will provide adequate funds for cash distributions to shareholders, operating
expenses and funds for a few investment opportunities. On March 1, 1996, the
17
<PAGE>
Company entered into a revolving credit agreement with Bank Leumi Trust Company
of New York, which makes available to the Company up to $5,000,000 for
additional property acquisitions. The Credit Agreement provides for additional
institutions to become parties to a total credit facility of $15,000,000
(including the $5,000,000 commitment of Bank Leumi). There is no assurance that
additional institutions will become parties to the Credit Agreement. It will
continue to be the Company's policy to make sufficient cash distributions to
shareholders in order for the Company to maintain its real estate investment
trust status under the Internal Revenue Code.
In connection with the lease agreements with Total Petroleum, Inc. ("Total
Petroleum") consummated in 1991, the Company agreed to expend certain funds to
remediate environmental problems discovered at certain locations that were net
leased to Total Petroleum. It was agreed that the net cost to the Company would
not exceed $350,000 per location, with any excess cost being the responsibility
of Total Petroleum. At that time the Company deposited $2,000,000 with an
independent escrow agent to insure compliance by the Company with its
obligations with respect to the environmental clean up. The escrow agent held
approximately $1,345,000 as of December 31, 1995 which the Company deems
adequate to cover any additional environmental costs.
The Michigan Underground Storage Tank Fund Administration ("MUSTFA") has
been reimbursing qualified companies for environmental costs incurred in "clean
up" associated with underground storage tanks. In 1995, the Company received or
accrued approximately $66,000 regarding this fund. The Company cannot estimate
the amount, if any, which will be reimbursed by MUSTFA in the future due to an
announced termination of the program.
RESULTS OF OPERATIONS
COMPARISON OF YEARS ENDED DECEMBER 31, 1995 AND 1994
Total revenues increased to $4,890,962 for the year ended December 31, 1995
from $4,041,378 for the year ended December 31, 1994. The increase of
approximately $850,000 is the result of a substantial increase in rental income,
offset in part by decreases in interest, dividends and other income, resulting
from Management's decision during 1994 to concentrate on investments in improved
real estate net leased on a long term basis. Rental income increased by
$1,682,084, from $983,373 in 1994 to $2,665,457 in 1995, primarily due to rents
earned on sixteen properties acquired from Gould Investors L.P. ("Gould") in
January 1995 ("January 1995 Transaction") and four other properties acquired
during 1995 and 1994. Interest income from related parties decreased from
$2,361,013 in 1994 to $1,878,262 in 1995, principally due to the extinguishment
of a mortgage receivable as part of the January 1995 Transaction. The decrease
was partly offset by an increase in the discount amortization of a senior note
receivable resulting from an increase in principal collections on such note
during 1995.
Dividends from related party decreased to $13,940 in 1995 from $270,000 in
1994 due to the transfer of preferred shares of BRT Realty Trust as part of the
January 1995 Transaction. Interest and other income decreased to $333,303 in
1995 from $426,992 in 1994 primarily due to a decrease in the amount received or
accrued from MUSTFA.
The $266,280 increase in depreciation from $180,557 in 1994 to $446,837 in
1995 results from depreciation on properties acquired during 1995 and 1994. The
decrease in interest -- mortgages payable from $484,440 in 1994 to $453,684 in
1995 is the net result of the elimination of interest paid on a $2,753,700
mortgage loan which was fully repaid in March 1995, offset by interest paid on
new mortgages obtained in connection with property acquisitions during 1995 and
1994.
Effective January 1, 1995, the Company became self-managed, thereby
eliminating the management fee. In connection with the January 1995 Transaction,
the Company must pay annual fixed leasehold rent on one property of $289,000
through April 2010. There was no such expense in 1994.
18
<PAGE>
General and administrative costs increased in 1995 to $609,745 from $412,158
in 1994 substantially due to salary and related payroll costs for the Company's
President, as the Company converted to self-management effective January 1995.
To a lesser extent, the increase results from additional payroll charges, as the
Company's level of activity increased.
COMPARISON OF YEARS ENDED DECEMBER 31, 1994 AND 1993
Total revenues increased to $4,041,378 for the year ended December 31, 1994
from $3,348,419 for the year ended December 31, 1993. The $257,037 increase in
rental income results from the acquisition of a long term net leased property in
June 1994, offset to a limited extent by the sale of a parcel of real estate in
November 1993. Interest income from related parties increased to $2,361,013 in
1994 from $1,907,286 in 1993. The increase of $453,727 is due primarily to
interest earned in 1994 on a mortgage loan purchased from the FDIC at a
substantial discount on July 30, 1993 and interest earned on a senior secured
note receivable acquired in February 1993, offset in part by the exchange of a
mortgage receivable for preferred shares in September 1993. Dividends of
$270,000 and $79,500 were paid on the preferred shares during 1994 and 1993,
respectively.
Interest and other income decreased from $635,297 for the year ended
December 31, 1993 to $426,992 for the year ended December 31, 1994. The $208,305
decrease is substantially due to a decrease of interest earned on U.S.
Government securities resulting from the sale of such investments during 1993,
the proceeds of which were used to invest in the mortgage loan purchased from
the FDIC and the senior secured note receivable. The decrease was partly offset
during 1994 due to an increase in other income of approximately $50,000,
representing a partial return of unexpended escrow funds.
The $78,604 increase in depreciation expense to $180,557 in 1994 results
substantially from the purchase of a property in June 1994. In connection with
this purchase, the Company obtained a $4,250,000 mortgage loan, resulting in
interest on mortgages payable increasing in 1994 by $202,186.
The increases in management fees of $19,376 is due to the increase in gross
revenues on which the management fee was based. Effective January 1, 1995 the
management fee was eliminated as the Company became a self administered real
estate investment trust.
General and administrative costs of $412,158 in 1994 reflect an increase of
$57,038 from the prior year expense of $355,120 and is substantially due to an
increase in expenses allocated by Gould Investors L.P. caused by an increase in
the usage of staff, as the Company's level of activity increased.
Gain on sale of investments in 1993 resulted from the sale of U.S.
Government obligations and securities.
In August, 1993, the Company entered into a contract for the sale of real
estate at a sales price lower than the carrying amount. The Company recorded a
provision for valuation adjustment for this difference of $258,744. The sale
closed during November 1993. There was no comparable provision in 1994.
ITEM 8. -- FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data listed in Items 14(a)(1) and
14(a)(2) hereof are incorporated herein by reference.
ITEM 9. -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None
PART III
Information required by Part III (Item 10 -- "Directors and Executive
Officers of the Registrant", Item 11 -- "Executive Compensation", Item 12 --
"Security Ownership of Certain Beneficial Owners and Management" and Item 13 --
"Certain Relationships and Related Transactions") will be contained in the
definitive proxy statement to be filed within 120 days of the end of the
Company's fiscal year.
19
<PAGE>
PART IV
ITEM 14. -- EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)Documents filed as part of this Report:
1. The following financial statements of the Company are included in this
Report on Form 10-K:
<TABLE>
<CAPTION>
PAGE
-----------
<C> <S> <C>
-- Report of independent auditors (Ernst & Young LLP, successor to F-1
Kenneth Leventhal & Company, Independent Certified Public
Accountants)......................................................
-- Statements:
F-2
Consolidated Balance Sheets........................................
F-3
Consolidated Statements of Income..................................
F-4
Consolidated Statements of Stockholders' Equity....................
F-5-F-6
Consolidated Statements of Cash Flows..............................
F-7-F-16
Notes to Consolidated Financial Statements.........................
</TABLE>
2. Financial Statement Schedules:
<TABLE>
<C> <S> <C>
-- Schedule III -- Real Estate and Accumulated F-17-F-18
Depreciation........................................
-- Schedule IV -- Mortgage Loans on Real Estate......... F-19-F-20
</TABLE>
All other schedules are omitted because they are not applicable or the
required information is shown in the consolidated financial statements or the
notes thereto.
<TABLE>
<C> <C> <S>
3. EXHIBITS
3.1 Articles of Incorporation, as amended, of the Company, filed as Exhibit 3.1 to the
Company's Form 10-Q for the quarter ended September 30, 1985, which Exhibit is incorporated
herein by reference.
3.2 Amendment to Articles of Incorporation, filed as Exhibit to the Company's Form 10-Q for the
quarter ended June 30, 1989, which Exhibit is incorporated herein by reference.
3.3 Amendment to Articles of Incorporation, filed as an Exhibit to the Company's Form 10-Q for
the quarter ended June 30, 1990, which Exhibit is incorporated herein by reference.
3.4 By-Laws of the Company, as amended, filed as an Exhibit to the Company's Form 10-Q for the
quarter ended June 30, 1989, which Exhibit is incorporated herein by reference.
3.5 Amendment to By-Laws filed as an Exhibit to the Company's Form 10-Q for the quarter ended
June 30, 1990, which Exhibit is incorporated herein by reference.
10.1 Lease, dated July 24, 1975, between Harvest of Texas, Inc., landlord, and The Kroger Co.,
tenant, as amended, filed as Exhibit 10.5 to the Company's Form 10-K for the year ended
December 31, 1987, which Exhibit is incorporated herein by reference.
10.2 (i) Lease dated December 2, 1986 between Golden Plaza (1513) Associates, as
landlord, and The May Department Store Company ("May"), as tenant, for the
Chicago (Ashland Avenue), Illinois Property, filed as Exhibit b(i) to the
Company's Form 8-K dated September 1, 1987, which Exhibit is incorporated herein
by reference.
</TABLE>
20
<PAGE>
<TABLE>
<C> <C> <S>
(ii) Lease dated December 2, 1986 between Golden Plaza (812) Associates, as landlord,
and May, as tenant, for the Nashville, Tennessee property, filed as Exhibit
b(ii) to the Company's Form 8-K dated September 1, 1987, which Exhibit is
incorporated herein by reference.
(iii) Lease dated December 2, 1986 between Golden Plaza (717) Associates, as landlord,
and May, as tenant, for the Ottumwa, Iowa Property, filed as Exhibit b(iii) to
the Company's Form 8-K dated September 1, 1987, which Exhibit is incorporated
herein by reference.
(iv) Lease dated December 2, 1986 between Golden Plaza (1466) Associates, as
landlord, and May, as tenant, for the Chicago Heights, Illinois Property, filed
as Exhibit b(iv) to the Company's Form 8-K dated September 1, 1987, which
Exhibit is incorporated herein by reference.
(v) Lease dated December 2, 1986 between Golden Plaza (1485) Associates, as
landlord, and May, as tenant, for the West Valley City, Utah Property, filed as
Exhibit b(v) to the Company's Form 8-K dated September 1, 1987, which Exhibit is
incorporated herein by reference.
(vi) Lease dated December 2, 1986 between Golden Plaza (2652) Associates, as
landlord, and May, as tenant, for the Baltimore, Maryland Property, filed as
Exhibit b(vi) to the Company's Form 8-K dated September 1, 1987, which Exhibit
is incorporated herein by reference.
(vii) Lease dated December 2, 1986 between Golden Plaza (94) Associates, as landlord,
and May, as tenant, for the Kansas City, Kansas Property, filed as Exhibit
b(vii) to the Company's Form 8-K dated September 1, 1987, which Exhibit is
incorporated herein by reference.
(viii) Lease dated December 2, 1986 between Golden Plaza (1530) Associates, as
landlord, and May, as tenant, for the Seattle, Washington Property, filed as
Exhibit b(viii) to the Company's Form 8-K dated September 1, 1987, which Exhibit
is incorporated herein by reference.
(ix) Lease dated December 2, 1986 between Golden Plaza (1508) Associates, as
landlord, and May, as tenant, for the Chicago (E. 47th St.), Illinois Property,
filed as Exhibit b(ix) to the Company's Form 8-K dated September 1, 1987, which
Exhibit is incorporated herein by reference.
(x) Lease dated December 2, 1986 between Golden Plaza (822) Associates, as landlord,
and May, as tenant, for the Decatur, Illinois Property, filed as Exhibit b(x) to
the Company's Form 8-K dated September 1, 1987, which Exhibit is incorporated
herein by reference.
(xi) Lease dated December 2, 1986 between Golden Plaza (2633) Associates, as
landlord, and May, as tenant, for the Dallas, Texas Property, filed as Exhibit
b(xi) to the Company's Form 8-K dated September 1, 1987, which Exhibit is
incorporated herein by reference.
On September 1, 1987 the leases referred to in 10.3 were assigned to the
Company, as landlord.
10.3 Lease dated January 17, 1989 and modification thereof dated as of February 15, 1989 between
Crystal Management, Inc., as Landlord and Stamford Realty Associates, Inc. as tenant with
respect to Madison Avenue, New York, New York, filed as an exhibit to the Company's Form
8-K dated June 27, 1994 and incorporated herein by reference.
10.4 Purchase and Sale Agreement dated as of December 28, 1994 with Gould Investors L.P. with
respect to the acquisition of sixteen net leased properties, filed as an exhibit to the
Company's Form 8-K dated February 2, 1995 and incorporated herein by reference.
</TABLE>
21
<PAGE>
<TABLE>
<C> <C> <S>
10.5 Lease dated April 30, 1970 between Arthur L. Feinstein, et. ano and Prudent Resources
Trust, as Tenant (Ground Lease) with respect to Zero City Frozen Food Warehouse, Miami,
Florida filed as an exhibit to the Company's Form 10-K dated March 23, 1995 and
incorporated herein by reference.
10.6 Lease dated April 30, 1970 between Prudent Resources Trust, as Landlord, and Zero Food
Storage, Inc. as Tenant (Operating Lease) with respect to Zero City Frozen Food Warehouse,
Miami, Florida filed as an exhibit to the Company's Form 10-K dated March 23, 1995 and
incorporated herein by reference.
10.7 Form of lease entered into with Total Petroleum with respect to 13 Total Petroleum
properties filed as an exhibit to the Company's Form 10-K dated March 23, 1995 and
incorporated herein by reference.
10.8 Lease dated March 1, 1995 between Hollywood Video Partners LLC, as Landlord, and Hollywood
Entertainment Corporation, as Tenant, with respect to Killeen, Texas property. This exhibit
is filed herewith. The lease was assigned to OLP Texas, Inc., a wholly owned subsidiary of
the Company.
10.9 Lease dated September 20, 1994 between HWD Video Partners, Inc., as Landlord and Hollywood
Entertainment Corporation, as Tenant, with respect to Rosenberg, Texas property. The
exhibit is filed herewith. This lease was assigned to OLP Texas, Inc., a wholly owned
subsidiary of the Company.
10.10 Lease dated June 28, 1995 between OLP Iowa, Inc. (a wholly owned subsidiary of the
Company), as Landlord, and Audio King Corporation, as Tenant, with respect to Cedar Rapids,
Iowa property. This exhibit is filed herewith.
10.11 Credit Agreement dated March 1, 1996 between the Company and Bank Leumi Trust Company of
New York. This exhibit is filed herewith.
21.1 Subsidiaries of registrant (filed herewith)
27 Financial Data Statements
(b) No reports on Form 8-K were filed by the Registrant during the last quarter of
the period covered by this report.
</TABLE>
22
<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 of the undersigned, thereunto duly authorized.
ONE LIBERTY PROPERTIES, INC.
Dated: March , 1996
By: /s/ MATTHEW GOULD
-----------------------------------
Matthew Gould
PRESIDENT
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 in the capacities indicated on the dates indicated.
<TABLE>
<C> <S> <C>
SIGNATURE TITLE DATE
- ------------------------------------------------------ -------------------------------- -----------------------
/s/ FREDRIC H. GOULD
------------------------------------------- Chairman of the Board of March 12, 1996
Fredric H. Gould Directors
/s/ MATTHEW GOULD
------------------------------------------- President and Chief Executive March 12, 1996
Matthew Gould Officer
/s/ MARSHALL ROSE
------------------------------------------- Director March 12, 1996
Marshall Rose
/s/ JOSEPH A. AMATO
------------------------------------------- Director March 12, 1996
Joseph A. Amato
/s/ CHARLES BIEDERMAN
------------------------------------------- Director March 12, 1996
Charles Biederman
/s/ ARTHUR HURAND
------------------------------------------- Director March 12, 1996
Arthur Hurand
/s/ DAVID W. KALISH
------------------------------------------- Vice President and Chief March 12, 1996
David W. Kalish Financial Officer
</TABLE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
One Liberty Properties, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of One Liberty
Properties, Inc. and subsidiaries (the "Company") as of December 31, 1995 and
1994, and the related consolidated statements of income, stockholders' equity
and cash flows for each of the three years in the period ended December 31,
1995. Our audits also included the financial statement schedules listed in the
Index at Item 14(a). These financial statements and schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
One Liberty Properties, Inc. and subsidiaries at December 31, 1995 and 1994, and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles. Also, in our opinion, the related
financial statement schedules, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information set forth therein.
ERNST & YOUNG LLP
New York, New York
February 9, 1996
except for Note 10, as to which the date is
March 1, 1996
F-1
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Real estate investments, at cost (Notes 3 and 4)
Land........................................................................... $ 7,299,417 $ 3,586,317
Buildings...................................................................... 18,154,919 8,163,951
-------------- --------------
25,454,336 11,750,268
Less accumulated depreciation................................................ 1,200,571 753,734
-------------- --------------
24,253,765 10,996,534
Mortgages receivable -- less unamortized discount -- (substantially all from
related parties) -- (Note 3).................................................... 7,036,141 13,988,031
Senior secured note receivable -- less unamortized discount -- (related party) --
(Note 3)........................................................................ 528,575 2,108,193
Cash and cash equivalents........................................................ 3,844,409 2,701,456
Unbilled rent receivable......................................................... 86,767 173,547
Rent, interest, deposits and other receivables................................... 696,790 360,599
Investments in U.S. Government obligations and securities -- (Note 2)............ 1,274,747 3,972,256
Investments in BRT Realty Trust -- (related party) -- (Notes 2 and 3)............ 127,704 3,219,481
Other............................................................................ 191,348 132,676
-------------- --------------
$ 38,040,246 $ 37,652,773
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Mortgages payable (Note 4)..................................................... $ 6,590,154 $ 6,983,647
Accounts payable and accrued expenses.......................................... 193,767 198,890
Dividends payable.............................................................. 748,346 498,400
-------------- --------------
7,532,267 7,680,937
-------------- --------------
Commitments and contingencies (Notes 5, 6 and 7)................................. -- --
Redeemable Convertible Preferred Stock, $1 par value; $1.60 cumulative annual
dividend; 2,300,000 shares authorized; 808,776 shares issued; liquidation and
redemption values of $16.50 (Note 5)............................................ 12,796,475 12,643,998
-------------- --------------
Stockholders' equity:
Common Stock, $1 par value; 25,000,000 shares authorized; 1,416,119 and
1,399,119 shares issued and outstanding....................................... 1,416,119 1,399,119
Paid-in capital................................................................ 13,218,757 13,233,109
Net unrealized loss on available-for-sale securities (Note 2).................. (6,758) (34,913)
Accumulated undistributed net income........................................... 3,083,386 2,730,523
-------------- --------------
17,711,504 17,327,838
-------------- --------------
$ 38,040,246 $ 37,652,773
-------------- --------------
-------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-2
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Revenues:
Rental income (Note 6)............................................. $ 2,665,457 $ 983,373 $ 726,336
Interest from related parties (Note 3)............................. 1,878,262 2,361,013 1,907,286
Dividends from related party (Note 3).............................. 13,940 270,000 79,500
Interest and other income.......................................... 333,303 426,992 635,297
------------- ------------- -------------
4,890,962 4,041,378 3,348,419
------------- ------------- -------------
Expenses:
Depreciation....................................................... 446,837 180,557 101,953
Interest -- mortgages payable...................................... 453,684 484,440 282,254
Management fee (Note 7)............................................ -- 103,086 83,710
Leasehold rent..................................................... 284,394 -- --
General and administrative (Note 7)................................ 609,745 412,158 355,120
------------- ------------- -------------
1,794,660 1,180,241 823,037
------------- ------------- -------------
Operating income..................................................... 3,096,302 2,861,137 2,525,382
------------- ------------- -------------
Gain on sale of investments.......................................... -- -- 168,631
Provision for valuation adjustment of real estate realized upon sale
of real estate...................................................... -- -- (258,744)
------------- ------------- -------------
Loss on sale of real estate and investments.......................... -- -- (90,113)
------------- ------------- -------------
Net income........................................................... $ 3,096,302 $ 2,861,137 $ 2,435,269
------------- ------------- -------------
------------- ------------- -------------
Calculation of net income applicable to common stockholders:
Net income......................................................... $ 3,096,302 $ 2,861,137 $ 2,435,269
Less dividends and accretion on preferred stock.................... 1,446,519 1,444,703 1,442,907
------------- ------------- -------------
Net income applicable to common stockholders......................... $ 1,649,783 $ 1,416,434 $ 992,362
------------- ------------- -------------
------------- ------------- -------------
Weighted average number of common shares outstanding................. 1,409,371 1,356,989 1,338,619
------------- ------------- -------------
------------- ------------- -------------
Net income per common share (Note 2):
Operating income................................................... $ 1.17 $ 1.04 $ .81
Loss on sale of real estate and investments........................ -- -- (.07)
------------- ------------- -------------
Net income......................................................... $ 1.17 $ 1.04 $ .74
------------- ------------- -------------
------------- ------------- -------------
Cash distributions per share:
Common Stock....................................................... $ 1.03 $ .86 $ .94
------------- ------------- -------------
------------- ------------- -------------
Preferred Stock.................................................... $ 1.60 $ 1.60 $ 1.60
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
NET
UNREALIZED
GAIN (LOSS) ON
AVAILABLE-FOR- ACCUMULATED
COMMON PAID-IN SALE UNDISTRIBUTED
STOCK CAPITAL SECURITIES NET INCOME TOTAL
------------- -------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
Balances, January 1, 1993................ $ 1,338,619 $ 13,003,572 $ -- $ 2,453,850 $ 16,796,041
Net income............................... -- -- -- 2,435,269 2,435,269
Distributions -- Common Stock
($.94 per share)....................... -- -- -- (1,258,302) (1,258,302)
Distributions -- Preferred Stock
($1.60 per share)...................... -- -- -- (1,294,042) (1,294,042)
Accretion on Preferred Stock............. -- (148,865) -- -- (148,865)
------------- -------------- -------------- -------------- --------------
Balances, December 31, 1993.............. 1,338,619 12,854,707 -- 2,336,775 16,530,101
Net income............................... -- -- -- 2,861,137 2,861,137
Distributions -- Common Stock
($.86 per share)....................... -- -- -- (1,173,347) (1,173,347)
Distributions -- Preferred Stock
($1.60 per share)...................... -- -- -- (1,294,042) (1,294,042)
Accretion on Preferred Stock............. -- (150,661) -- -- (150,661)
Exercise of options...................... 60,500 529,063 -- -- 589,563
Net unrealized loss on available-for-sale
securities (Note 2)..................... -- -- (34,913) -- (34,913)
------------- -------------- -------------- -------------- --------------
Balances, December 31, 1994.............. 1,399,119 13,233,109 (34,913) 2,730,523 17,327,838
Net income............................... 3,096,302 3,096,302
Distributions -- Common stock
($1.03 per share)...................... (1,449,397) (1,449,397)
Distributions -- Preferred stock
($1.60 per share)...................... (1,294,042) (1,294,042)
Accretion on preferred stock............. (152,477) (152,477)
Exercise of options...................... 17,000 138,125 155,125
Net unrealized gain on available-for-sale
securities (Note 2)..................... 28,155 28,155
------------- -------------- -------------- -------------- --------------
Balances, December 31, 1995.............. $ 1,416,119 $ 13,218,757 $ (6,758) $ 3,083,386 $ 17,711,504
------------- -------------- -------------- -------------- --------------
------------- -------------- -------------- -------------- --------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------------------
1995 1994 1993
------------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income........................................................ $ 3,096,302 $ 2,861,137 $ 2,435,269
Adjustments to reconcile net income to net cash provided by
operating activities:
(Gain) on sale of investments................................... -- -- (168,631)
Provision for valuation adjustment.............................. -- -- 258,744
Depreciation and amortization................................... 479,645 236,841 148,200
Amortization of discount on mortgage receivable -- related
party.......................................................... -- -- (151,784)
Changes in assets and liabilities:
(Increase) decrease in rent, interest, deposits and other
receivables.................................................. (241,681) (54,660) 141,358
(Decrease) increase in accounts payable and accrued
expenses..................................................... (5,123) 49,726 27,329
------------- ------------- -------------
Net cash provided by operating activities................... 3,329,143 3,093,044 2,690,485
------------- ------------- -------------
Cash flows from investing activities:
Additions to real estate.......................................... (3,819,323) (5,549,182) --
Costs of acquisition of real estate and mortgage receivable from
Gould Investors L.P. -- related party............................ (90,514) -- --
Collection of mortgages receivable -- (including $148,291,
$236,625 and $141,432 from related parties in 1995, 1994 and
1993)............................................................ 169,388 249,712 153,308
Collection of senior secured note receivable -- BRT Realty Trust
-- related party................................................. 1,579,618 928,103 178,846
Investment in mortgages receivable -- related parties, net of
discount......................................................... -- -- (6,080,582)
Investment in senior secured note receivable -- BRT Realty Trust
-- related party, net of discount................................ -- -- (3,215,142)
Sale of real estate, net.......................................... -- -- 283,222
Investment in BRT Realty Trust shares of beneficial interest...... -- -- (583,142)
Sale of U.S. Government obligations and securities, net........... 2,806,713 739,188 9,266,507
Other............................................................. (14,986) -- --
------------- ------------- -------------
Net cash provided by (used in) investing activities......... 630,896 (3,632,179) 3,017
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from mortgages payable................................... 2,413,350 4,250,000 --
Satisfaction of mortgage payable.................................. (2,753,700) -- --
Payment of financing costs........................................ (85,225) (100,355) --
Repayment of mortgages payable.................................... (53,143) (20,053) --
Exercise of stock options......................................... 155,125 589,563 --
Cash distributions -- Common Stock................................ (1,199,451) (1,132,319) (1,124,440)
Cash distributions -- Preferred Stock............................. (1,294,042) (1,294,042) (1,294,042)
------------- ------------- -------------
Net cash (used in) provided by financing activities......... (2,817,086) 2,292,794 (2,418,482)
------------- ------------- -------------
Net increase in cash and cash equivalents........................... 1,142,953 1,753,659 275,020
Cash and cash equivalents at beginning of year...................... 2,701,456 947,797 672,777
------------- ------------- -------------
Cash and cash equivalents at end of year............................ $ 3,844,409 $ 2,701,456 $ 947,797
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1994 1993
-------------- ----------- -------------
<S> <C> <C> <C>
Supplemental disclosures of cash flow information:
Cash paid during the year for interest expense...................... $ 467,116 $ 430,076 $ 282,254
Cash paid during the year for income taxes.......................... 43,784 10,981 13,849
Supplemental schedule of noncash investing and financing activities:
Acquisition of real estate and mortgage receivable from Gould
Investors L.P., a related party.................................... (9,861,729) -- --
Consideration for acquisition from Gould Investors L.P.:
Extinguishment of mortgage receivable............................. 6,850,000 -- --
Transfer of BRT preferred stock................................... 2,455,355 -- --
Transfer of BRT common stock...................................... 556,374 -- --
Cancellation of secured note receivable from BRT Realty Trust, a
related party, in exchange for 1,030,000 of newly issued,
convertible redeemable preferred shares............................ -- -- 2,455,355
Accretion on Preferred Stock........................................ 152,477 150,661 148,865
</TABLE>
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
NOTE 1 -- ORGANIZATION AND BACKGROUND
One Liberty Properties, Inc. (the "Company") was incorporated in 1982 in the
state of Maryland. The Company is a self-managed Real Estate Investment Trust
("REIT") which currently participates in net leasing transactions and has
engaged in other real property transactions and in real property mortgages.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of One Liberty
Properties, Inc. and its wholly-owned subsidiaries. Material intercompany items
and transactions have been eliminated. The Company and its subsidiaries are
hereinafter referred to as the Company.
RECLASSIFICATION OF FINANCIAL STATEMENTS
Certain amounts reported in previous consolidated financial statements have
been reclassified in the accompanying consolidated financial statements to
conform to the current year's presentation.
USE OF ESTIMATES
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
INCOME RECOGNITION
Rental income includes the base rent that each tenant is required to pay in
accordance with the terms of their respective leases reported on a straight-line
basis over the initial term of the lease. Mortgage receivable discount is
amortized over the remaining life, utilizing the interest method, based on the
Company's evaluation of the collectibility of the carrying amount of the
mortgage. Note receivable discount is amortized over the remaining life, based
on principal collections.
MEASUREMENT OF LOAN IMPAIRMENT
During the year ended December 31, 1995 the Company adopted Statement of
Financial Accounting Standards No. 114 ("SFAS #114"), Accounting by Creditors
for Impairment of a Loan. SFAS #114 defines impairment as the probability that
all amounts due under a loan agreement will not be collected according to the
contractual terms. SFAS #114 requires measurement of loan impairment based on
either the present value of expected future cash flows discounted at the loan's
effective interest rate or as an expedient, the fair value of the loan's
collateral. If the measure of the impaired loan is less than the recorded
investment in the loan, the Company shall recognize an impairment.
The Company did not have any impaired loans at December 31, 1995 and
December 31, 1994.
DEPRECIATION
Depreciation of buildings is computed on the straight-line method over an
estimated useful life of 40 years for commercial properties and 27 and one half
years for residential properties.
DEFERRED FINANCING COSTS
Mortgage costs are deferred and amortized on a straight-line basis over the
terms of the respective debt obligations.
F-7
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FEDERAL INCOME TAXES
The Company has qualified as a real estate investment trust under the
applicable provisions of the Internal Revenue Code. Under these provisions, the
Company will not be subject to federal income taxes on amounts distributed to
stockholders providing it distributes substantially all of its taxable income
and meets certain other conditions.
Distributions made during 1995 and 1994 included approximately 8% and 2%,
respectively, of capital gains, with the balance ordinary income.
INVESTMENTS IN DEBT AND EQUITY SECURITIES
Effective January 1, 1994, the Company adopted Statement of Financial
Accounting Standards #115, Accounting for Certain Investments in Debt and Equity
Securities. The SFAS addresses accounting and reporting for (1) investments in
equity securities that have readily determinable fair values and (2) all
investments in debt securities. The Company has determined in accordance with
SFAS #115 that its investment in common shares of BRT Realty Trust ("BRT"), a
related party of the Company (see Note 3 as to the Company's relationship to
BRT), and its investment in U.S. Government obligations and securities are
"available-for-sale" securities.
The accounting treatment of such securities at December 31, 1995 and 1994 is
fair value, with unrealized holding gains and losses excluded from earnings and
reported as a separate component of stockholders' equity.
The Company's investment in 30,048 beneficial shares of BRT, purchased at a
cost of $97,656 has a fair market value at December 31, 1995 of $127,704
resulting in an unrealized holding gain of $30,048. The cost basis of the
Company's investment in U.S. Government obligations and securities, which have
an average maturity of two to three years, is $1,310,552 and the fair value is
$1,274,747, resulting in an unrealized holding loss of $35,805. In addition, the
Company has invested $16,600 in equity securities which have a fair market value
of $15,599 at December 31, 1995. The aggregate net unrealized holding loss of
$6,758 is included as a separate component of stockholders' equity.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments:
Mortgages receivable: Three mortgage loans of the Company aggregating
$1,201,907 are currently fixed at interest rates which approximate market.
Accordingly, the carrying amounts of the mortgage loans approximate their fair
values. The remaining mortgage loan was purchased by the Company at a discount,
which is being amortized by the Company over the life of the mortgage. The
Company expects to receive a yield to maturity of approximately 14.5%. The
Company estimates the fair value of the loan to approximate its face amount of
$8,816,652 at December 31, 1995. The loan is being carried on the balance sheet
at $5,834,234, the difference representing the remaining unamortized discount of
$2,982,418.
Senior secured note receivable: Due to the high paydown rate the Company has
experienced on this note and which the Company anticipates will continue on the
remaining balance (which matures June 1997) and due to the note providing for
interest at the prime rate plus one percent, the Company estimates the fair
value of the note to approximate its face amount of $760,638 at December 31,
1995. The note is being carried on the balance sheet at $528,575, the difference
representing the remaining unamortized discount of $232,063.
F-8
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Cash and short term investments: The carrying amounts reported in the
balance sheet for these instruments approximate their fair values.
Investments in U.S. Government obligations and securities and investments in
BRT Realty Trust: Since these investments are considered "available-for-sale",
they are reported in the balance sheet based upon quoted market prices.
Mortgages payable: The Company determined the estimated fair value of its
debt by discounting future cash payments at their effective rates of interest,
which approximate current market rates of interest for similar loans.
Accordingly, there is no material difference between their carrying amount and
fair value.
Redeemable convertible preferred stock: Based on the December 31, 1995
quoted market price per share of $16.50, the fair value of the Company's
redeemable convertible preferred stock is $13,344,804.
ACCRETION ON PREFERRED STOCK
The Company has Preferred Stock outstanding which is both redeemable and
convertible. The stock was initially recorded in the financial statements at its
fair value based upon the initial average trades on the American Stock Exchange.
The amount by which the redemption value exceeds the carrying value is being
accreted using the interest method over the life of the redemption period.
STOCK BASED COMPENSATION
The Company grants stock options for a fixed number of shares to officers
and employees with an exercise price equal to the fair value of the shares at
the date of grant. The Company accounts for stock option grants in accordance
with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees, and, accordingly, recognizes no compensation expense for the stock
option grants.
EARNINGS PER COMMON SHARE
Primary earnings per common share data is based upon the weighted average
number of common shares and assumed equivalent shares outstanding during the
year, after giving effect to the dividends and accretion relating to the
Company's Preferred Stock. The Preferred Stock is not considered a common stock
equivalent for the purpose of computing earnings per share because their assumed
conversion is anti-dilutive. The assumed exercise of outstanding share options,
using the treasury stock method, is not materially dilutive for the primary
earnings per common share computation.
Fully diluted earnings per common share are based on an increase in the
number of common shares that would be outstanding assuming the exercise of
common share options. Since fully diluted earnings per share amounts are not
materially dilutive, such amounts are not presented.
CASH EQUIVALENTS
Cash equivalents consist of highly liquid investments with maturities of
three months or less when purchased.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the FASB issued Statement No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
which requires the Company make a review of each real estate asset owned for
which indicators of impairment are present, to determine whether the carrying
amount of the asset will be recovered. Recognition of impairment would be
required if the undiscounted cash flows estimated to be generated by those
assets are less than the assets' carrying
F-9
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
amount. Measurement would be based upon the fair market value of the asset.
Statement 121 also addresses the accounting for long-lived assets that are
expected to be disposed of. The Company will adopt Statement 121 in the first
quarter of 1996 and, based on current circumstances, does not believe the effect
of adoption will be material.
NOTE 3 -- REAL ESTATE PURCHASES, MORTGAGES AND SENIOR SECURED NOTE RECEIVABLE
AND PRINCIPAL RELATED PARTY TRANSACTIONS
REAL ESTATE PURCHASES
On January 19, 1995, the Company acquired from Gould Investors L.P.
("Gould") in a single transaction, sixteen net leased real estate properties
(including the reacquisition of thirteen retail locations net leased to Total
Petroleum and sold to Gould in December 1991 for an aggregate consideration of
$8,107,020) and one mortgage receivable. The properties are all net leased on a
long term basis to third parties with current expirations ranging from 2004 to
2051, and have certain tenant renewal rights. The consideration paid for the
properties was comprised of 1) the extinguishment of a $6,850,000 mortgage loan
which the Company held on thirteen of the acquired properties and 2) 1,030,000
restricted convertible preferred shares of BRT and 173,719 Beneficial Shares of
BRT owned by the Company. The closing price of the BRT Beneficial Shares on the
New York Stock Exchange on January 19, 1995 (the date of the transaction) was
$3 5/8. The preferred shares do not trade publicly. The Company's Board of
Directors received, prior to and as a condition to consummation of the
transaction, valuation analyses on the sixteen properties acquired and an
opinion from an independent investment banker relating to the fairness of the
transaction. The Company recorded the assets acquired at the carrying amount of
the assets exchanged (plus transaction costs), resulting in a reclassification
from investments in BRT and mortgages receivable to real estate investments, at
cost.
In connection with the Total Petroleum lease agreement, the Company
deposited $2,000,000 with an independent escrow agent, which represents the
estimated maximum amount to remediate environmental problems discovered at
certain locations. The agreement limits the maximum payment to approximately
$350,000 per location. The escrow agent currently holds approximately $1,345,000
in escrow as of December 1995, which the Company believes is adequate to cover
any additional environmental costs.
On January 19, 1995 Gould owned 917,400 shares of the common stock of the
Company or 65.6% of the equity interest and 50.9% of the voting rights. At
December 31, 1995 Gould owned 715,227 shares of the common stock of the Company
or 50.5% of the equity interest and 39.3% of the voting rights.
On June 14, 1994, the Company acquired from a wholly-owned subsidiary of
BRT, the fee interest of a property located in midtown Manhattan, for a
consideration of $5,525,000, plus closing costs of $124,537. The transaction and
the purchase price were unanimously approved by the independent directors of the
Company, subject to the receipt of an independent real estate appraisal. After
receipt of an independent appraisal substantiating the purchase price, the
acquisition was consummated. Simultaneously with the purchase, the Company
obtained a $4,250,000 nonrecourse mortgage loan from a local institution. The
fee position was acquired subject to a long term net lease with a current annual
rent of $550,000, with increases in the net rent every five years. The next rent
increase will be in 1999.
At December 31, 1994, the Company owned 203,767 shares of Beneficial
Interest of BRT and 1,030,000 shares of BRT preferred stock, (representing all
outstanding shares of preferred stock) accounting for 14.7% of the total voting
power of BRT. At December 31, 1995, the Company's
F-10
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
NOTE 3 -- REAL ESTATE PURCHASES, MORTGAGES AND SENIOR SECURED NOTE RECEIVABLE
AND PRINCIPAL RELATED PARTY TRANSACTIONS (CONTINUED)
investment in BRT was reduced to 30,048 shares of Beneficial Interest accounting
for less than 1% of the total voting power of BRT. For the years ended December
31, 1995, 1994 and 1993, the Company earned $13,940, $270,000 and $79,500,
respectively, on its shares of BRT preferred stock.
MORTGAGES RECEIVABLE
Mortgages receivable at December 31, 1995 and 1994 consists of the
following:
<TABLE>
<CAPTION>
AFFILIATES 1995 1994
- ----------------------------------------------------------------------------- ------------- --------------
<C> <S> <C> <C>
(i) Gould Investors L.P............................................... $ -- $ 6,850,000
(ii) Entity substantially owned by Gould Investors L.P. (net of
unamortized discount of $2,982,418 and $3,301,918)................ 5,834,234 5,922,524
(iii) Entity substantially owned by Gould Investors L.P................. 860,000 920,000
NON-AFFILIATES
- -----------------------------------------------------------------------------
Other............................................................. 341,907 295,507
------------- --------------
$ 7,036,141 $ 13,988,031
------------- --------------
------------- --------------
</TABLE>
i)
This mortgage loan arose from the sale to Gould in 1991 described above, and
provided for interest only payments until maturity, with an initial interest
rate of ten percent for the first five years and ten and one half percent
for the last five years. The interest income amounted to $33,145 for the
year ended December 31, 1995 and $685,000 each for the years ended December
31, 1994 and 1993. The mortgage loan was extinguished as part of the January
19, 1995 transaction. See "Real Estate Purchases" above.
ii)
On July 30, 1993, as a result of a public auction, the Federal Deposit
Insurance Corporation sold to an entity related to the Company, for a
consideration of $19,000,300, a $23,000,000 first mortgage, providing for an
interest rate of 8% per annum, secured by an office building located in
Manhattan, New York. The office building which secures this mortgage is owned
by a partnership in which Gould is General Partner and in which Gould owns
substantially all of the partnership interests. Simultaneously with the
purchase, $13,181,000 was advanced by an unrelated party, $6,080,000 (which
includes closing costs) was advanced by the Company, and the mortgage was
severed into a first mortgage of $13,181,000 paying interest at 9 1/2% per
annum held by the unrelated party and a subordinate wrap mortgage of
$9,819,000 held by the Company. Both the first mortgage and the wrap mortgage
mature in 2005 at which time the first mortgage will be fully amortized and
the wrap mortgage will have a principal balance of approximately $4,000,000.
The Company receives monthly principal and interest payments of $79,318 and
at December 31, 1995 and 1994 its principal balance had been reduced to
approximately $8,817,000 and $9,224,000, respectively. The discount of
$3,738,400 is being amortized by the Company over the life of the mortgage.
The Company expects to receive a yield to maturity of approximately 14.5%.
Interest income, including amortization of the discount of $319,500, $310,200
and $126,300, amounted to $861,750, $873,459 and $386,748 for the years ended
1995, 1994 and 1993, respectively.
The building which secures the first mortgage and the wrap mortgage is leased
to the City of New York. The lease expires in 2005 with an option to renew
for an additional five years and provides the City with a limited right of
termination. The first mortgage and the wrap mortgage are nonrecourse to the
owner of the building.
F-11
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
NOTE 3 -- REAL ESTATE PURCHASES, MORTGAGES AND SENIOR SECURED NOTE RECEIVABLE
AND PRINCIPAL RELATED PARTY TRANSACTIONS (CONTINUED)
iii)
In January 1992, the Company made a first mortgage loan to a partnership in
which Gould is General Partner and in which Gould owns substantially all of
the partnership interests, in the amount of $1,200,000. The mortgage is
secured by an apartment building in Manhattan, New York. The maturity date
of the loan was extended to January 31, 1997 from its due date of January
31, 1995 and the interest rate was increased to 11% per annum, effective as
of February 1, 1995. The mortgage note bore interest at 11% per annum,
through January 31, 1994 and 10% through January 31, 1995 with minimum
amortization of $5,000 per month. The unpaid balance at December 31, 1995 is
$860,000. The interest income amounted to $96,863, $99,859 and $121,275 for
the years ended 1995, 1994 and 1993, respectively.
The transactions listed above in items i) through iii) were approved by the
independent directors of the Company. The directors who are affiliated with the
Company and Gould abstained from the voting on these transactions.
Annual maturities of real estate loans during the next five years and
thereafter are summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- ------------------------------------------------------------------------------
<S> <C>
1996.......................................................................... $ 778,508
1997.......................................................................... 1,260,461
1998.......................................................................... 484,097
1999.......................................................................... 508,251
2000.......................................................................... 532,820
2001 and thereafter........................................................... 6,454,422
--------------
Total................................................................... 10,018,559
Less: Unamortized discount.................................................... 2,982,418
--------------
Net carrying amount -- mortgages receivable................................... $ 7,036,141
--------------
--------------
</TABLE>
SENIOR SECURED NOTE RECEIVABLE
On February 26, 1993 the Company purchased from an unrelated entity 28.9% of
a 16.67% portion of an indebtedness due to various institutions by BRT. The
Company paid $3,215,142 for a $4,626,720 share of the principal amount of such
indebtedness. The discount of $1,411,578 is being amortized by the Company as
principal payments are received. The principal earns interest at prime plus one
percent (9.5% as of December 31, 1995). At December 31, 1995 and 1994 the
Company's portion of the indebtedness has been reduced to $760,638 and
$3,033,774, respectively, and the carrying amount net of unamortized discount
amounted to $528,575 and $2,108,193. The purchase of the portion of this
indebtedness was approved by the independent directors of the Company. The
directors who are affiliated with the Company and BRT abstained from the voting
on this transaction.
F-12
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
December 31, 1995
NOTE 4 -- MORTGAGES PAYABLE
At December 31, 1995 there are four outstanding mortgages payable, all of
which are secured by individual real estate investments with an aggregate
carrying value of $9,368,505 before accumulated depreciation. The mortgages bear
interest at rates ranging from 8.5% to 9.1%, and mature between 1999 and 2002.
Scheduled principal repayments during the next five years and thereafter are
as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -------------------------------------------------------------------------------
<S> <C>
1996........................................................................... $ 90,477
1997........................................................................... 100,397
1998........................................................................... 109,501
1999........................................................................... 4,042,260
2000........................................................................... 925,307
2001 and thereafter............................................................ 1,322,212
-------------
Total...................................................................... $ 6,590,154
-------------
-------------
</TABLE>
NOTE 5 -- REDEEMABLE CONVERTIBLE PREFERRED STOCK
The Preferred Stock has the following rights, qualifications and conditions:
(i) a cumulative dividend preference of $1.60 per share per annum; (ii) a
liquidation preference of $16.50 per share; (iii) a right to convert each share
of Preferred Stock at any time into .825 of a share of Common Stock; (iv)
redeemable by the Company after July 1, 1994 at $17.30 per share and at premiums
declining to $16.50 on July 1, 1998 and thereafter; (v) an option by each
preferred holder to put the Preferred Stock to the Company at $16.50 per share
for the period commencing July 1, 1999 and ending on September 28, 1999; and
(vi) one-half vote per share.
NOTE 6 -- REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS
The rental properties owned at December 31, 1995 are leased under
noncancellable operating leases to corporate tenants with current expirations
ranging from 1996 to 2051, with certain tenant renewal rights. All lease
agreements are net lease arrangements which require the tenant to pay not only
rent but all the expenses of the leased property including maintenance, taxes,
utilities and insurance. Certain lease agreements provide for periodic rental
increases and others provide for increases based on the consumer price index.
The minimum future rentals to be received on the operating leases in effect
at December 31, 1995 over the next five years are as follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
- -------------------------------------------------------------------------------
<S> <C>
1996........................................................................... $ 3,087,270
1997........................................................................... 2,724,696
1998........................................................................... 2,751,804
1999........................................................................... 2,821,392
2000........................................................................... 2,785,113
</TABLE>
Included in the minimum future rentals is a property that an unrelated third
party owns the fee title to. The Company pays annual fixed leasehold rent of
$288,833 through April 2010 and has a right to extend the lease for up to three
15 year and one 14 year renewal options.
The Company leases eleven of its properties to a retail chain of stores,
with the primary lease term ending on December 31, 1996. The tenant has
exercised its option to renew with respect to three of the
F-13
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
NOTE 6 -- REAL ESTATE INVESTMENTS AND MINIMUM FUTURE RENTALS (CONTINUED)
locations and has otherwise extended a lease with respect to one location. It is
uncertain whether the remaining seven leases, which represent approximately 6%
of the Company's total revenues for 1995, will be renewed.
At December 31, 1995, the Company has recorded an unbilled rent receivable
aggregating $86,767, representing rent reported on a straight-line basis in
excess of rental payments required under the initial term of the lease. The
minimum future rentals presented above include amounts applicable to the
repayment of these unbilled rent receivables.
For the year ended December 31, 1995, the following assets generated
revenues for the Company in amounts exceeding 10% of the Company's total
revenues:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
DECEMBER 31, 1995
------------------------
% OF TOTAL
DESCRIPTION REVENUE REVENUES
- ---------------------------------------------------------------------------- ----------- -----------
<S> <C> <C>
Senior Secured Note Receivable (a).......................................... $ 886,503 18.13%
Mortgage receivable - related party (b)..................................... 861,750 17.62
Total Petroleum properties (c).............................................. 810,379 16.57
Residential and retail apartment building................................... 550,000 11.25
</TABLE>
- ------------------------
(a) See note 3 -- Senior Secured Note Receivable for other information.
(b) See note 3 -- Mortgages Receivable (ii) for other information.
(c) Total Petroleum, an operator of combination gas station and retail
convenience stores, is a tenant in thirteen of the Company's properties, all
located in the State of Michigan.
NOTE 7 -- MANAGEMENT AGREEMENT AND OTHER RELATED PARTY TRANSACTIONS
On December 31, 1994, the management agreement which had been in effect
since July 1989 was terminated and on January 1, 1995, the Company became
self-managed incurring payroll and payroll related costs for the Company's
President of $137,460. Prior to January 1, 1995, the Company was managed by an
entity ("Manager") controlled by the Chairman and Vice Chairman of the Company's
Board of Directors, and its President, all of whom are officers of the managing
general partner of Gould. The Manager was responsible for the day-to-day
operations of the Company, served as a consultant to the Company in connection
with certain policy decisions made by the Company's Board of Directors and
performed various services in connection with property and asset management on
behalf of the Company. The Manager was entitled to an annual fee, payable
quarterly, equal to 2.5% of the Company's gross revenues, subject to limitations
(as defined in the management agreement). Such fees amounted to $83,710 and
$103,086 during the years ended December 31, 1993 and 1994 respectively. In
addition, during the year ended December 31, 1994, the Company paid $42,500 to
the Manager for services rendered in connection with obtaining mortgage
financing on a property the Company purchased in June 1994.
Gould charged the Company $127,806, $167,727 and $210,357 during the years
ended December 31, 1993, 1994, and 1995, respectively, for allocated general and
administrative expenses and payroll based on time incurred by various employees.
A company controlled by certain trustees and officers of the Company was
paid mortgage brokerage fees of $24,134 during the year ended December 31, 1995.
See Note 3 for other related party transaction information.
F-14
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
NOTE 8 -- STOCK OPTIONS
On November 17, 1989, the directors of the Company granted, under the 1989
Stock Option Plan, options to purchase a total of 110,000 shares of Common Stock
at $11 per share to a number of the Company's officers and employees. In 1994,
one officer exercised 20,000 of these options and the balance expired. On June
6, 1991, the directors of the Company granted to each of the three independent
directors of the Company an option to purchase 5,000 shares of Common Stock at
$9.125 per share. On March 4, 1993, the Board of Directors granted, also under
the 1989 Stock Option Plan, options to purchase a total of 100,000 common shares
at $9.125 per share to a number of officers and employees of the Company.
Stock options are granted at per share amounts at least equal to their fair
market value at the date of grant. The options are cumulatively exercisable at a
rate of 25% per annum and expire five years after the date of grant.
A maximum of 225,000 common shares were reserved for issuance under the 1989
Stock Option Plan, of which 90,000 are available for grant at December 31, 1995.
Changes in the number of common shares under all option arrangements are
summarized as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1995 1994 1993
----------- ----------- ---------------
<S> <C> <C> <C>
Outstanding at beginning of period........................... 74,500 225,000 125,000
Granted...................................................... -- -- 100,000
Option prices per share granted.............................. -- -- $ 9.125
Exercisable at end of period................................. 32,500 20,750 142,500
Exercised.................................................... 17,000 60,500 --
Expired...................................................... -- 90,000 --
Outstanding at end of period................................. 57,500 74,500 225,000
Option prices per share outstanding.......................... $ 9.125 $ 9.125 $ 9.125 - $11
</TABLE>
F-15
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
NOTE 9 -- QUARTERLY FINANCIAL DATA (UNAUDITED):
<TABLE>
<CAPTION>
QUARTER ENDED
---------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- --------- ------------- ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1995
Revenues..................................................... $ 1,217 $ 1,178 $ 1,367(a) $ 1,129
Net income................................................... 742 740 907(a) 707
Net income applicable to common stockholders................. 380 378 545(a) 347
Net income per common share.................................. .27 .27 .39(a) .24
</TABLE>
- ------------------------
(a) Includes an additional amount of approximately $200,000 ($.14 per common
share) of income from accelerated principal payments on the Senior Secured
Note Receivable (see Note 3).
<TABLE>
<CAPTION>
QUARTER ENDED
------------------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
----------- ----------- ------------- -------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1994
Revenues...................................................... $ 946 $ 952 $ 1,168 $ 975
Net income.................................................... 736 656 742 727
Net income applicable to common stockholders.................. 375 295 381 365
Net income per common share................................... .28 .22 .28 .26
</TABLE>
NOTE 10 -- SUBSEQUENT EVENT
On March 1, 1996 the Company entered into a $5,000,000 revolving credit
agreement ("Credit Agreement") with Bank Leumi Trust Company of New York ("Bank
Leumi"). Borrowings under the Credit Agreement will be used to provide the
Company with funds to acquire properties. The Credit Agreement will mature
February 28, 1999 with a right for the Company to extend the Credit Agreement
until February 29, 2000. As collateral for any advances to be made by Bank Leumi
under the Credit Agreement, the Company has pledged the stock of each of its
subsidiaries and certain mortgages receivable.
The Company has not drawn down any funds under the Credit Agreement.
F-16
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE III -- CONSOLIDATED REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1995
<TABLE>
<CAPTION>
GROSS AMOUNT AT WHICH CARRIED AT
INITIAL COST TO COMPANY DECEMBER 31, 1995
-------------------------------------- ------------------------------------ ACCUMULATED DATE OF
ENCUMBRANCES LAND BUILDINGS LAND BUILDINGS TOTAL DEPRECIATION CONSTRUCTION
------------- ---------- ----------- ---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
FREE STANDING
RETAIL LOCATIONS:
Houston, TX............ $ -- $ 700,000 $ 774,850 $ 700,000 $ 774,850 $ 1,474,850 $ 169,498 1980
Killeen, TX............ 729,311 267,942 1,071,768 267,942 1,071,768 1,339,710 10,048 1995
Cedar Rapids, IA....... 990,000 280,292 1,121,164 280,292 1,121,164 1,401,456 15,182 1995
Miscellaneous.......... 692,100 4,941,347 10,747,791 4,941,347 10,747,791 15,689,138 756,970 Various
APARTMENT
BUILDING:
New York, NY........... 4,178,743 1,109,836 4,439,346 1,109,836 4,439,346 5,549,182 248,873 1910
------------- ---------- ----------- ---------- ----------- ----------- ------------
$ 6,590,154 $7,299,417 $18,154,919 $7,299,417 $18,154,919 $25,454,336 $1,200,571
------------- ---------- ----------- ---------- ----------- ----------- ------------
------------- ---------- ----------- ---------- ----------- ----------- ------------
<CAPTION>
LIFE ON WHICH
DEPRECIATION IN
LATEST INCOME
STATEMENT IS
DATE ACQUIRED COMPUTED (YEARS)
---------------- -----------------
<S> <C> <C>
FREE STANDING
RETAIL LOCATIONS:
Houston, TX............ April 1, 1987 40
Killeen, TX............ August 18, 1995 40
Cedar Rapids, IA....... June 29, 1995 40
Miscellaneous.......... Various 40
APARTMENT
BUILDING:
New York, NY........... June 14, 1994 27.5
</TABLE>
F-17
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
NOTES TO SCHEDULE III -- CONSOLIDATED REAL ESTATE AND
ACCUMULATED DEPRECIATION
Reconciliation of "Real Estate and Accumulated Depreciation"
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1995 1994 1993
-------------- -------------- -------------
<S> <C> <C> <C>
Investment in real estate:
Balance, beginning of year........................................ $ 11,750,268 $ 6,201,086 $ 6,780,086
Addition -- land and buildings.................................... 13,704,068 5,549,182 --
Deduction -- cost of property sold................................ -- -- (579,000)
-------------- -------------- -------------
Balance, end of year.............................................. $ 25,454,336 $ 11,750,268 $ 6,201,086
-------------- -------------- -------------
-------------- -------------- -------------
Accumulated depreciation:
Balance, beginning of year........................................ $ 753,734 $ 573,177 $ 508,258
Addition -- depreciation.......................................... 446,837 180,557 101,953
Deduction -- accumulated depreciation related to property sold.... -- -- (37,034)
-------------- -------------- -------------
Balance, end of year.............................................. $ 1,200,571 $ 753,734 $ 573,177
-------------- -------------- -------------
-------------- -------------- -------------
</TABLE>
The aggregate cost of the properties is the same for federal income tax
purposes.
F-18
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE IV -- MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1995
<TABLE>
<CAPTION>
NUMBER OF MATURITY FACE AMOUNT OF
DESCRIPTION LOANS INTEREST RATE DATE PERIODIC PAYMENT TERMS MORTGAGE
- ----------------------------- ------------- -------------------- --------- ----------------------------- -----------------
<S> <C> <C> <C> <C> <C>
First mortgage loans:
Land and building/ retail 1 9.75% Jul-96 $3,550 monthly allocated to $ 281,086
-- Bad Axe, MI interest and principal,
balance of $274,213 due at
maturity
Building/commercial, 1 10% through January Jan-97 Interest plus minimum 860,000
residential -- NY, NY 31, 1995 11% amortization of $5,000
thereafter monthly, balance of principal
at maturity
Land and building/ office 1 14.5 %(b) Feb-05 $79,318 monthly allocated to 8,816,652(c)
-- NY, NY interest and principal,
balance of $4,073,525 due at
maturity
Second mortgage loan:
Land and building/ 1 10.25% Oct-01 $1,158 monthly allocated to 60,821
commercial -- Seattle, WA interest and principal,
self-liquidates by maturity
- -----------------
Total.................. 4 $ 10,018,559
- -----------------
- -----------------
<CAPTION>
CARRYING
AMOUNT OF
DESCRIPTION MORTGAGE
- ----------------------------- -------------
<S> <C>
First mortgage loans:
Land and building/ retail $ 281,086
-- Bad Axe, MI
Building/commercial, 860,000
residential -- NY, NY
Land and building/ office 5,834,234
-- NY, NY
Second mortgage loan:
Land and building/ 60,821
commercial -- Seattle, WA
-------------
Total.................. $ 7,036,141
-------------
-------------
</TABLE>
F-19
<PAGE>
ONE LIBERTY PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE IV -- MORTGAGE LOANS ON REAL ESTATE
DECEMBER 31, 1995
Notes to the Schedule:
(a) The following summary reconciles mortgages receivable at their carrying
values:
<TABLE>
<CAPTION>
1995 1994
-------------- --------------
<S> <C> <C>
Balance at beginning of year........................................ $ 13,988,031 $ 14,237,743
Additions:
New mortgage loan (d)............................................. 67,498 --
Amortization of discount.......................................... 319,500 310,200
Deductions:
Cancellation of mortgage receivable from Gould Investors L.P.,
when the the Company acquired fee title to the properties. See
Note 3 to consolidated financial statements for other
information...................................................... 6,850,000 --
Collections of principal............................................ 488,888 559,912
-------------- --------------
$ 7,036,141 $ 13,988,031
-------------- --------------
-------------- --------------
</TABLE>
(b) Represents the expected yield to maturity which includes amortization of
discount and interest collections.
(c) The face amount of mortgage is before an unamortized discount of $2,982,418.
(d) Acquired mortgage when Company acquired fee title to the land. See Note 3 to
consolidated financial statements for other information.
F-20
<PAGE>
LEASE AT
U.S. HIGHWAY 190 AND FORT HOOD ST.
KILLEEN, TEXAS
HOLLYWOOD VIDEO PARTNERS, LLC
LANDLORD
and
HOLLYWOOD ENTERTAINMENT CORPORATION,
TENANT
<PAGE>
TABLE OF CONTENTS
1 Lease Agreement, Premises and Common Area . . . . . . . . . . . . .1
2. Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
3 . Rent. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
4. Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
5. Building Construction . . . . . . . . . . . . . . . . . . . . . . .3
6. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
7. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
8. Repairs and Maintenance . . . . . . . . . . . . . . . . . . . . . .6
9. Utilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
10. Environmental Matters . . . . . . . . . . . . . . . . . . . . . . .8
11. Alterations . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
12. Fixtures and Personal Property. . . . . . . . . . . . . . . . . . .9
13. Signage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
14. Liens . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
15. Operations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
16. Lighting. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
17. Parking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
i
<PAGE>
18. Damage to Premises. . . . . . . . . . . . . . . . . . . . . . . . 11
19. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . 11
20. Permitted Transfers, Assignment and Subletting. . . . . . . . . . 12
21. Access to Premises. . . . . . . . . . . . . . . . . . . . . . . . 13
22. Default; Remedies . . . . . . . . . . . . . . . . . . . . . . . . 13
23. Defaults by Landlord. . . . . . . . . . . . . . . . . . . . . . . 14
24. Surrender of Premises . . . . . . . . . . . . . . . . . . . . . . 15
25. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . 15
26. Subordination, Non-Disturbance and Attornment . . . . . . . . . . 15
27. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
28. Holding Over. . . . . . . . . . . . . . . . . . . . . . . . . . . 16
29. Covenant of Title and Quiet Enjoyment . . . . . . . . . . . . . . 16
30. Estoppel Certificate. . . . . . . . . . . . . . . . . . . . . . . 16
31. Force Majeure . . . . . . . . . . . . . . . . . . . . . . . . . . 16
32. Limitations on Landlord's Liability . . . . . . . . . . . . . . . 16
33. Waiver of Contractual or Statutory Landlord's Lien. . . . . . . . 17
34. Collateral Assignment . . . . . . . . . . . . . . . . . . . . . . 17
35. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
36. Tenant's Conduct of Business. . . . . . . . . . . . . . . . . . . 17
ii
<PAGE>
37. Construction Disputes . . . . . . . . . . . . . . . . . . . . . . 17
38. Landlord's Acquisition Contingency. . . . . . . . . . . . . . . . 18
39. Drop Box. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
40. Miscellaneous Provisions. . . . . . . . . . . . . . . . . . . . . 18
EXHIBITS
EXHIBIT "A" - Legal Description of the Land
EXHIBIT "B" - Site Plan of Premises
EXHIBIT "C" - Landlord/Tenant Work
EXHIBIT "C-1" Responsibility Schedule
EXHIBIT "D" - Commencement Date Endorsement Sheet
EXHIBIT "E" - Non-Disturbance and Attornment Agreement
EXHIBIT "F" - Memorandum of Lease
iii
<PAGE>
LEASE
This lease (herein the "LEASE") is deemed to be entered into this __th
day of _______________, 1995 between HOLLYWOOD VIDEO PARTNERS, LLC a Nevada
Limited Liability Company (herein the "LANDLORD") and HOLLYWOOD ENTERTAINMENT
CORPORATION, an Oregon corporation (herein the "TENANT") according to the
following terms and conditions:
39. LEASE AGREEMENT; PREMISES AND COMMON AREA.
A. PREMISES. For valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, Landlord hereby agrees to
lease to Tenant and Tenant hereby agrees to lease from Landlord in
accordance with the terms of this Lease that real property situated in the
CITY OF KILLEEN, State of TEXAS, commonly known as the INTERSECTION OF U.S.
HIGHWAY 190 AND FORT HOOD ST., consisting of approximately 48,177 square
feet of land (herein the "LAND") and a building of approximately 8,000
square feet (herein the "BUILDING") collectively referred to as the
"PREMISES." The legal description of the Land and a graphical depiction of
the Premises in the form of a site plan (herein the "SITE PLAN") are
respectively attached hereto as EXHIBITS "A" and "B."
B. COMMON AREA. If the Premises are part of a common-interest
subdivision (herein the "PROJECT"), the Landlord hereby grants Tenant the
right to use the "COMMON AREAS" thereof. Such Common Areas constitute the
areas and facilities outside the Premises designated for the general non-
exclusive use of Tenant and other lessees of the Project and such tenant's
respective employees, suppliers, shippers, customers, and invitees. The
Common Areas include parking areas, loading and unloading areas, trash
areas, roadways, sidewalks, walkways, parkways, driveways, and landscaped
areas. If the Premises are in a Project, the Tenant acknowledges that this
Lease is subject to pre-existing recorded instruments (herein the "PROJECT
DOCUMENTS") affecting the Common Areas and the operation of businesses
within the Project. Tenant hereby agrees to comply with the terms of the
Project Documents and rules and regulations affecting the use of the Common
Areas. Upon Tenant's request, Landlord shall deliver to Tenant a current
Preliminary Title Report or Title Report and all underlying documents shown
as exceptions to title affecting the Premises. Upon the discovery of any
document affecting title which would prohibit or restrict Tenant's use of
the Premises for a retail entertainment software or video rental and sales
store, then Tenant may terminate this Lease upon thirty (30) days' prior
written notice to Landlord, unless Landlord is able to remove such
prohibition or restriction within said 30-day period. Notwithstanding the
foregoing, Landlord understands and agrees that the Premises can be used by
tenant as a retail entertainment software or video sales and rental store
and Tenant's ability to so use the Premises is a condition precedent to
this Lease. Landlord represents that nothing contained in the Project
Documents or applicable zoning will prohibit construction of the Building
as contemplated in this Lease. Landlord shall make no changes to the
Common Area or other improvements in the Project which would adversely
impact the visibility of or access to the Premises or reduce parking
available to the Premises or otherwise interfere with Tenant's business.
1
<PAGE>
40. TERM
A. INITIAL TERM. The "INITIAL TERM" of this Lease shall be for
fifteen (15) years beginning on the "COMMENCEMENT DATE" and ending on the
last day of the month fifteen (15) years following the Commencement Date.
The Commencement Date shall be on the earlier of Tenant's acceptance of the
Premises or Tenant's opening for business. Landlord shall give Tenant not
less than ten (10) days prior written notice of substantial completion of
"LANDLORD'S WORK" after which Tenant shall have an additional ten (10) days
to inspect the Building so as to assure itself that it has been constructed
in accordance with approved plans and specifications, normal and customary
"PUNCH LIST" items excepted. Plans and specifications for Landlord's Work
are attached hereto as EXHIBIT "C." Tenant shall notify Landlord of any
construction or design defects or material deviations from said plans and
specifications within said ten (10) day period or Tenant shall be deemed to
have accepted the Premises. Landlord shall deliver to Tenant within thirty
(30) days from Tenant's acceptance of the Premises, a Certificate of
Occupancy therefor. After Tenant's acceptance of the Premises, Landlord
shall correct any minor "Punch List" items no later than thirty (30) days
after Tenant's acceptance of the Premises. In accordance with the
foregoing, Landlord and Tenant shall specify the exact Commencement Date on
the Commencement Date Endorsement sheet attached hereto as EXHIBIT "D."
B. RENEWAL TERM. Tenant shall have the right to renew this Lease
for two (2) additional periods of five (5) years each so long as Tenant is
not in breach of any provision of this Lease. Tenant shall notify Landlord
in writing not later than one hundred eighty (180) days prior to the
expiration of the initial term or any existing renewal term of Tenant's
election to so renew the Lease.
41. RENT
A. BASE RENT. Beginning forty-five (45) days from the Commencement
Date, Tenant shall pay Landlord as "BASE RENT" for the Premises without any
claim, offset, or deduction, (except as otherwise expressly provided in
this Lease) the following sums:
<TABLE>
<CAPTION>
Lease Base Annual Monthly Base
Year Rental Annual Rental
------ ----------- -------------
<S> <C> <C>
Years 1-5 $141,200.00 $11,766.67
Years 6-10 $162,380.00 $13,531.67
Years 11-15 $162,380.00 $13,531.67
Years 16-20 $186,737.00 $15,561.42
Years 21-25 $214,747.55 $17,895.63
</TABLE>
payable on the first day of each month, without notice, during the term
hereof. Notwithstanding the foregoing, if the Commencement Date is other
than on the first day of the month, then the first monthly base rent
installment shall be for that first initial partial month calculated by
multiplying the base rent by a fraction, the numerator of which is the
remaining days of that month, and the denominator of which is the total
number of days in that month.
2
<PAGE>
B. COMMON AREA EXPENSE. If the Premises are in a Project, in
addition to Base Rent, Tenant shall pay Landlord Tenant's share of Common
Area expenses attributable to the Premises, as set for the paragraph 8.C.
4. USE. The Premises shall be used for the sale and rental of
pre-recorded audio and/or video products (including, but not limited to
tapes and compact discs), audio and/or video software, laser disks
and/or home entertainment software; the rental of video and/or audio
equipment and sale and/or rental of related accessories including, but
not limited to, the demonstration, display and training, and the sale of
electronic equipment; the sale and/or rental of any substitutes for such
products as well as all uses incidental thereto (including storage,
service and repair); the sale of food products that are normally sold in
a movie theater; and for any lawful and permitted uses.
5. BUILDING CONSTRUCTION.
A. CONSTRUCTION DEADLINE. Landlord shall substantially complete
construction of the Building ("LANDLORD'S WORK") no later than AUGUST 1,
1995 (the "SCHEDULED DELIVERY DATE") in accordance with the plans and
specifications, and if the Building has not been substantially completed
thereby, Tenant shall receive two days 'free rent' for each one-day
period of delay. In the event Landlord fails to complete Landlord's
Work within one hundred twenty (120) days after the Scheduled Delivery
Date, Tenant shall be entitled to terminate this Lease and receive a
refund of any and all amounts previously paid by Tenant to Landlord, or
Tenant may continue to accrue 'free rent' until Landlord has
substantially completed Landlord's Work.
B. LANDLORD'S AND TENANT'S CONSTRUCTION WORK. Landlord agrees at
Landlord's expense, to perform Landlord's Work in a good and workmanlike
manner in the construction of the Premises substantially in accordance
with the plans and specifications and "RESPONSIBILITY SCHEDULE"
respectively attached hereto and made a part hereof as EXHIBIT "C" and
EXHIBIT "C-1". Landlord shall utilize first quality new materials in
compliance with all applicable laws, ordinances, rules and statutes.
Once Landlord has substantially completed Landlord's Work, it shall
notify Tenant that the Premises are ready for Tenant's occupancy. All
work on the Premises other than that to be so performed by Landlord is
to be done by Tenant, at Tenant's expense (herein "TENANT'S WORK").
Tenant's Work shall be constructed in a good and workmanlike manner, in
accordance with its plans and specifications to be submitted to Landlord
for its approval, which approval shall not be unreasonably withheld, and
shall be deemed approved if Landlord does not object to Tenant's plans
in writing within FIVE (5) days of the Landlord's receipt thereof,
specifying in detail Landlord's reasonable objections thereto.
C. TENANT'S CONSTRUCTION ALLOWANCE. Landlord agrees to provide
Tenant with a cash allowance of $12.00 per square foot (or $96,000.00 in
total) for the purpose of constructing its leasehold improvements
(hereinafter, "TENANT'S CONSTRUCTION ALLOWANCE"). Landlord agrees that
Tenant's Construction Allowance shall be due and payable within ten (10)
days following receipt by Landlord of properly executed lien waiver forms;
provided, however, if Landlord fails to pay Tenant's Construction
Allowance within such ten-day period, then the Free Rent Period (as
defined below) shall be extended for that number of days equal to the
quotient of the unpaid Tenant's Construction Allowance together with
Accrued Interest (hereinafter defined) divided by the per diem Base
Rental and Additional Tent which is to be paid by Tenant during the
Primary Term of the Lease rounded to the nearest whole number. For
example, if the unpaid Tenant's Construction Allowance and
3
<PAGE>
Accrued Interest is $50,000.00 and the per diem Base Rental and
Additional Rent is equal to $420, then the Free Rent Period shall be
extended by 119 days beyond the Rent Commencement Date ($50,000.00
divided by $420 is equal to 119). For purposes hereof, the term
"ACCRUED INTEREST" shall mean interest on the unpaid portion of Tenant's
Construction Allowance at a rate equal to the lesser of (a) the maximum
rate permitted by law, or (b) two percent (2%) plus the prime rate of
interest most recently published in the Wall Street Journal (the
"DEFAULT RATE") from the date Tenant's Construction Allowance was
required to be paid by Landlord through the end of the Free Rent Period,
as extended hereby.
D. CONSTRUCTION PERIOD INSURANCE. Landlord agrees to obtain and
maintain at its expense public liability insurance and worker's
compensation insurance adequate to fully protect Tenant and Landlord
against any and all liability for death or injury to persons or damage
to property by reason of construction of Landlord's Work. Tenant
agrees, at its expense, to obtain and maintain public liability
insurance and worker's compensation insurance adequate to fully protect
Landlord as well as Tenant from and against any and all liability for
death or injury to person, or, damage to property, by reason of the
construction of Tenant's Work.
E. SIMULTANEOUS CONSTRUCTION. Except in the event of the negligence
of Landlord, its agents, or employees, if Landlord's Work and Tenant's
Work progresses simultaneously, Landlord shall not be liable for any
injury to person or damage to property of Tenant, or of Tenant's
employees, licensees or invitees, from any cause whatsoever occurring
upon or about the Premises, and Tenant shall indemnify and hold Landlord
harmless from any and all liability and claims arising out of or
connected with any such injury or damage.
6. TAXES. In addition to Base Rent, Tenant agrees to pay to Landlord
additional payments as follows:
A. OBLIGATION TO PAY. Tenant shall pay all real property taxes and
general assessments, and special assessments (herein "TAXES") which may
be levied or assessed against the Premises, either directly or as a
result of the Premises being located within the Project by any lawful
authority for each calendar year or portion thereof. Tenant's
obligations hereunder shall be pro-rated for any partial lease year and
shall survive the expiration of the term of this Lease for tax payments
on the last year hereof
B. PAYMENT PROCEDURE. The Taxes during the Initial Term or any
renewal term shall be paid annually. Upon receipt of all tax bills and
assessment bills attributed to any calendar year during the Initial Term
of any renewal term, Landlord shall furnish Tenant with a statement of
the Taxes payable for such year along with a copy of such tax bills.
Tenant shall pay such taxes to Landlord at least fifteen (15) days
prior to the date Landlord is required to pay said Taxes. A copy of a
tax bill or assessment bill submitted by Landlord to Tenant shall at all
times be sufficient evidence of the amount of Taxes levied or assessed
against the property to which such bill relates. Upon Tenant's written
request, Landlord shall notify Tenant in writing of Landlord's estimate
of Tenant's annual proportionate share of Taxes due hereunder. The
obligations shall survive the expiration of the term of this Lease.
Tenant shall be solely responsible for payment of taxes with respect to
Tenant's fixtures, business equipment, and personal property.
Notwithstanding any other provisions of this Lease, in the event of a
special assessment for a public or private improvement, the life of
which extends beyond the term of the Lease, the taxes and assessments
for such improvement shall be amortized over the estimated length of the
improvement, not to exceed twenty (20) years; Tenant shall only be
responsible to pay the amortized portion thereof during the term of the
Lease. In addition, Tenant shall not be responsible to pay the amortized
portion thereof during the term of the Lease. In addition, Tenant shall
not be responsible to pay any traffic impact fees billed by any
governmental agency as part of the Taxes.
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C. CONTEST. Tenant may, at its option, contest any Taxes against
the Premises and attempt to obtain a reduction in the assessed valuation
upon the Premises for the purpose of reducing any such Tax assessment.
Without expense or liability to Landlord, Landlord shall cooperate with
Tenant and execute any document which may be reasonably necessary and
proper for any proceeding. If a Tax reduction is obtained there shall
be a proportionate reduction in Tenant's Taxes for such year, and any
excess payments by Tenant shall be refunded by Landlord, without
interest, when such refunds have been received by Landlord. In the event
Landlord desires to contest the Taxes due on the Premises, Tenant agrees
to cooperate with Landlord and execute any document which may be
reasonably necessary and proper for any proceeding at no cost to Tenant.
D. EXCLUSIONS. Tenant shall not be responsible for any income, excess
profits, estate, single business, inheritance or succession tax levied
against Landlord.
7. INSURANCE.
A. LIABILITY INSURANCE. Landlord shall obtain and maintain
commercial General Liability insurance (herein "LIABILITY INSURANCE") on
the Premises and appurtenant areas, naming Landlord and Tenant (as an
additional insured) with coverage of not less than Three Million Dollars
($3,000,000) per occurrence for combined bodily injury and property
damage.
B. CASUALTY INSURANCE. Landlord shall also obtain and maintain
all risk property insurance (herein "CASUALTY INSURANCE") covering fire
and extended coverage, vandalism and malicious mischief, sprinkler
leakage and all other perils of direct physical loss or damage insuring
the improvements located in the Premises and all appurtenances thereto
(excluding Tenant's property) for the full replacement value thereof
C. RENTAL INTERRUPTION INSURANCE. Landlord shall also obtain and
maintain rental interruption insurance (herein "RENTAL INTERRUPTION
INSURANCE") covering a period not to exceed one (1) year.
D. PLATE GLASS INSURANCE. Tenant shall be responsible for the
maintenance, repair and replacement of the plate glass in or on the
Premises, but shall not be required to keep plate glass insurance.
E. PAYMENT OF INSURANCE. Tenant shall reimburse Landlord for
Landlord's annual total costs for the premiums for Liability Insurance,
Casualty Insurance, and Rental Interruption Insurance (herein
collectively "INSURANCE"). Tenant's costs for such premium shall be due
and payable, in advance, as follows: (i) Beginning on the Commencement
Date, and continuing on the first day of each month thereafter, Tenant
shall pay monthly to Landlord, Landlord's costs for the premiums of such
Insurance; and (ii) any additional amounts for Insurance for any year
shall be paid by Tenant to Landlord upon written demand. Landlord, shall
furnish Tenant a certificate of such Insurance. Notwithstanding the
foregoing, Tenant may elect to carry some or all insurance referred to in
this paragraph upon ten (10) days' prior written notice to Landlord, in
which event Landlord shall be relieved of its obligation to do so and
Landlord shall be named as an additional insured under Tenant's policy
of insurance, and Tenant shall in such event have no obligation to
reimburse Landlord for such insurance costs. In no event shall Tenant be
required to reimburse Landlord for Landlord's insurance costs which
duplicate insurance which Tenant elects to carry hereunder.
F. INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least A, V, or such other rating as may be
required by a lender having a lien on the Premises, as set forth in the
most current
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issue of "Best's Insurance Guide." Tenant shall not do or permit to be done
anything which shall invalidate the insurance policies referred to in
this Paragraph 7. The insuring party shall cause to be delivered to the
other party certified copies of, or certificates evidencing the
existence and amounts of, the insurance, and with the additional
insureds, required hereunder. No such policy shall be cancelable or
subject to modification except after thirty (30) days' prior written
notice to the non-insuring party. The insuring party shall at least
thirty (30) days prior to the expiration of such policies, furnish the
non-insuring party with evidence of renewals or "insurance binders"
evidencing renewal thereof, or, if the Landlord is the non-insuring
party, the Landlord may order such insurance and charge the cost thereof
to Tenant.
G. WAIVER OF SUBROGATION RIGHTS. Landlord and Tenant and all
parties claiming under them mutually release and discharge each other
from all claims and liabilities arising from or caused by any casualty,
hazard, or activity covered by insurance on the Premises and waive any
right of subrogation which might otherwise exist in or accrue to any
person on account thereof. Each insurance policy to be carried by
Landlord or Tenant under this Lease (other than Tenant's Insurance)
shall include a clause or endorsement to the effect the waiver contained
herein will not adversely affect or impair such policy or prejudice the
right of the insured to recover under such policy, and each such policy
shall permit this waiver of liability and contain a waiver of
subrogation.
H. ADDITIONAL PREMIUMS DUE TO HAZARDOUS USE. Tenant shall not
keep, use, sell or offer for sale in or upon the Premises any article
which may be prohibited by the standard form of fire insurance policy.
Tenant shall pay any increase in premiums for fire and extended coverage
insurance that may be charged on the amount of such insurance which may
be carried by Landlord on the Premises resulting from the type of
merchandise sold by Tenant in the Premises. In determining whether
increased premiums are the result of Tenant's use of the Premises, a
schedule, issued by the organization making the insurance rate on the
Premises, showing the various components of such rate, shall be
conclusive evidence of the several items and charges which make up the
fire insurance rate on the Premises.
The Tenant also shall pay in such event, any additional premium on the
rent insurance policy that may be carried by the Landlord for its
protection against rent loss through fire. Bills for such additional
premiums shall be tendered by Landlord to Tenant at such times as
Landlord may reasonably elect, and shall be due from, and payable by,
Tenant within thirty (30) days of written demand therefor.
8. REPAIRS AND MAINTENANCE,
A. STRUCTURE AND PREMISES. Tenant shall, at its sole cost and
expense, maintain or cause to be maintained (and where necessary,
replace) the Premises, including but not limited to, all structural
systems, roof membrane, load-bearing walls, floor slabs, and HVAC system
and equipment. Such maintenance obligations shall also include the
parking areas, landscaped areas, sidewalks, driveways and pylon sign on
the Premises and all facilities, trade fixtures and other equipment
located inside the Building. Upon request, Landlord shall deliver to
Tenant copies of all warranties and guarantees that are issued by
contractors and manufacturers with respect to the construction of the
Premises and the materials and equipment installed therein. Landlord
shall use its best efforts to have Tenant named on all such warranties
and guarantees for which a beneficiary is named.
B. CONTENTS. Tenant shall, at Tenant's expense, keep, maintain,
repair, and, if necessary, replace the interior of the Premises, trade
fixtures, marquees, and signage so that the same are in good condition
and repair. Furthermore, Tenant agrees to maintain a comprehensive
maintenance contract approved by Landlord on the HVAC system.
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C. COMMON AREA. Notwithstanding anything in this paragraph to
the contrary, if the Premises are within a common-interest subdivision
and an operator is delegated or appointed to perform the repair or
maintenance obligations that would otherwise be the responsibility of
Tenant, then Tenant shall be relieved of the obligation to perform such
maintenance or repairs. In such event, Tenant shall pay, in accordance
with any declarations of the covenants, conditions, restrictions, and
easements, and/or common-area maintenance agreements, its proportionate
cost of the repair and maintenance obligations excluding principal or
interest payments on the loans secured by mortgages on the Premises,
depreciation or amortization of any improvements, the cost of any
special service provided to less than all tenants, and costs and
expenses incurred in connection with leasing space in the Project.
D. DEFAULT. If Tenant fails to perform any maintenance, repairs
or replacements required to be performed by it under this Lease, then in
addition to all other available rights and remedies, Landlord may give
Tenant written notice thereof, and perform such maintenance, repairs or
replacements itself or through an independent contractor and all costs
and expenses incurred in connection therewith, together with an interest
on the balance thereof remaining unpaid from time to time at the lesser
of the prime commercial rate of interest being charged by the Bank of
America from time to time plus two percent (2%) or the maximum permitted
by law, shall become due and owing from Tenant to Landlord, on demand.
E. EMERGENCY. Notwithstanding anything to the contrary contained
herein, in the case of an emergency, Landlord shall have the right to
immediately perform any such maintenance, repairs or replacements (and
charge Tenant the costs and expenses incurred) without giving Tenant
prior written notice thereof or an opportunity to cure, provided that
Landlord shall give contemporaneous notification to Tenant of the
emergency and the related maintenance, repairs or replacements, however,
if contemporaneous notice is not practicable, as determined by Landlord
in its reasonable judgment, then Landlord shall provide notice as soon
thereafter as may reasonably be practicable.
F. CONSTRUCTION QUALITY AND WARRANTY. Landlord warrants and
guarantees Landlord's Work to have been accomplished in a first class
manner with good workmanship and materials for a period of twelve (12)
months from the Commencement Date. After expiration of said twelve (12)
month warranty period, Landlord shall assign to Tenant any and all
warranties and guaranties of third parties held by Landlord, except in
the event same are unassignable, Landlord shall enforce same for the
benefit of Tenant.
G. COMPLIANCE WITH LAW. Landlord warrants that upon completion
of Landlord's Work, such work will comply with all applicable codes and
regulations affecting the Premises. Landlord shall be responsible for
paying any or all fines or penalties for noncompliance or violation of
such codes and regulations during the term of this Lease with respect to
Landlord's Work. Tenant shall be responsible for paying any or all
fines or penalties for noncompliance or violation of codes and
regulations of governmental authorities during the term of this Lease
with respect to Tenant's Work.
9. UTILITIES.
A. Hook-Ups. Landlord shall cause the necessary mains,
conduits and other facilities to be provided to make water, sewer, gas,
phone and electricity available to the Premises in accordance with the
Plans and Specifications.
B. Payments. Tenant shall pay for all water, gas, heat, light,
power, telephone and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to the Premises, Tenant shall pay at
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Landlord's option, either Tenants share or a reasonable proportion to be
determined by Landlord of all charges jointly metered with other tenants
in the Project.
C. REFUSE COLLECTION. Tenant shall be solely responsible for and
promptly pay all charges for collection of refuse and garbage from the
Premises. If the Premises are part of the Project and the operator of
the Project provides garbage collection service for all occupants of the
Project, then Tenant shall pay its proportionate share thereof.
D. CAPACITY. Tenant shall not install any equipment which can
exceed the capacity of any utility facilities as specified in the Plans
and Specifications and if any equipment installed by Tenant requires
additional utility facilities it shall be installed at Tenant's expense
in compliance with all code requirements and plans and specifications
subject to Landlord's prior written approval.
E. INTERRUPTION. Except in the event of the negligence of
Landlord, its agents, or employees, Landlord shall not be liable to
Tenant in damages or otherwise if the said utilities or services are
interrupted or terminated because of necessary repairs, installations,
or improvements, or any cause beyond the Landlord's reasonable control,
nor shall any such interruption or termination relieve Tenant of the
performance of any of its obligations hereunder, except that if Tenant
is unable to operate its business for a period greater than forty-eight
(48) hours after the occurrence of said interruption or termination,
there shall be an abatement of Base Rent hereunder during such period.
10. ENVIRONMENTAL MATTERS.
A. REPRESENTATIONS AND INDEMNITY. Landlord represents and warrants
that: (i) any handling, transportation, storage, treatment or usage of
hazardous or toxic substances that has occurred on the Premises shall be
in compliance with all applicable federal, state and local laws,
regulations and ordinances; (ii) to the best of its knowledge, no leak,
spill, discharge, emission or disposal of hazardous or toxic substances
has occurred on the Premises; and (iii) the soil, groundwater, soil
vapor on or under the Premises is or will be free of toxic or hazardous
substances. Except to the extent caused by Tenant, Landlord agrees to
indemnify, defend and hold Tenant and its officers, employees and agents
harmless from any claims, judgments, damages, fees, penalties, costs,
liabilities (including sums paid in settlement of claims) or loss
including attorney's fees, consultants fees, and expert fees to the
extent that those representations and warranties are false or
inaccurate, unless the presence of such toxic or hazardous substances
are present as the result of the negligence or willful misconduct of
Tenant, its officers, employees or agents. Without limiting the
generality of the foregoing, this indemnification includes costs
incurred in connection with any investigation of site conditions or any
cleanup, remedial, removal or restoration work required by any federal,
state or local governmental agency or political subdivision because of
the presence or suspected presence of toxic or hazardous substances in
the soil or groundwater on or under the Premises, unless the toxic or
hazardous substances are present as the result of the negligence or
wilful misconduct of Tenant, its officers, agents or employees.
B. ENVIRONMENTAL REPORTS AND TERMINATION RIGHTS. Landlord shall
obtain and deliver to Tenant a "Phase I Environmental Report" and any
other environmental reports obtained by Landlord. Either Landlord or
Tenant may terminate this Lease within fifteen (15) days of its receipt
of such report(s), if the environmental report(s) indicate, in such
party's reasonable discretion, that the Premises are contaminated with
hazardous or toxic substances. If either Landlord or Tenant fails to
terminate this Lease within fifteen (15) days of its receipt of the
environmental reports(s), then the parties shall have waived any right
to terminate this Lease based on the environmental report(s). In no
event shall Tenant be obligated to remediate, remove or take any
responsibility whatsoever for Hazardous Materials are present by the
acts of Tenant or its agents.
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11. ALTERATIONS. Tenant shall not make any exterior or structural
alterations to any portion of the Premises without the prior written
consent of Landlord which shall not be unreasonably withheld. Except for
Tenant's property, all alterations, additions, and improvements
constructed by Landlord shall become, upon termination of this Lease,
the property of Landlord. Tenant shall be permitted to make interior
non-structural alterations, additions and improvements costing less than
$50,000.00 without Landlord's prior written consent.
12. FIXTURES AND PERSONAL PROPERTY. Any trade fixtures, business
equipment, inventory, trademarked items, signs, decorative soffit,
counters, shelving, showcases, mirrors and other removable personal
property installed in or on the Premises by Tenant, at its expense,
shall remain the property of the Tenant. Landlord agrees that Tenant
shall have the right to remove any and all of such items. Tenant at its
expense shall immediately repair any damage occasioned by the removal of
Tenant's property, and upon expiration or earlier termination of this
Lease, shall leave the Premises in a "broom clean" condition, free of
debris, normal wear and tear excepted. Tenant shall pay before
delinquency all taxes, assessments, license fees and public charges
levied, assessed or imposed upon its business operation in the Premises
as well as upon Tenant's property in, or upon the Premises. If any such
items of Tenant's property are assessed with property of Landlord, then
such assessment shall be equitably divided between Landlord and Tenant
on the basis of the relative fair market value of Tenant's property. No
taxes, assessments, fees, or charges referred to in this paragraph shall
be considered as real property "Taxes." Landlord hereby waives,
releases, and relinquishes any and all rights of distraint, levy,
attachment or recourse to such Tenant's property.
13. SIGNAGE. Tenant shall have the right to install, at Tenant's sole
expense, Tenant's sign package provided it is in compliance with
applicable governmental regulations and ordinances and the "Project
Documents." Prior to or simultaneously with the execution of this Lease,
Tenant shall submit to Landlord its sign package, which shall be deemed
approved by the Landlord. Landlord shall cooperate with Tenant in
filing any signage application, permit and/or variance for said signage
or with respect to the Premises. Tenant's signage package may include
marquee-type signage on the interior of the Premises visible from the
exterior and Tenant may replace the signage on the marquee from time to
time without permission of Landlord so long as such signage and
replacements are in compliance with applicable law and the Project
Documents. Furthermore, neither Landlord nor any other party may place
any signage or other advertisements on the exterior wall or roof of the
Premises without obtaining the prior written consent of Tenant.
14. LIENS. Neither Tenant nor Landlord shall cause any lien,
encumbrance or charge arising out of any unpaid work or work claim of
any contractor, mechanic, laborer, or materialman to affect the
Premises. If any lien or notice of lien on account of an alleged debt
of Tenant or Landlord shall be filed against the Premises, then Tenant
or Landlord, as the case may be, shall, within thirty (30) days after
notice of the filing thereof, cause the lien to be discharged of record
by payment, deposit or bond. If the responsible party fails to cause
such lien or notice of lien to be discharged by either paying the
amounts claimed to be due or by procuring the discharge of such lien by
deposit or by bonding proceedings, then the other party hereto shall be
entitled to defend any actions for foreclosure of such lien by the
lienor or to pay-off such lien. Any money paid by the responsible party
and all costs and expenses, including attorney's fees, incurred by
Landlord in connection therewith, together with interest at the lesser
of the prime rate of interest for commercial loans charged by the Bank
of America plus two percent (2%) per annum or the maximum rate permitted
by law thereon shall be paid by Tenant to Landlord on demand. In the
event that the
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responsible party diligently contests any such claim, it agrees to
indemnify, defend, and hold harmless the non-responsible party from any and
all costs, liability and damages, including attorney's fees resulting
therefrom, and, if requested, upon demand, immediately to deposit with
Landlord cash or surety bond in form and with a company satisfactory to
the nonresponsible party in an amount equal to one hundred fifty percent
(150%) of such contested claim.
15. OPERATIONS.
A. COMPLIANCE WITH LAW. Tenant and Landlord agree to comply with
all laws, ordinances, orders and regulations affecting the use and
occupancy of the Premises or the Project. Tenant agrees to comply with
the reasonable regulations and requirements of any insurance
underwriter, inspection bureau or similar agency with respect to the
Premises. Tenant also agrees to permit Landlord to comply with such
recommendations and requirements.
B. PROHIBITIONS. Tenant agrees not to (i) permit any illegal
practice to be carried on or committed on the Premises; (ii) make use of
or allow the Premises to be used for any purpose that might invalidate
the rate of insurance therefor; (iii) keep or use or permit to be kept
or used on the Premises any flammable fluids, gases, or explosives
without the prior written permission of Landlord except for normal
cleaning products; (iv) use the Premises for any purpose whatsoever
which might create a nuisance; (v) deface or injure the Building; (vi)
overload the floor; (vii) commit or suffer any waste; or (viii) install
any equipment that overloads electrical lines.
16. LIGHTING. Subject to any restrictions in the Project Documents,
Landlord agrees to provide adequate lighting of the Land including the
parking lot from thirty (30) minutes before dusk until 2:00 a.m., which
lighting shall include the illumination of any pylon or monument sign
advertising Tenant's business conducted in the Premises, as well as
lighting for the other signage and backlit awnings utilized by Tenant in
the advertising of the business conducted by Tenant in the Premises if
same is not separately metered and controlled by Tenant.
17. PARKING. If the Premises are part of a Project, Tenant shall have
the non-exclusive right to use all of the parking spaces in the Project
in accordance with the Project Documents. Except to the extent required
by law, Landlord shall not require, nor shall Tenant be obligated to
permit, any fire lane, loading zone, handicapped parking or other
restrictive parking to be located in the vicinity of Tenant's storefront
and entrance to the Premises.
18. DAMAGE TO PREMISES.
A. RECONSTRUCTION. If the Premises or any portion thereof shall
be damaged or destroyed by fire or other casualty, Tenant shall
immediately notify Landlord orally and in writing and Landlord shall
(except as provided below) diligently remove any resulting debris and
repair, restore, or rebuild as is necessary to substantially return the
Premises to the condition existing immediately prior to such damage or
destruction and this Lease shall remain in full force and effect.
Notwithstanding the foregoing, if any repairs, restorations or
reconstruction are not commenced within ninety (90) days from the date
of the casualty and are not actually repaired, restored or reconstructed
to substantially the same condition existing prior to the casualty
within eight (8) months of the date of the casualty, Tenant may
terminate this Lease by thirty (30) days' prior written notice thereof
to Landlord. Landlord shall not be required to provide funds in excess
of insurance proceeds which may be required
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for such repairing, restoring or rebuilding. In the event of a termination
of the Lease as aforesaid, this Lease shall be null and void and of no
further force or effect and the parties shall have no further rights or
obligations to each other hereunder. Notwithstanding anything to the
contrary herein contained, Landlord shall have no right, title, interest
or claim to insurance maintained by Tenant with respect to Tenant's
property, including, but not limited to insurance proceeds payable with
respect thereto.
B. RENT ABATEMENT. Tenant shall be entitled to a prorated
deduction of Base Rent for that period in which the Premises is
untenantable. Such deduction shall be based on the proportion of the
space rendered untenantable bears to the space occupied, provided,
however, if Tenant is unable, in its reasonable discretion, to operate
its business in the Premises, there shall be a full abatement of Rent.
C. SOURCE OF FUNDS. Landlord agrees to accept the property
insurance proceeds recoverable under Landlord's Casualty Insurance as
payment in full for any loss or damage to the Premises, and not to make
any claim against Tenant for any loss or damage to the improvements
located in the Premises which occur and arise as a result of matters
which can be covered by insurance, unless such loss or damage was caused
by the acts or omissions of Tenant or Tenant's employees, agents,
contractors, or invitees, and only after application of insurance
proceeds received in connection with such loss or damage.
19. INDEMNIFICATION.
A. BY TENANT. Except to the extent caused by Landlord's
negligence or willful misconduct, Tenant indemnifies and holds Landlord
harmless from and against any and all cost, expense, claims, demands,
and liabilities, including attorney's fees, arising from Tenant's use of
the Premises, or from any act or any failure to act, in or about the
Premises by Tenant or its agents, employees, or contractors, or from any
breach or default by Tenant of this Lease. If any action or proceeding
shall be brought against Landlord by reason of any such claim, Tenant
shall defend the Landlord at Tenant's expense by counsel reasonably
satisfactory to Landlord.
B. BY LANDLORD. Except to the extent caused by Tenant's
negligence or willful misconduct, Landlord indemnifies and holds Tenant
harmless from and against any and all cost, expense, claims, demands,
and liabilities, including attorney's fees, arising from Landlord's
obligations or use of the Premises, or from any act, or any failure to
act, in or about the Premises or Land by Landlord or its agents,
employees, contractors, or invitees, or from any breach or default by
Landlord of this Lease. If any action or proceeding shall be brought
against Tenant by reason of any such claim, Landlord shall defend the
same at Landlord's expense by counsel reasonably satisfactory to Tenant.
20. PERMITTED TRANSFERS, ASSIGNMENT, AND SUBLETTING.
A. PERMITTED TRANSFERS. Tenant shall have the absolute right to
sublet, assign or otherwise transfer its interest in this Lease to an
entity which has, after such subletting, assignment, or transfer, a net
worth in excess of five million dollars ($5,000,000) calculated under
generally accepted accounting principles, or to a licensee, franchisee
or any parent or operating subsidiary of Tenant, or subsidiary of
Tenant's parent or to a corporation with which it may merge or
consolidate ("PERMITTED TRANSFER"), without Landlord's approval, as long
as Tenant remains fully liable for full performance of all its
obligations under this Lease. The sale or exchange of stock in the
Tenant in a public offering and the subsequent sale of such stock on a
nationally recognized exchange (including, but not limited to, the
NASDAQ) shall not constitute an assignment under this paragraph.
B. TENANT'S ASSIGNMENT OR SUBLEASE. Subject to the limitations
hereof, Tenant shall have the right to transfer, assign, and sublet to
or enter into a license or concession
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agreement with a third party for any lawful use not in contravention of
the Project Documents or other agreements affecting the Premises which
runs with the Land upon the prior written consent of Landlord, which
consent shall not be unreasonably withheld, provided however, that if
Landlord fails to respond to any request by Tenant for Landlord's
consent or approval within thirty (30) days of such request, the consent
or approval of Landlord shall be deemed given. In the event of an
assignment, subletting, or other transfer pursuant to this subparagraph,
Tenant shall remain primarily liable for the full performance of its
obligations under this Lease. Except in the event of a Permitted
Transfer, Tenant shall pay to Landlord seventy-five percent (75%) of all
"profits" derived by Tenant from such assignment or sublease. For
purposes of this subparagraph, "profits" shall mean the proceeds
actually received by Tenant from any assignee or sublessee of Tenant
over the Base Rent and any other additional charges payable to Landlord
hereunder. Tenant shall furnish Landlord with a sworn statement,
certified by an authorized representative of Tenant, setting forth in
detail the computation of receipts, and Landlord, or its
representatives, shall have access to the books, records and papers of
Tenant in relation thereto, and the right to make copies thereof.
Seventy-five percent (75%) of Tenant's profits shall be paid to Landlord
in installments as Tenant receives them from such assignee or subtenant.
Landlord shall credit Tenant three-quarters of all reasonable costs
incurred by Tenant in securing and entering into such sublease or
assignment, including, but not limited to brokerage commissions, rent
concessions, legal, advertising, and construction allowances, but in no
event shall such credits exceed the profits.
C. LANDLORD'S ASSIGNMENT. Landlord shall have the right to
transfer, assign and convey, in whole or in part, any or all of the
right, title and interest to the Premises, provided, such transferee or
assignee shall be bound by the terms, covenants and agreements herein
contained, and shall expressly assume and agree to perform the covenants
and agreements of Landlord contained herein. In the event that Landlord
executes a mortgage affecting the Premises which is of senior priority
to this Lease, then Tenant may require Landlord to concurrently execute
a nondisturbance and attornment agreement with such lender, reasonably
acceptable to Tenant.
21. ACCESS TO PREMISES. Except in the case of an emergency, upon
reasonable prior notice (but in no event less than twenty-four (24)
hours), Landlord may enter the Premises to inspect, to show the Premises
to prospective purchasers and lenders, or to perform maintenance and
repair obligations imposed upon Landlord by this Lease.
22. DEFAULT; REMEDIES.
A. DEFAULT. The occurrence of any of the following shall constitute a
material default of this Lease by Tenant (herein "EVENT OF DEFAULT"):
1. Any failure by Tenant to pay Base Rent or make any
other payment required to be made by Tenant hereunder within ten (10)
days after receipt of written notice from the Landlord;
2. A failure by Tenant to observe and perform any other
provision of this Lease to be observed or performed by the Tenant,
where such failure continues for thirty (30) days after written notice
thereof by Landlord to Tenant, except that this (30) day period shall
be extended for a reasonable period of time if the alleged default is
not reasonably capable of cure within said thirty (30) day period and
Tenant proceeds to diligently cure the default; and
3. The making by Tenant of any general assignment for
the benefit of creditors, the filing by or against Tenant of a
petition to have Tenant adjudged a bankrupt, or a petition for
reorganization or arrangement under any law relating to bankruptcy
(unless, in the case of a petition filed against Tenant, the same is
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dismissed within sixty (60) days); the appointment of a trustee or
receiver to take possession that is not restored to Tenant within thirty
(30) days, or the attachment, execution or other judicial seizure that
is not discharged within thirty (30) days.
B. REMEDIES. Upon an Event of Default by Tenant, then Landlord may,
in addition to any other right or remedy available at law, do the
following:
1 . Terminate this Lease, in which event Tenant shall
immediately surrender the Premises to Landlord, and if Tenant fails to
do so, Landlord may, without prejudice to any other remedy which he may
have for possession or arrearages in rent, enter upon and take possession
of the Premises and expel or remove Tenant and any other person who may
be occupying the Premises or any part thereof without breaching the
peace. Additionally, in such event Landlord shall be entitled to
recover from Tenant: (i) the worth at the time of the award of the
unpaid rent which had been earned at the time of termination; (ii) the
worth at the time of award of the amount by which the unpaid rent which
would have been earned after termination until the time of award exceeds
the amount of such rental loss that the Tenant proves could have been
reasonably avoided; (iii) the worth at the time of award of the amount
by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Tenant proves
could be reasonably avoided; and (iv) any other amount necessary to
compensate Landlord for all the detriment proximately caused by the
Tenant's failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom,
including but not limited to the cost of recovering possession of the
Premises, expenses of reletting, including necessary renovation and
alteration of the Premises, reasonable attorneys' fees, and that portion
of the leasing commission paid by Landlord applicable to the unexpired
term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the prior sentence shall be computed
by discounting such amount at the discount rate of the Federal Reserve
Bank of San Francisco at the time of award plus one percent (1%).
Efforts by Landlord to mitigate damages caused by Tenant's default or
breach of this Lease shall not waive Landlord's right to recover damages
under this paragraph. If termination of this Lease is obtained through
the provisional remedy of unlawful detainer, Landlord shall have the
right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Landlord may reserve therein the right to
recover all or any part thereof in a separate suit for such rent and/or
damages. Landlord shall be entitled to recover the unamortized portion
of the brokerage commissions paid by Landlord under this Lease;
2. Enter upon and take possession of the Premises without
terminating this Lease and expel or remove Tenant and any other person
who may be occupying the Premises or any part thereof without breaching
the peace, and, Landlord shall use its reasonable efforts to relet the
Premises on commercially reasonable terms and receive the rent therefor;
and Tenant agrees to pay to Landlord on demand any deficiency on a
monthly basis that may arise by reason of such reletting. Landlord
shall be entitled to recover the unamortized portion of the brokerage
commissions paid by Landlord under this Lease; and
3. Enter upon the Premises without breaching the peace, and do
whatever Tenant is obligated to do under the terms of this Lease, in which
case Tenant shall reimburse Landlord on demand for any reasonable expenses
which Landlord may incur in thus effecting compliance with Tenant's
obligations under this Lease plus interest at a rate equal to the lesser of
the prime rate of interest for commercial loans charged by the Bank of
America plus two (2%) percent or the maximum rate permitted by law from the
date of any expenditure until Landlord has been paid for same.
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23. DEFAULTS BY LANDLORD. If Landlord defaults in the performance of
any of its obligations under this Lease, which default continues for a
period of more than thirty (30) days after receipt of written notice
from Tenant to Landlord and Landlord's lender, if any, specifying such
default, or if such default is of a nature to require more than thirty
(30) days for remedy and continues beyond the time reasonably necessary
to cure (and Landlord has not undertaken procedures to cure the default
within such thirty (30) day period and diligently pursued such efforts
to complete cure), Tenant may, in addition to any other remedy available
at law or in equity at its option, upon written notice, incur any
expense necessary to perform the obligation of Landlord specified in
such notice and deduct such expense from the Base Rent or other charges
next becoming due.
24. SURRENDER OF PREMISES. Tenant shall, upon expiration of this
Lease, or any earlier termination of this Lease for any cause, surrender
to Landlord the Premises in good order and "broom clean" condition,
ordinary wear and tear excepted, including, without limitation, all
building apparatus and equipment then upon the Premises, and all
alterations, improvements and other additions which may be made or
installed by either party to, in, upon or about the Premises, except for
Tenant's property, which shall remain the property of Tenant.
25. CONDEMNATION. If the Premises or any portion thereof or the
Project are taken under the power of eminent domain, or sold under the
threat of the exercise of said power (all of which are herein called
"CONDEMNATION"), this Lease shall terminate as to the part so taken as
of the date the condemning authority takes title or possession,
whichever first occurs. If more than five percent (5%) of the floor
area of the Premises, or more than twenty percent (20%) of that portion
of the Common Areas designated as parking for the Project is taken by
Condemnation, Tenant may, at Tenant's option, to be exercised in writing
only within thirty (30) days after Landlord shall have given Tenant
written notice of such taking (or in the absence of such notice, within
thirty (30) days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority
takes such possession. If Tenant does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and
effect as to the portion of the Premises remaining, except that the rent
shall be reduced in the proportion that the floor area of the Premises
so taken bears to the total floor area of the Premises. No reduction of
rent shall occur if the only area taken is that which is not part of the
Premises. Any award for the taking of all or any part of the Premises
under the power of eminent domain or any payment made under threat of
the exercise of such power shall be the property of Landlord, whether
such award shall be made as compensation for diminution in value or the
leasehold or for the taking of the fee, or as severance damages;
provided however, that Tenant shall be entitled to any award for loss of
or damage to Tenant's property and relocation expenses. If this Lease
is not terminated by reason of such Condemnation, Landlord shall, from
severance damages received by Landlord in connection with such
Condemnation, repair any damage to the Premises caused by such
Condemnation except to the extent that Tenant has been reimbursed
therefor by the condemning authority. Tenant shall pay any amount in
excess of such severance damages required to complete such repair.
26. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT. Upon written
request of Landlord, or any mortgagee or beneficiary of Landlord, Tenant
shall, in writing, subordinate its rights hereunder to the interest of
any ground lessor of the Land and to the lien of any mortgage or deed of
trust, now or hereafter in force against the Land and/or Building, and
to all advances made or hereafter to be made thereon, provided, however,
that the ground lessor, or the mortgagee or trustee named in said
mortgage or trust deed shall agree to execute a Non-Disturbance
Agreement in favor of Tenant in the form attached hereto as EXHIBIT "E."
In the event any proceedings are brought for foreclosure, or in the
event of the exercise of the power of sale under any mortgage of deeds
of trust, upon any such foreclosure or sale
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Tenant agrees to recognize such beneficiary or purchaser as the Landlord
under this Lease, provided all of Tenant's rights under this Lease
continue unabated.
27. NOTICES. Notices and demands required or permitted hereunder shall
be sent by certified mail, return receipt requested, postage prepaid, or
by Federal Express or other reputable overnight courier service and
shall be deemed to have been given upon the date the same is postmarked
if sent by certified mail or the day deposited with Federal Express or
such other reputable overnight courier service, but shall not be deemed
received until one (1) business day following deposit with Federal
Express or other reputable overnight courier service or three (3) days
following deposit in the United States Mail sent to Landlord and Tenant
at the addresses specified beneath their signatures hereof or at such
other address requested in writing by either party upon fifteen (15)
days' prior notice to the other party.
28. HOLDING OVER. If Tenant or any party claiming under Tenant remains
in possession of the Premises or any part thereof after any termination
or expiration of this Lease, Landlord, in its sole discretion, may treat
such holdover as a month-to-month tenancy subject to all the terms and
conditions of this Lease provided herein except Base Rent shall be a sum
equal to one hundred fifty (150%) of the Rent most recently paid by
Tenant to Landlord.
29. COVENANT OF TITLE AND QUIET ENJOYMENT. Upon Tenant paying the
rent and charges for the Premises and observing and performing all of
the covenants, conditions, and provisions on Tenant's part to be observed
and performed hereunder, Tenant shall have quiet possession of the
Premises for the entire term hereof subject to all of the provisions of
this Lease.
30. ESTOPPEL CERTIFICATE. Either party, upon request of the other
party, shall execute, acknowledge and deliver an instrument, stating, if
the same is true, that this Lease is a true and exact copy of the Lease
between the parties hereto, that there are no amendments hereof (or
stating what amendments there may be), that it is then in full force and
effect and that, to the best of its knowledge, there are no offsets,
defense or counterclaims with respect to the payment of Rent reserved
hereunder or in the performance of the other terms, covenants and
conditions hereof on the part of Tenant or Landlord, as the case may be,
to be performed, and that as of such date no default has been declared
hereunder by either party or if not specifying the same. Such
instrument will be executed by other party and delivered to the
requesting party within fifteen (15) days of receipt, or else the
statements made in the proposed estoppel request shall be deemed to be
correct.
31. FORCE MAJEURE. In the event that either party hereto shall be
delayed or hindered in or prevented from the performance required
hereunder by reason of strikes, lockouts, labor troubles, failure of
power, riots, insurrection, war, acts of God, or other reason of like
nature not the fault of the party delayed in performing work or doing
acts (herein collectively, "PERMITTED DELAY"), such party shall be
excused for the period of time equivalent to the delay caused by such
Permitted Delay. Notwithstanding the foregoing, any extension of time
for a Permitted Delay shall be conditioned upon the party seeking an
extension of time delivering written notice of such Permitted Delay to
the other party within ten (10) days of the event causing the Permitted
Delay, and the maximum period of time which Landlord shall be permitted
to delay any act or performance of work due to a Permitted Delay shall
be sixty (60) days.
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32. LIMITATIONS ON LANDLORD'S LIABILITY. Notwithstanding anything to
the contrary contained in this Lease, in the event of any default or
breach by Landlord with respect to any of the terms, covenants and
conditions of this Lease to be observed, honored or performed by
Landlord, Tenant shall look solely to the estate and property of
Landlord in the Land and building(s) owned by Landlord comprising the
Premises for the collection of any judgment (or any other judicial
procedures requiring the payment of money by Landlord) and no other
property or assets of Landlord shall be subject to levy, execution, or
other procedures for satisfaction of Tenant's remedies.
33. WAIVER OF CONTRACTUAL OR STATUTORY LANDLORD'S LIEN. Any statutory
or contractual security interest or lien of Landlord against Tenant's
property shall be and is hereby expressly forever waived and released.
Landlord agrees to execute on demand any and all instruments as may be
reasonably requested by Tenant and/or Tenant's lender in connection with
the provisions of this paragraph.
34. COLLATERAL ASSIGNMENT. Tenant shall have the right, at any time
and from time to time during the Initial Term and the renewal terms, as
security for any indebtedness owed by Tenant to collaterally assign its
right, title and interest in and to this Lease to its lender and if such
lender enforces its rights and remedies under and pursuant to said
assignment or encumbrance, this Lease shall continue in full force and
effect, subject to the terms of this Lease. In connection with any such
collateral assignment, Landlord agrees to execute within thirty (30) days
of written demand an agreement to provide such lender with notice and
opportunity to cure any of Tenant's defaults hereunder for an additional
twenty (20) day period after expiration of cure periods herein provided
to Tenant. Nothing herein shall entitle Tenant to encumber or mortgage
Landlord's fee interest in the Premises, including the improvements
thereon.
35. BROKERS. Landlord covenants and agrees to pay broker's
commissions, if any, in accordance with a separate agreement executed by
and between Landlord and any brokers and, further, agrees to indemnify
Tenant for all claims and demands made by any such broker. In addition,
Landlord and Tenant agree to indemnify and hold each other harmless from
and against any and all liability and cost which Landlord or Tenant, as
applicable, may suffer in connection with any other real estate brokers
claiming by, through, or under Landlord or Tenant, as applicable, seeking
any commission, fee or payment in connection with this Lease.
36. TENANT'S CONDUCT OF BUSINESS. Notwithstanding anything in this
Lease to the contrary, nothing in this Lease shall be construed as an
obligation for Tenant to open or operate its business in the Premises.
Tenant shall have the right to remove Tenant's property and cease
operations in the Premises at any time and at Tenant's sole discretion.
However, the right to cease to operate its business shall not affect
Tenant's obligation to pay all amounts due hereunder and be obligated to
perform all covenants and obligations hereunder. Tenant shall give
Landlord thirty (30) days' prior written notice of its intention to
cease its business operations on the Premises. At such time it is
operating its business in the Premises, Tenant agrees to conduct its
business in a first-class manner consistent with reputable
business standards and practices. Furthermore, in no event shall Tenant be
liable to Landlord for damages as a result of operating other stores in the
area surrounding the Premises or any other area, nor shall Tenant be
limited or restricted in any way from opening or operating other stores in
the area surrounding the Premises or any other area.
37. CONSTRUCTION DISPUTES. Any disputes which may arise between
Landlord and Tenant concerning Landlord's Work or Tenant's Work shall be
submitted to an architect mutually
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selected by Landlord's architect and Tenant's architect, within fifteen
(15) days from notice of the existence of such dispute. Such dispute
shall be adjudicated by the appointed architect within thirty (30) days
of his or her appointment based upon any documentation submitted to him
by Landlord and Tenant. The appointed architect's adjudication of the
dispute shall be final and binding upon Landlord and Tenant who agree
hereby to abide by such decision.
38. LANDLORD'S ACQUISITION CONTINGENCY. The obligations of Landlord
and Tenant under this Lease are contingent upon Landlord's acquisition
of the Land on or before one hundred twenty (120) days from the
execution of this Lease. If said Land is not acquired within such
120-day period, then either Landlord or Tenant shall have the right to
terminate this Lease upon giving sixty (60) days' prior written notice
thereof to the other party hereto. Conversely, if Landlord or Tenant
fails to give such notice of termination within the 60-day period, then
this contingency shall be deemed to be thereafter and forever waived.
If the Lease is duly terminated pursuant to the terms of this paragraph,
then the Lease shall be considered null and void, any and all sums paid
by Tenant to Landlord shall be forthwith refunded and the parties shall
have no further obligations to the other with respect to this Lease.
39. DROP BOX. Subject to compliance with the Project Documents and
applicable law, Tenant may install a drive-by drop box within the Common
Area. The drop box will measure approximately four feet (4') wide,
forty-four inches (44") tall, and thirty-five inches (35") in depth at a
location visible from Tenant's front door, easily accessible to
vehicular traffic and within 30 feet (30') of the Premises.
40. MISCELLANEOUS PROVISIONS.
A. ATTORNEYS' FEES. If either Landlord or Tenant institutes any
action or proceeding against the other relating to the provisions of
this Lease, or any default hereunder, the unsuccessful party in such
action or proceeding agrees to reimburse the prevailing party for the
reasonable expenses of attorneys' fees. Such reimbursement shall
include all legal expenses incurred prior to trial, at trial and at all
levels of appeal and post judgment proceedings.
B. CUMULATIVE RIGHTS AND REMEDIES. All rights and remedies of
Landlord and Tenant herein created or otherwise extending at law are
cumulative, and the exercise of one or more rights or remedies may be
exercised and enforced concurrently or consecutively and whenever and as
often as deemed desirable, except that to the extent any such rights
and/or remedies of Landlord or Tenant existing at law conflict with the
terms of this Lease, then the terms of this Lease shall control.
C. SUCCESSORS AND ASSIGNS. All covenants, promises, conditions,
representations and agreements herein contained shall be binding upon,
apply and inure to the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
D. WAIVER. The failure of either Landlord or Tenant to insist
upon strict performance by the other of any of the covenants,
conditions, and agreements of this Lease shall not be deemed a waiver of
any subsequent breach or default in any of the covenants, conditions and
agreements of this Lease.
E. INTERPRETATION. The parties hereto agree that it is their
intention hereby to create only the relationship of Landlord and Tenant,
and no provision hereof, or act of either party hereunder, shall ever be
construed as creating the relationship of principal and agent, a
partnership, a joint venture or other enterprise between the parties
hereto.
17
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F. RECORDING. Tenant shall not record this Lease. At Tenant's
request, the parties shall join in the execution of a memorandum or
so-called "short-form" of this Lease for the purposes of recordation in
accordance with the form attached hereto as EXHIBIT "F" and made a part
hereof. Any recording costs associated with the memorandum or short
form of this Lease shall be borne by the party requesting recordation.
G. CONSENT. In connection with any approval or consent of
Landlord required by the terms and conditions of the Lease, Landlord
covenants and agrees that it shall not unreasonably withhold or delay
any such consent or approval. Furthermore, in the event that Landlord
fails to respond to any request by Tenant for Landlord's consent or
approval within thirty (30) days of such request, the consent or
approval of Landlord shall be deemed given.
H. SEVERABILITY. Any provision of this Lease which shall prove to
be invalid, void or illegal shall in no way affect, impair or invalidate
any other provisions hereof and such other provisions shall remain in
full force and effect.
I. GOVERNING LAW. This Lease shall be governed by the laws of
the state in which the Premises are located.
J. OBLIGATIONS WHICH SURVIVE EXPIRATION OF THE LEASE. The
following obligations of Landlord shall survive the expiration or
termination of the Lease: (a) any obligation herein permitted to be
performed after the end of the termination of this Lease; (b) any
obligation not reasonably susceptible of performance prior to the
termination of this Lease; and (c) any obligation to be performed
pursuant hereto at or before the end of the Initial Term or any renewal
term which is not so performed. The provisions of this Lease with
respect to any obligation of Tenant to pay any sum owing after the
expiration or other termination of this Lease shall survive the
expiration or other termination of this Lease.
K. TIME OF THE ESSENCE. Time shall be of the essence in
interpreting the provisions of this Lease.
L. INTEREST ON PAST-DUE OBLIGATIONS. If Tenant shall fail to
pay, when the same is due and payable and after proper notice and the
expiration of all cure periods, Base Rent or any other payment due
hereunder, said unpaid amounts shall bear interest from the due date
thereof to the date of payment at an annual rate of interest equal to
the lessor of the prime rate of interest for commercial loans charged by
First National Bank of Chicago plus two percent (2.0%) or the maximum rate
permitted by law. Tenant shall in addition, pay as Additional Rent a
fee of One Hundred Dollars ($100.00) for processing of late payments.
M. ENTIRE AGREEMENT. This Lease contains all of the agreements
of the parties hereto with respect to matters covered or mentioned in
this Lease and no prior agreement, letters, representations, warranties,
promises, or understandings pertaining to any such matters shall be
effective for any such purpose. The Lease may be amended or added to
only by an agreement in writing signed by the parties hereto or their
respective successors in interest.
N. COUNTERPARTS. This Lease may be executed in any number of
counterparts with the same effect as if all Parties hereto had signed the
same document. All counterparts shall be construed together and shall
constitute one Lease.
O. SECURITY MEASURES. Tenant hereby acknowledges that Landlord
shall have no obligation whatsoever to provide guard service or other
security measures for the benefit of the Premises or the Project.
Tenant assumes all responsibility for the protection of Tenant, its
agents, and invitees and the property of Tenant and of Tenant's agents
and invitees from acts of third parties.
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P. RENT. All monetary obligations or charges to be paid by Tenant
to Landlord under the terms of this lease shall be treated like "rent"
hereunder.
Q. AUTHORITY TO EXECUTE. The individuals executing this Lease on
behalf of Landlord represent and warrant to Tenant that they are fully
authorized and legally capable of executing this Lease on behalf of
Lessor and that such execution is binding upon all parties holding an
ownership interest in the Project.
"LANDLORD"
HOLLYWOOD VIDEO PARTNERS, LLC
177 S. Beverly Drive
Beverly Hills, California 90212-3002
Dated: 3/1/95 By: /s/ M. E. Zimmerman
---------------- ----------------------------------
Mark E. Zimmerman
"TENANT"
HOLLYWOOD ENTERTAINMENT CORPORATION
10300 S.W. Allen Boulevard
Beaverton, Oregon 97005
Dated: 2/20/95 By: /s/ VP
--------------- ---------------------------------
Its Vice President
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ADDENDUM
Addendum to Lease Agreement
by and Between Hollywood Video Partners, LLC,
Trustee or Assigns ("Lessor")
and Hollywood Entertainment
Corporation dba Hollywood Video
Superstore ("Lessor")
This Addendum to Lease Agreement shall amend, modify and supersede the
specific terms of the Lease Agreement to which this Addendum is attached.
1. THIS LEASE IS CONTINGENT UPON THE APPROVAL BY LANDLORD AND THE CITY OF
KILLEEN, TEXAS OF TENANT'S PLANS AND ELEVATIONS TO BE SUBMITTED BY THE
TENANT INCLUDING, BUT NOT LIMITED TO SIGNAGE AND COLORS. IN THE EVENT
EITHER LANDLORD OR THE CITY OF KILLEEN, TEXAS DO NOT APPROVE THE PLANS AS
SET FORTH HEREIN AND, IF TENANT IN ITS SOLE DISCRETION, DOES NOT ALTER THE
PLANS, TENANT MAY TERMINATE THIS LEASE.
<PAGE>
EXHIBIT "A"
LEGAL DESCRIPTION OF THE LAND
FIELD NOTES for a tract of land in Bell County, Texas, part of the John Gosline
Survey, Abstract No. 344, and the land herein described being a part of Lot 1,
Block 2, Highland Development Corporation Commercial Subdivision, an addition to
the city of Killeen, Bell County, Texas, being of record in Cabinet A, Slide 71-
A, Plat Records of Bell County, Texas.
BEGINNING at a 3/8" iron rod set in the south margin of U.S. Highway 190
(Central Texas Expressway) that bears N. 43 DEG. 11' 36" W., 493.88 feet, and N.
49 DEG. 02' 31" W., 99.55 feet from the northwest corner of Lot 1, for the
northeast corner of this.
THENCE N. 82 DEG. 50'14" W., 385.04 feet to a 3/8" iron rod set for the
southwest corner of this.
THENCE N. 07 DEG. 09' 46" E., 178.54 feet, a 3/8" iron rod set, and N. 40 DEG.
58' 10" E., 65.80 feet, to a 3/8" iron rod set in the south margin of U. S.
Highway 190 for the northwest corner of this.
THENCE S. 49 DEG. 02' 31" E., 419.28 feet with the south margin of U. S. Highway
190 to the PLACE OF BEGINNING, containing 1.106 acres of land.
<PAGE>
EXHIBIT "B"
SITE PLAN OF PREMISES
[MAP]
PAGE 1 of 2
<PAGE>
EXHIBIT "B"
SITE PLAN OF PREMISES
[MAP]
Page 2 of 2
<PAGE>
LEASE AT
NEC STATE HIGHWAY 59 & STATE HIGHWAY 36
(ROSENBURG), TEXAS
DATED: September 20, 1994
--------------------
HWD VIDEO PARTNERS, INC.,
LANDLORD
and
HOLLYWOOD ENTERTAINMENT CORPORATION,
TENANT
EXHIBIT B
---------
<PAGE>
TABLE OF CONTENTS
1. Lease Agreement; Premises and Common Area . . . . . .1
2. Term. . . . . . . . . . . . . . . . . . . . . . . . .2
3. Rent. . . . . . . . . . . . . . . . . . . . . . . . .2
4. Use . . . . . . . . . . . . . . . . . . . . . . . . .3
5. Building Construction . . . . . . . . . . . . . . . .3
6. Taxes . . . . . . . . . . . . . . . . . . . . . . . .4
7. Insurance . . . . . . . . . . . . . . . . . . . . . .5
8. Repairs and Maintenance . . . . . . . . . . . . . . .6
9. Utilities . . . . . . . . . . . . . . . . . . . . . .7
10. Environmental Matters . . . . . . . . . . . . . . . .8
11. Alterations . . . . . . . . . . . . . . . . . . . . .9
12. Fixtures and Personal Property. . . . . . . . . . . .9
13. Signage . . . . . . . . . . . . . . . . . . . . . . .9
14. Liens . . . . . . . . . . . . . . . . . . . . . . . 10
15. Operations. . . . . . . . . . . . . . . . . . . . . 10
16. Lighting. . . . . . . . . . . . . . . . . . . . . . 10
17. Parking . . . . . . . . . . . . . . . . . . . . . . 10
18. Damage to Premises. . . . . . . . . . . . . . . . . 11
19. Indemnification . . . . . . . . . . . . . . . . . . 11
20. Permitted Transfers, Assignment, and Subletting . . 12
21. Access to Premises. . . . . . . . . . . . . . . . . 13
22. Default; Remedies . . . . . . . . . . . . . . . . . 13
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23. Defaults by Landlord. . . . . . . . . . . . . . . . 14
24. Surrender of Premises . . . . . . . . . . . . . . . 15
25. Condemnation. . . . . . . . . . . . . . . . . . . . 15
26. Subordination, Non-Disturbance and Attornment . . . 15
27. Notices . . . . . . . . . . . . . . . . . . . . . . 15
28. Holding Over. . . . . . . . . . . . . . . . . . . . 16
29. Covenant of Title and Quiet Enjoyment . . . . . . . 16
30. Estoppel Certificate. . . . . . . . . . . . . . . . 16
31. Force Majeure . . . . . . . . . . . . . . . . . . . 16
32. Limitations on Landlord's Liability . . . . . . . . 16
33. Waiver of Contractual or Statutory Landlord's Lien. 17
34. Collateral Assignment . . . . . . . . . . . . . . . 17
35. Brokers . . . . . . . . . . . . . . . . . . . . . . 17
36. Tenant's Conduct of Business. . . . . . . . . . . . 17
37. Construction Disputes . . . . . . . . . . . . . . . 17
38. Landlord's Acquisition Contingency. . . . . . . . . 18
39. Drop Box. . . . . . . . . . . . . . . . . . . . . . 18
40. Miscellaneous Provisions. . . . . . . . . . . . . . 18
EXHIBITS
--------
EXHIBIT "A" - Legal Description of the Land
EXHIBIT "B" - Site Plan of Premises
EXHIBIT "C" - Landlord/Tenant Work
EXHIBIT "C-1" Responsibility Schedule
EXHIBIT "D" - Commencement Date Endorsement Sheet
EXHIBIT "E" - Non-Disturbance and Attornment Agreement
EXHIBIT "F" - Memorandum of Lease
ii
<PAGE>
LEASE
-----
This lease (herein the "Lease") is deemed to be entered into
this 20th day of September, 1994, between HWD VIDEO PARTNERS, INC., a California
corporation (herein the "Landlord") and HOLLYWOOD ENTERTAINMENT CORPORATION, an
Oregon corporation (herein the "Tenant") according to the following terms and
conditions:
1. LEASE AGREEMENT; PREMISES AND COMMON AREA.
A. PREMISES. For valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, Landlord
hereby agrees to lease to Tenant and Tenant hereby agrees to
lease from Landlord in accordance with the terms of this
Lease that real property situated in the City of Rosenburg,
State of Texas, commonly known as NEC State Highway 59 and
State Highway 36, consisting of approximately 34,000 square
feet of land (herein the "Land") and a building of
approximately 8,000 square feet (herein the "Building")
collectively referred to as the "Premises." The legal
description of the Land and a graphical depiction of the
Premises in the form of a site plan (herein the "Site Plan")
are respectively attached hereto as Exhibits "A" and "B."
B. COMMON AREA. If the Premises are part of a
common-interest subdivision (herein the "Project"), the
Landlord hereby grants Tenant the right to use the "Common
Areas" thereof. Such Common Areas constitute the areas and
facilities outside the Premises designated for the general
non-exclusive use of Tenant and other lessees of the Project
and such tenant's respective employees, suppliers, shippers,
customers, and invitees. The Common Areas include parking
areas, loading and unloading areas, trash areas, roadways,
sidewalks, walkways, parkways, driveways, and landscaped
areas. If the Premises are in a Project, the Tenant
acknowledges that this Lease is subject to pre-existing
recorded instruments (herein the "Project Documents")
affecting the Common Areas and the operation of businesses
within the Project. Tenant hereby agrees to comply with the
terms of the Project Documents and rules and regulations
affecting the use of the Common Areas. Upon Tenant's
request, Landlord shall deliver to Tenant a current
Preliminary Title Report or Title Report and all underlying
documents shown as exceptions to title affecting the
Premises. Upon the discovery of any document affecting title
which would prohibit or restrict Tenant's use of the
Premises for a retail entertainment software or video rental
and sales store, then Tenant may terminate this Lease upon
thirty (30) days' prior written notice to Landlord, unless
Landlord is able to remove such prohibition or restriction
within said 30-day period. Notwithstanding the foregoing,
Landlord understands and agrees that the Premises can be
used by tenant as a retail entertainment software or video
sales and rental store and Tenant's ability to so use the
Premises is a condition precedent to this Lease. Landlord
represents that nothing contained in the Project Documents
or applicable zoning will prohibit construction of the
Building as contemplated in this Lease. Landlord shall make
no changes to the Common Area or other improvements in the
Project which would adversely impact
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the visibility of or access to the Premises or reduce
parking available to the Premises or otherwise interfere
with Tenant's business.
2. TERM.
A. INITIAL TERM. The "Initial Term" of this Lease
shall be for fifteen (15) years beginning on the
"Commencement Date" and ending on the last day of the month
fifteen (15) years following the Commencement Date. The
Commencement Date shall be on the earlier of Tenant's
acceptance of the Premises or Tenant's opening for business.
Landlord shall give Tenant not less than ten (10) days prior
written notice of substantial completion of "Landlord's
Work" after which Tenant shall have an additional ten (10)
days to inspect the Building so as to assure itself that it
has been constructed in accordance with approved plans and
specifications, normal and customary "Punch List" items
excepted. Plans and specifications for Landlord's Work are
attached hereto as Exhibit "C." Tenant shall notify Landlord
of any construction or design defects or material deviations
from said plans and specifications within said ten (10) day
period or Tenant shall be deemed to have accepted the
Premises. Landlord shall deliver to Tenant within thirty
(30) days from Tenant's acceptance of the Premises, a
Certificate of Occupancy therefor. After Tenant's acceptance
of the Premises, Landlord shall correct any minor "Punch
List" items no later than thirty (30) days after Tenant's
acceptance of the Premises. In accordance with the
foregoing, Landlord and Tenant shall specify the exact
Commencement Date on the Commencement Date Endorsement sheet
attached hereto as Exhibit "D."
B. RENEWAL TERM. Tenant shall have the right to
renew this Lease for two (2) additional periods of five (5)
years each so long as Tenant is not in breach of any
provision of this Lease. Tenant shall notify Landlord in
writing not later than one hundred eighty (180) days prior
to the expiration of the initial term or any existing renewal
term of Tenant's election to so renew the Lease.
3. RENT.
A. BASE RENT. Beginning forty-five (45) days from
the Commencement Date, Tenant shall pay Landlord as "Base
Rent" for the Premises without any claim, offset, or
deduction, (except as otherwise expressly provided in this
Lease) the following sums:
Lease Base Annual Monthly Base
Year Rental Annual Rental
----- ----------- -------------
Years 1-5 $111,800.00 $ 9,316.66
Years 6-10 $128,750.00 $10,729.16
Years 11-15 $128,750.00 $10,729.16
Years 16-20 $147,855.00 $12,321.25
Years 21-25 $170,033.00 $14,169.41
payable on the first day of each month, without notice, during the term
hereof. Notwithstanding the foregoing, if the Commencement Date is other
than on the first day of the month, then the first monthly base rent
installment shall be for that first initial partial month calculated by
multiplying the base rent by a fraction, the numerator of which is the
remaining
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days of that month, and the denominator of which is the total number of
days in that month.
B. COMMON AREA EXPENSE. If the Premises are in a Project, in
addition to Base Rent, Tenant shall pay Landlord Tenant's share of Common
Area expenses attributable to the Premises, as set for the paragraph 8.C.
4. USE. The Premises shall be used for the sale and rental of
pre-recorded audio and/or video products (including, but not limited to tapes
and compact discs), audio and/or video software, laser disks and/or home
entertainment software; the rental of video and/or audio equipment and sale
and/or rental of related accessories including, but not limited to, the
demonstration, display and training, and the sale of electronic equipment;
the sale and/or rental of any substitutes for such products as well as all
uses incidental thereto (including storage, service and repair); the sale of
food products that are normally sold in a movie theater; and for any lawful
and permitted uses.
5. BUILDING CONSTRUCTION.
A. CONSTRUCTION DEADLINE. Landlord shall substantially complete
construction of the Building ("Landlord's Work") no later than February 1,
1995 (the "Scheduled Delivery Date") in accordance with the plans and
specifications, and if the Building has not been substantially completed
thereby, Tenant shall receive one day 'free rent' for each one-day period
of delay. In the event Landlord fails to complete Landlord's Work within
one hundred twenty (120) days after the Scheduled Delivery Date, Tenant
shall be entitled to terminate this Lease and receive a refund of any and
all amounts previously paid by Tenant to Landlord, or Tenant may continue
to accrue 'free rent' until Landlord has substantially completed Landlord's
Work.
B. LANDLORD'S AND TENANT'S CONSTRUCTION WORK. Landlord agrees at
Landlord's expense, to perform Landlord's Work in a good and workmanlike
manner in the construction of the Premises substantially in accordance with
the plans and specifications and "Responsibility Schedule" respectively
attached hereto and made a part hereof as Exhibit "C" and Exhibit "C-1".
Landlord shall utilize first quality new materials in compliance with all
applicable laws, ordinances, rules and statutes. Once Landlord has
substantially completed Landlord's Work, it shall notify Tenant that the
Premises are ready for Tenant's occupancy. All work on the Premises other
than that to be so performed by Landlord is to be done by Tenant, at
Tenant's expense (herein "Tenant's Work"). Tenant's Work shall be
constructed in a good and workmanlike manner, in accordance with its plans
and specifications to be submitted to Landlord for its approval, which
approval shall not be unreasonably withheld; and shall be deemed approved
if Landlord does not object to Tenant's plans in writing within five (5)
days of the Landlord's receipt thereof, specifying in detail Landlord's
reasonable objections thereto.
C. TENANT'S CONSTRUCTION ALLOWANCE. Landlord agrees to provide
Tenant with a cash allowance of $0.00 (zero) per square foot for the
purpose of constructing its leasehold improvements (hereinafter, "Tenant's
Construction Allowance"). Landlord agrees that Tenant's Construction
Allowance shall be due and payable within ten (10) days following receipt
by Landlord of properly executed lien waiver forms; provided,
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however, if Landlord fails to pay Tenant's Construction Allowance within
such ten-day period, then the Free Rent Period (as defined below) shall be
extended for that number of days equal to the quotient of the unpaid
Tenant's Construction Allowance together with Accrued Interest (hereinafter
defined) divided by the per diem Base Rental and Additional Rent which is
to be paid by Tenant during the Primary Term of the Lease rounded to the
nearest whole number. For example, if the unpaid Tenant's Construction
Allowance and Accrued Interest is $50,000 and the per diem Base Rental and
Additional Rent is equal to $420, then the Free Rent Period shall be
extended by 119 days beyond the Rent Commencement Date ($50,000 divided by
$420 is equal to 119). For purposes hereof, the term "Accrued Interest"
shall mean interest on the unpaid portion of Tenant's Construction
Allowance at a rate equal to the lesser of (a) the maximum rate permitted
by law, or (b) two percent (2%) plus the prime rate of interest most
recently published in the Wall Street Journal (the "Default Rate") from the
date Tenant's Construction Allowance was required to be paid by Landlord
through the end of the Free Rent Period, as extended hereby.
D. CONSTRUCTION PERIOD INSURANCE. Landlord agrees to obtain and
maintain at its expense public liability insurance and worker's
compensation insurance adequate to fully protect Tenant and Landlord
against any and all liability for death or injury to persons or damage to
property by reason of construction of Landlord's Work. Tenant agrees, at
its expense, to obtain and maintain public liability insurance and worker's
compensation insurance adequate to fully protect Landlord as well as Tenant
from and against any and all liability for death or injury to person, or,
damage to property, by reason of the construction of Tenant's Work.
E. SIMULTANEOUS CONSTRUCTION. Except in the event of the negligence
of Landlord, its agents, or employees, if Landlord's Work and Tenant's Work
progresses simultaneously, Landlord shall not be liable for any injury to
person or damage to property of Tenant, or of Tenant's employees, licensees
or invitees, from any cause whatsoever occurring upon or about the
Premises, and Tenant shall indemnify and hold Landlord harmless from any
and all liability and claims arising out of or connected with any such
injury or damage.
6. TAXES. In addition to Base Rent, Tenant agrees to pay to Landlord
additional payments as follows:
A. OBLIGATION TO PAY. Tenant shall pay all real property taxes and
general assessments, and special assessments (herein "Taxes") which may be
levied or assessed against the Premises, either directly or as a result of
the Premises being located within the Project, by any lawful authority for
each calendar year or portion thereof. Tenant's obligations hereunder shall
be pro-rated for any partial lease year and shall survive the expiration of
the term of this Lease for tax payments on the last year hereof.
B. PAYMENT PROCEDURE. The Taxes during the Initial Term or any
renewal term shall be paid annually. Upon receipt of all tax bills and
assessment bills attributed to any calendar year during the Initial Term of
any renewal term, Landlord shall furnish Tenant with a statement of the
Taxes payable for such year along with a copy of such tax bills. Tenant
shall pay such taxes to Landlord at least fifteen (15)
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days prior to the date Landlord is required to pay said Taxes. A copy of a
tax bill or assessment bill submitted by Landlord to Tenant shall at all
times be sufficient evidence of the amount of Taxes levied or assessed
against the property to which such bill relates. Upon Tenant's written
request, Landlord shall notify Tenant in writing of Landlord's estimate of
Tenant's annual proportionate share of Taxes due hereunder. The obligations
shall survive the expiration of the term of this Lease. Tenant shall be
solely responsible for payment of taxes with respect to Tenant's fixtures,
business equipment, and personal property. Notwithstanding any other
provisions of this Lease, in the event of a special assessment for a public
or private improvement, the life of which extends beyond the term of the
Lease, the taxes and assessments for such improvement shall be amortized
over the estimated length of the improvement, not to exceed twenty (20)
years; Tenant shall only be responsible to pay the amortized portion
thereof during the term of the Lease. In addition, Tenant shall not be
responsible to pay any traffic impact fees billed by any governmental
agency as part of the Taxes.
C. CONTEST. Tenant may, at its option, contest any Taxes against
the Premises and attempt to obtain a reduction in the assessed valuation
upon the Premises for the purpose of reducing any such Tax assessment.
Without expense or liability to Landlord, Landlord shall cooperate with
Tenant and execute any document which may be reasonably necessary and
proper for any proceeding. If a Tax reduction is obtained there shall be a
proportionate reduction in Tenant's Taxes for such year, and any excess
payments by Tenant shall be refunded by Landlord, without interest, when
such refunds have been received by Landlord. In the event Landlord desires
to contest the Taxes due on the Premises, Tenant agrees to cooperate with
Landlord and execute any document which may be reasonably necessary and
proper for any proceeding at no cost to Tenant.
D. EXCLUSIONS. Tenant shall not be responsible for any income,
excess profits, estate, single business, inheritance or succession tax
levied against Landlord.
7. INSURANCE.
A. LIABILITY INSURANCE. Landlord shall obtain and maintain
commercial General Liability insurance (herein "Liability Insurance") on
the Premises and appurtenant areas, naming Landlord and Tenant (as an
additional insured) with coverage of not less than Three Million Dollars
($3,000,000) per occurrence for combined bodily injury and property damage.
B. CASUALTY INSURANCE. Landlord shall also obtain and maintain all
risk property insurance (herein "Casualty Insurance") covering fire and
extended coverage, vandalism and malicious mischief, sprinkler leakage and
all other perils of direct physical loss or damage insuring the
improvements located in the Premises and all appurtenances thereto
(excluding Tenant's property) for the full replacement value thereof.
C. RENTAL INTERRUPTION INSURANCE. Landlord shall also obtain and
maintain rental interruption insurance (herein "Rental Interruption
Insurance") covering a period not to exceed one (1) year.
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D. PLATE GLASS INSURANCE. Tenant shall be responsible for the
maintenance, repair and replacement of the plate glass in or on the
Premises, but shall not be required to keep plate glass insurance.
E. PAYMENT OF INSURANCE. Tenant shall reimburse Landlord for
Landlord's annual total costs for the premiums for Liability Insurance,
Casualty Insurance, and Rental Interruption Insurance (herein collectively
"Insurance"). Tenant's costs for such premium shall be due and payable, in
advance, as follows: (i) Beginning on the Commencement Date, and
continuing on the first day of each month thereafter, Tenant shall pay
monthly to Landlord, Landlord's costs for the premiums of such Insurance;
and (ii) any additional amounts for Insurance for any year shall be paid by
Tenant to Landlord upon written demand. Landlord, shall furnish Tenant a
certificate of such Insurance. Notwithstanding the foregoing, Tenant may
elect to carry some or all insurance referred to in this paragraph upon ten
(10) days' prior written notice to Landlord, in which event Landlord shall
be relieved of its obligation to do so and Landlord shall be named as an
additional insured under Tenant's policy of insurance, and Tenant shall in
such event have no obligation to reimburse Landlord for such insurance
costs. In no event shall Tenant be required to reimburse Landlord for
Landlord's insurance costs which duplicate insurance which Tenant elects to
carry hereunder.
F. INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least A, V, or such other rating as may be
required by a lender having a lien on the Premises, as set forth in the
most current issue of "Best's Insurance Guide." Tenant shall not do or
permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 7. The insuring party shall cause to be
delivered to the other party certified copies of, or certificates
evidencing the existence and amounts of, the insurance, and with the
additional insureds, required hereunder. No such policy shall be cancelable
or subject to modification except after thirty (30) days' prior written
notice to the non-insuring party. The insuring party shall at least thirty
(30) days prior to the expiration of such policies, furnish the non-
insuring party with evidence of renewals or "insurance binders"
evidencing renewal thereof, or, if the Landlord is the non-insuring
party, the Landlord may order such insurance and charge the cost thereof
to Tenant.
G. WAIVER OF SUBROGATION RIGHTS. Landlord and Tenant and all
parties claiming under them mutually release and discharge each other from
all claims and liabilities arising from or caused by any casualty, hazard,
or activity covered by insurance on the Premises and waive any right of
subrogation which might otherwise exist in or accrue to any person on
account thereof. Each insurance policy to be carried by Landlord or Tenant
under this Lease (other than Tenant's Insurance) shall include a clause or
endorsement to the effect the waiver contained herein will not adversely
affect or impair such policy or prejudice the right of the insured to
recover under such policy, and each such policy shall permit this waiver of
liability and contain a waiver of subrogation.
H. ADDITIONAL PREMIUMS DUE TO HAZARDOUS USE. Tenant shall not keep,
use, sell or offer for sale in or upon the Premises any article which may
be prohibited by the standard form of fire insurance policy. Tenant shall
pay any increase in premiums for fire and extended coverage insurance that
may be charged on the amount of such insurance which may be carried by
Landlord on the Premises resulting from the type of
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merchandise sold by Tenant in the Premises. In determining whether
increased premiums are the result of Tenant's use of the Premises, a
schedule, issued by the organization making the insurance rate on the
Premises, showing the various components of such rate, shall be conclusive
evidence of the several items and charges which make up the fire insurance
rate on the Premises.
The Tenant also shall pay in such event, any additional premium on the
rent insurance policy that may be carried by the Landlord for its
protection against rent loss through fire. Bills for such additional
premiums shall be tendered by Landlord to Tenant at such times as Landlord
may reasonably elect; and shall be due from, and payable by, Tenant within
thirty (30) days of written demand therefor.
8. REPAIRS AND MAINTENANCE.
A. STRUCTURE AND PREMISES. Tenant shall, at its sole cost and
expense, maintain or cause to be maintained (and where necessary, replace)
the Premises, including but not limited to, all structural systems, roof
membrane, load-bearing walls, floor slabs, and HVAC system and equipment.
Such maintenance obligations shall also include the parking areas,
landscaped areas, sidewalks, driveways and pylon sign on the Premises and
all facilities, trade fixtures and other equipment located inside the
Building. Upon request, Landlord shall deliver to Tenant copies of all
warranties and guarantees that are issued by contractors and manufacturers
with respect to the construction of the Premises and the materials and
equipment installed therein. Landlord shall use its best efforts to have
Tenant named on all such warranties and guarantees for which a beneficiary
is named.
B. CONTENTS. Tenant shall, at Tenant's expense, keep, maintain,
repair, and, if necessary, replace the interior of the Premises, trade
fixtures, marquees, and signage so that the same are in good condition and
repair. Furthermore, Tenant agrees to maintain a comprehensive maintenance
contract approved by Landlord on the HVAC system.
C. COMMON AREA. Notwithstanding anything in this paragraph to the
contrary, if the Premises are within a common-interest subdivision and an
operator is delegated or appointed to perform the repair or maintenance
obligations that would otherwise be the responsibility of Tenant, then
Tenant shall be relieved of the obligation to perform such maintenance or
repairs. In such event, Tenant shall pay, in accordance with any
declarations of the covenants, conditions, restrictions, and easements,
and/or common-area maintenance agreements, its proportionate cost of the
repair and maintenance obligations excluding principal or interest payments
on the loans secured by mortgages on the Premises, depreciation or
amortization of any improvements, the cost of any special service provided
to less than all tenants, and costs and expenses incurred in connection
with leasing space in the Project.
D. DEFAULT. If Tenant fails to perform any maintenance, repairs or
replacements required to be performed by it under this Lease, then in
addition to all other available rights and remedies, Landlord may give
Tenant written notice thereof, and perform such maintenance, repairs or
replacements itself or through an independent contractor and all costs and
expenses incurred in connection therewith, together with an interest on the
balance thereof remaining unpaid from time to time at the lesser of the
prime commercial rate of interest being charged by the Bank of America from
time to time plus two percent (2%) or the maximum permitted by
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law, shall become due and owing from Tenant to Landlord, on demand.
E. EMERGENCY. Notwithstanding anything to the contrary contained
herein, in the case of an emergency, Landlord shall have the right to
immediately perform any such maintenance, repairs or replacements (and
charge Tenant the costs and expenses incurred) without giving Tenant prior
written notice thereof or an opportunity to cure, provided that Landlord
shall give contemporaneous notification to Tenant of the emergency and the
related maintenance, repairs or replacements, however, if contemporaneous
notice is not practicable, as determined by Landlord in its reasonable
judgment, then Landlord shall provide notice as soon thereafter as may
reasonably be practicable.
F. CONSTRUCTION, QUALITY AND WARRANTY. Landlord warrants and
guarantees Landlord's Work to have been accomplished in a first class
manner with good workmanship and materials for a period of twelve (12)
months from the Commencement Date. After expiration of said twelve (12)
month warranty period, Landlord shall assign to Tenant any and all
warranties and guarantees of third parties held by Landlord, except in the
event same are unassignable, Landlord shall enforce same for the benefit of
Tenant.
G. COMPLIANCE WITH LAW. Landlord warrants that upon completion of
Landlord's Work, such work will comply with all applicable codes and
regulations affecting the Premises. Landlord shall be responsible for
paying any or all fines or penalties for noncompliance or violation of such
codes and regulations during the term of this Lease with respect to
Landlord's Work. Tenant shall be responsible for paying any or all fines or
penalties for noncompliance or violation of codes and regulations of
governmental authorities during the term of this Lease with respect to
Tenant's Work.
9. UTILITIES.
A. HOOK-UPS. Landlord shall cause the necessary mains, conduits and
other facilities to be provided to make water, sewer, gas, phone and
electricity available to the Premises in accordance with the Plans and
Specifications.
B. PAYMENTS. Tenant shall pay for all water, gas, heat, light,
power, telephone, and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to the Premises, Tenant shall pay at Landlord's option,
either Tenant's share or a reasonable proportion to be determined by
Landlord of all charges jointly metered with other tenants in the Project.
C. REFUSE COLLECTION. Tenant shall be solely responsible for and
promptly pay all charges for collection of refuse and garbage from the
Premises. If the Premises are part of the Project and the operator of the
Project provides garbage collection service for all occupants of the
Project, then Tenant shall pay its proportionate share thereof.
D. CAPACITY. Tenant shall not install any equipment which can
exceed the capacity of any utility facilities as specified in the Plans and
Specifications and if any equipment installed by Tenant requires additional
utility facilities it shall be installed at Tenant's expense in compliance
with all code requirements and plans and specifications subject to
Landlord's prior written approval.
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E. INTERRUPTION. Except in the event of the negligence of Landlord,
its agents, or employees, Landlord shall not be liable to Tenant in damages
or otherwise if the said utilities or services are interrupted or
terminated because of necessary repairs, installations, or improvements, or
any cause beyond the Landlord's reasonable control, nor shall any such
interruption or termination relieve Tenant of the performance of any of its
obligations hereunder, except that if Tenant is unable to operate its
business for a period greater than forty-eight (48) hours after the
occurrence of said interruption or termination, there shall be an abatement
of Base Rent hereunder during such period.
10. ENVIRONMENTAL MATTERS.
A. REPRESENTATIONS AND INDEMNITY. Landlord represents and warrants
that: (i) any handling, transportation, storage, treatment or usage of
hazardous or toxic substances that has occurred on the Premises shall be in
compliance with all applicable federal, state and local laws, regulations
and ordinances; (ii) to the best of its knowledge, no-leak, spill,
discharge, emission or disposal of hazardous or toxic substances has
occurred on the Premises; and (iii) the soil, groundwater, soil vapor on or
under the Premises is or will be free of toxic or hazardous substances.
Except to the extent caused by Tenant, Landlord agrees to indemnify, defend
and hold Tenant and its officers, employees and agents harmless from any
claims, judgments, damages, fines, penalties, costs, liabilities (including
sums paid in settlement of claims) or loss including attorney's fees,
consultant's fees, and expert fees to the extent that those representations
and warranties are false or inaccurate, unless the presence of such toxic
or hazardous substances are present as the result of the negligence or
willful misconduct of Tenant, its officers, employees or agents. Without
limiting the generality of the foregoing, this indemnification includes
costs incurred in connection with any investigation of site conditions or
any cleanup, remedial, removal or restoration work required by any federal,
state or local governmental agency or political subdivision because of the
presence or suspected presence of toxic or hazardous substances in the soil
or groundwater on or under the Premises, unless the toxic or hazardous
substances are present as the result of the negligence or wilful misconduct
of Tenant, its officers, agents or employees.
B. ENVIRONMENTAL REPORTS AND TERMINATION RIGHTS. Landlord shall
obtain and deliver to Tenant a "Phase I Environmental Report" and any other
environmental reports obtained by Landlord. Either Landlord or Tenant may
terminate this Lease within fifteen (15) days of its receipt of such
report(s), if the environmental report(s) indicate, in such party's
reasonable discretion, that the Premises are contaminated with hazardous or
toxic substances. If either Landlord or Tenant fails to terminate this
Lease within fifteen (15) days of its receipt of the environmental
report(s), then the parties shall have waived any right to terminate this
Lease based on the environmental report(s). In no event shall Tenant be
obligated to remediate, remove or take any responsibility whatsoever for
Hazardous Materials unless such Hazardous Materials are present by the acts
of Tenant or its agents.
11. ALTERATIONS. Tenant shall not make any exterior or structural
alterations to any portion of the Premises without the prior written consent of
Landlord which shall not be unreasonably withheld. Except for Tenant's property,
all alterations, additions, and improvements constructed by Landlord shall
become, upon termination of this Lease, the property of Landlord. Tenant
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shall be permitted to make interior non-structural alterations, additions and
improvements costing less than $50,000.00 without Landlord's prior written
consent.
12. FIXTURES AND PERSONAL PROPERTY. Any trade fixtures, business
equipment, inventory, trademarked items, signs, decorative soffit, counters,
shelving, showcases, mirrors and other removable personal property installed in
or on the Premises by Tenant, at its expense, shall remain the property of the
Tenant. Landlord agrees that Tenant shall have the right to remove any and all
of such items. Tenant at is expense shall immediately repair any damage
occasioned by the removal of Tenant's property, and upon expiration or earlier
termination of this Lease, shall leave the Premises in a "broom clean"
condition, free of debris, normal wear and tear excepted. Tenant shall pay
before delinquency all taxes, assessments, license fees and public charges
levied, assessed or imposed upon its business operation in the Premises as well
as upon Tenant's property in, or upon the Premises. If any such items of
Tenant's property are assessed with property of Landlord, then such assessment
shall be equitably divided between Landlord and Tenant on the basis of the
relative fair market value of Tenant's property. No taxes, assessments, fees, or
charges referred to in this paragraph shall be considered as real property
"Taxes." Landlord hereby waives, releases, and relinquishes any and all rights
of distraint, levy, attachment or recourse to such Tenant's property.
13. SIGNAGE. Tenant shall have the right to install, at Tenant's sole
expense, Tenant's sign package provided it is in compliance with applicable
governmental regulations and ordinances and the "Project Documents." Prior to or
simultaneously with the execution of this Lease, Tenant shall submit to Landlord
its sign package, which shall be deemed approved by the Landlord. Landlord shall
cooperate with Tenant in filing any signage application, permit, and/or variance
for said signage or with respect to the Premises. Tenant's signage package may
include marquee-type signage on the interior of the Premises visible from the
exterior and Tenant may replace the signage on the marquee from time to time
without permission of Landlord so long as such signage and replacements are in
compliance with applicable law and the Project Documents. Furthermore, neither
Landlord nor any other party may place any signage or other advertisements on
the exterior wall or roof of the Premises without obtaining the prior written
consent of Tenant.
14. LIENS. Neither Tenant nor Landlord shall cause any lien, encumbrance
or charge arising out of any unpaid work or work claim of any contractor,
mechanic, laborer, or materialman to affect the Premises. If any lien or notice
of lien on account of an alleged debt of Tenant or Landlord shall be filed
against the Premises, then Tenant or Landlord, as the case may be, shall, within
thirty (30) days after notice of the filing thereof, cause the lien to be
discharged of record by payment, deposit or bond. If the responsible party fails
to cause such lien or notice of lien to be discharged by either paying the
amounts claimed to be due or by procuring the discharge of such lien by deposit
or by bonding proceedings, then the other party hereto shall be entitled to
defend any action for foreclosure of such lien by the lienor or to pay-off such
lien. Any money paid by the responsible party and all costs and expenses,
including attorney's fees, incurred by Landlord in connection therewith,
together with interest at the lesser of the prime rate of interest for
commercial loans charged by the Bank of America plus two percent (2%) per annum
or the maximum rate permitted by law thereon shall be paid by Tenant to Landlord
on demand. In the event that the responsible party diligently contests any such
claim, it agrees to indemnify, defend, and hold harmless the non-responsible
party from any and all costs,
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liability and damages, including attorney's fees resulting therefrom, and, if
requested, upon demand, immediately to deposit with Landlord cash or surety bond
in form and with a company satisfactory to the non-responsible party in an
amount equal to one hundred fifty percent (150%) of such contested claim.
15. OPERATIONS.
A. COMPLIANCE WITH LAW. Tenant and Landlord agree to comply with
all laws, ordinances, orders and regulations affecting the use and
occupancy of the Premises or the Project. Tenant agrees to comply with the
reasonable regulations and requirements of any insurance underwriter,
inspection bureau or similar agency with respect to the Premises. Tenant
also agrees to permit Landlord to comply with such recommendations and
requirements.
B. PROHIBITIONS. Tenant agrees not to (i) permit any illegal
practice to be carried on or committed on the Premises; (ii) make use of or
allow the Premises to be used for any purpose that might invalidate the
rate of insurance therefor; (iii) keep or use or permit to be kept or used
on the Premises any flammable fluids, gases, or explosives without the
prior written permission of Landlord except for normal cleaning products;
(iv) use the Premises for any purpose whatsoever which might create a
nuisance; (v) deface or injure the Building; (vi) overload the floor; (vii)
commit or suffer any waste; or (viii) install any equipment that overloads
electrical lines.
16. LIGHTING. Subject to any restrictions in the Project Documents,
Landlord agrees to provide adequate lighting of the Land including the parking
lot from thirty (30) minutes before dusk until 2:00 am, which lighting shall
include the illumination of any pylon or monument sign advertising Tenant's
business conducted in the Premises, as well as lighting for the other signage
and backlit awnings utilized by Tenant in the advertising of the business
conducted by Tenant in the Premises if same is not separately metered and
controlled by Tenant.
17. PARKING. If the Premises are part of a Project, Tenant shall have the
non-exclusive right to use all of the parking spaces in the Project in
accordance with the Project Documents. Except to the extent required by law,
Landlord shall not require, nor shall Tenant be obligated to permit, any fire
lane, loading zone, handicapped parking or other restrictive parking to be
located in the vicinity of Tenant's storefront and entrance to the Premises.
18. DAMAGE TO PREMISES.
A. RECONSTRUCTION. If the Premises or any portion thereof shall be
damaged or destroyed by fire or other casualty, Tenant shall immediately
notify Landlord orally and in writing and Landlord shall (except as
provided below) diligently remove any resulting debris and repair, restore,
or rebuild as is necessary to substantially return the Premises to the
condition existing immediately prior to such damage or destruction and this
Lease shall remain in full force and effect. Notwithstanding the foregoing,
if any repairs, restoration or reconstruction are not commenced within
ninety (90) days from the date of the casualty and are not actually
repaired, restored or reconstructed to substantially the same condition
existing prior to the casualty within eight (8) months of the date of the
casualty, Tenant may terminate this Lease by thirty (30) days' prior
written notice thereof to Landlord. Landlord shall not be required to
provide funds in
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excess of insurance proceeds which may be required for such repairing,
restoring or rebuilding. In the event of a termination of the Lease as
aforesaid, this Lease shall be null and void and of no further force or
effect and the parties shall have no further rights or obligations to each
other hereunder. Notwithstanding anything to the contrary herein contained,
Landlord shall have no right, title, interest or claim to insurance
maintained by Tenant with respect to Tenant's property, including, but not
limited to insurance proceeds payable with respect thereto.
B. RENT ABATEMENT. Tenant shall be entitled to a prorated deduction
of Base Rent for that period in which the Premises is untenantable. Such
deduction shall be based on the proportion of the space rendered
untenantable bears to the space occupied, provided, however, if Tenant is
unable, in its reasonable discretion, to operate its business in the
Premises, there shall be a full abatement of Rent.
C. SOURCE OF FUNDS. Landlord agrees to accept the property
insurance proceeds recoverable under Landlord's Casualty Insurance as
payment in full for any loss or damage to the Premises, and not to make any
claim against Tenant for any loss or damage to the improvements located in
the Premises which occur and arise as a result of matters which can be
covered by insurance, unless such loss or damage was caused by the acts or
omissions of Tenant or Tenant's employees, agents, contractors, or
invitees, and only after application of insurance proceeds received in
connection with such loss or damage.
19. INDEMNIFICATION.
A. BY TENANT. Except to the extent caused by Landlord's negligence
or willful misconduct, Tenant indemnifies and holds Landlord harmless from
and against any and all cost, expense, claims, demands, and liabilities,
including attorney's fees, arising from Tenant's use of the Premises, or
from any act, or any failure to act, in or about the Premises by Tenant or
its agents, employees, or contractors, or from any breach or default by
Tenant of this Lease. If any action or proceeding shall be brought against
Landlord by reason of any such claim, Tenant shall defend the Landlord at
Tenant's expense by counsel reasonably satisfactory to Landlord.
B. BY LANDLORD. Except to the extent caused by Tenant's negligence
or willful misconduct, Landlord indemnifies and holds Tenant harmless from
and against any and all cost, expense, claims, demands, and liabilities,
including attorney's fees, arising from Landlord's obligations or use of
the Premises, or from any act, or any failure to act, in or about the
Premises or Land by Landlord or its agents, employees, contractors, or
invitees, or from any breach or default by Landlord of this Lease. If any
action or proceeding shall be brought against Tenant by reason of any such
claim, Landlord shall defend the same at Landlord's expense by counsel
reasonably satisfactory to Tenant.
20. PERMITTED TRANSFERS, ASSIGNMENT, AND SUBLETTING.
A. PERMITTED TRANSFERS. Tenant shall have the absolute right to
sublet, assign or otherwise transfer its interest in this Lease to an
entity which has, after such subletting, assignment, or transfer, a net
worth in excess of five million dollars ($5,000,000) calculated under
generally accepted accounting principles, or to a licensee, franchisee or
any parent or operating subsidiary of Tenant, or subsidiary of Tenant's
parent, or to a corporation with which it may merge
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or consolidate ("Permitted Transfer"), without Landlord's approval, as long
as Tenant remains fully liable for full performance of all its obligations
under this Lease. The sale or exchange of stock in the Tenant in a public
offering and the subsequent sale of such stock on a nationally recognized
exchange (including, but not limited to, the NASDAQ) shall not constitute
an assignment under this paragraph.
B. TENANT'S ASSIGNMENT OR SUBLEASE. Tenant shall have the right to
transfer, assign, and sublet to or enter into a license or concession
agreement with a third party for any lawful use not in contravention of the
Project Documents of other agreements affecting the premises which runs
with the Land without the prior written consent of the Landlord. In the
event of an assignment, subletting, or other transfer pursuant to this
subparagraph, Tenant shall remain primarily liable for the full performance
of its obligations under this Lease.
C. LANDLORD'S ASSIGNMENT. Landlord shall have the right to
transfer, assign and convey, in whole or in part, any or all of the right,
title and interest to the Premises, provided, such transferee or assignee
shall be bound by the terms, covenants and agreements herein contained, and
shall expressly assume and agree to perform the covenants and agreements of
Landlord contained herein. In the event that Landlord executes a mortgage
affecting the Premises which is of senior priority to this Lease, then
Tenant may require Landlord to concurrently execute a nondisturbance and
attornment agreement with such lender, reasonably acceptable to Tenant.
21. ACCESS TO PREMISES. Except in the case of an emergency, upon
reasonable prior notice (but in no event less than twenty-four (24) hours),
Landlord may enter the Premises to inspect, to show the Premises to prospective
purchasers and lenders, or to perform maintenance and repair obligations imposed
upon Landlord by this Lease.
22. DEFAULT; REMEDIES.
A. DEFAULT. The occurrence of any of the following shall constitute
a material default of this Lease by Tenant (herein "Event of Default"):
1. Any failure by Tenant to pay Base Rent or make any other payment
required to be made by Tenant hereunder
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within ten (10) days after receipt of written notice from the
Landlord;
2. A failure by Tenant to observe and perform any other
provision of this Lease to be observed or performed by the Tenant,
where such failure continues for thirty (30) days after written notice
thereof by Landlord to Tenant, except that this thirty (30) day period
shall be extended for a reasonable period of time if the alleged
default is not reasonably capable of cure within said thirty (30) day
period and Tenant proceeds to diligently cure the default; and
3. The making by Tenant of any general assignment for the
benefit of creditors, the filing by or against Tenant of a petition to
have Tenant adjudged a bankrupt, or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case
of a petition filed against Tenant, the same is dismissed within sixty
(60) days); the appointment of a trustee or receiver to take
possession that is not restored to Tenant within thirty (30) days, or
the attachment, execution or other judicial seizure that is not
discharged within thirty (30) days.
B. REMEDIES. Upon an Event of Default by Tenant, then Landlord may,
in addition to any other right or remedy available at law, do the
following:
1. Terminate this Lease, in which event Tenant shall
immediately surrender the Premises to Landlord, and if Tenant fails to
do so, Landlord may, without prejudice to any other remedy which he
may have for possession or arrearages in rent, enter upon and take
possession of the Premises and expel or remove Tenant and any other
person who may be occupying the Premises or any part thereof without
breaching the peace. Additionally, in such event Landlord shall be
entitled to recover from Tenant: (i) the worth at the time of the
award of the unpaid rent which has been earned at the time of
termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that
the Tenant proves could have been reasonably avoided; (iii) the worth
at the time of award of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of such
rental loss that the Tenant proves could be reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all the
detriment proximately caused by the Tenant's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, including but not limited to the
cost of recovering possession of the Premises, expenses of reletting,
including necessary renovation and alteration of the Premises,
reasonable attorneys' fees, and that portion of the leasing commission
paid by Landlord applicable to the unexpired term of this Lease. The
worth at the time of award of the amount referred to in provision
(iii) of the prior sentence shall be computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San
Francisco at the time of award plus one percent (1%). Efforts by
Landlord to mitigate damages caused by Tenant's default or breach of
this Lease shall not waive Landlord's right to recover damages under
this paragraph. If termination of this Lease is obtained through the
provisional remedy of unlawful detainer, Landlord shall have the right
to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Landlord
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may reserve therein the right to recover all or any part thereof in a
separate suit for such rent and/or damages. Landlord shall be entitled
to recover the unamortized portion of the brokerage commissions paid
by Landlord under this Lease;
2. Enter upon and take possession of the Premises without
terminating this Lease and expel or remove Tenant and any other person
who may be occupying the Premises or any part thereof without
breaching the peace, and, Landlord shall use its reasonable efforts to
relet the Premises on commercially reasonable terms and receive the
rent therefor; and Tenant agrees to pay to Landlord on demand any
deficiency on a monthly basis that may arise by reason of such
reletting. Landlord shall be entitled to recover the unamortized
portion of the brokerage commissions paid by Landlord under this
Lease; and
3. Enter upon the Premises without breaching the peace, and do
whatever Tenant is obligated to do under the terms of this Lease, in
which case Tenant shall reimburse Landlord on demand for any
reasonable expenses which Landlord may incur in thus effecting
compliance with Tenant's obligations under this Lease plus interest at
a rate equal to the lesser of the prime rate of interest for
commercial loans charged by the Bank of America plus two (2%) percent
or the maximum rate permitted by law from the date of any expenditure
until Landlord has been paid for same.
23. DEFAULTS BY LANDLORD. If Landlord defaults in the performance of any
of its obligations under this Lease, which default continues for a period of
more than thirty (30) days after receipt of written notice from Tenant to
Landlord and Landlord's lender, if any, specifying such default; or if such
default is of a nature to require more than thirty (30) days for remedy and
continues beyond the time reasonably necessary to cure (and Landlord has not
undertaken procedures to cure the default within such thirty (30) day period and
diligently pursued such efforts to complete cure), Tenant may, in addition to
any other remedy available at law or in equity at its option, upon written
notice, incur any expense necessary to perform the obligation of Landlord
specified in such notice and deduct such expense from the Base Rent or other
charges next becoming due.
24. SURRENDER OF PREMISES. Tenant shall, upon expiration of this Lease,
or any earlier termination of this Lease for any cause, surrender to Landlord
the Premises in good order and "broom clean" condition, ordinary wear and tear
excepted, including, without limitation, all building apparatus and equipment
then upon the Premises, and all alterations, improvements and other additions
which may be made or installed by either party to, in, upon or about the
Premises, except for Tenant's property, which shall remain the property of
Tenant.
25. CONDEMNATION. If the Premises or any portion thereof or the Project
are taken under the power of eminent domain, or sold under the threat of the
exercise of said power (all of which are herein called "Condemnation"), this
Lease shall terminate as to the part so taken as of the date the condemning
authority takes title or possession, whichever first occurs. If more than five
percent (5%) of the floor area of the Premises, or more than twenty percent
(20%) of that portion of the Common Areas designated as parking for the Project
is taken by Condemnation, Tenant may, at Tenant's option, to be exercised in
writing only within thirty (30) days after Landlord shall have given Tenant
written notice of such taking (or in the absence of such notice, within thirty
(30) days
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after the condemning authority shall have taken possession) terminate this Lease
as of the date the condemning authority takes such possession. If Tenant does
not terminate this Lease in accordance with the foregoing, this Lease shall
remain in full force and effect as to the portion of the Premises remaining,
except that the rent shall be reduced in the proportion that the floor area of
the Premises so taken bears to the total floor area of the Premises. No
reduction of rent shall occur if the only area taken is that which is not part
of the Premises. Any award for the taking of all or any part of the Premises
under the power of eminent domain or any payment made under threat of the
exercise of such power shall be the property of Landlord, whether such award
shall be made as compensation for diminution in value or the leasehold or for
the taking of the fee, or as severance damages; provided however, that Tenant
shall be entitled to any award for loss of or damage to Tenant's property and
relocation expenses. If this Lease is not terminated by reason of such
Condemnation, Landlord shall, from severance damages received by Landlord in
connection with such Condemnation, repair any damage to the Premises caused by
such Condemnation except to the extent that Tenant has been reimbursed therefor
by the condemning authority. Tenant shall pay any amount in excess of such
severance damages required to complete such repair.
26. SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT. Upon written request
of Landlord, or any mortgagee or beneficiary of Landlord, Tenant shall, in
writing, subordinate its rights hereunder to the interest of any ground lessor
of the Land and to the lien of any mortgage or deed of trust, now or hereafter
in force against the Land and/or Building, and to all advances made or hereafter
to be made thereon, provided, however, that the ground lessor, or the mortgagee
or trustee named in said mortgage or trust deed shall agree to execute a Non-
Disturbance Agreement in favor of Tenant in the form attached hereto as Exhibit
"E." In the event any proceedings are brought for foreclosure, or in the event
of the exercise of the power of sale under any mortgage or deeds of trust, upon
any such foreclosure or sale Tenant agrees to recognize such beneficiary or
purchaser as the Landlord under this Lease, provided all of Tenant's rights
under this Lease continue unabated.
27. NOTICES. Notices and demands required or permitted hereunder shall be
sent by certified mail, return receipt requested, postage prepaid, or by Federal
Express or other reputable overnight courier service and shall be deemed to have
been given upon the date the same is postmarked if sent by certified mail or the
day deposited with Federal Express or such other reputable overnight courier
service, but shall not be deemed received until one (1) business day following
deposit with Federal Express or other reputable overnight courier service or
three (3) days following deposit in the United States Mail sent to Landlord and
Tenant at the addresses specified beneath their signatures hereof or at such
other address requested in writing by either party upon fifteen (15) days' prior
notice to the other party.
28. HOLDING OVER. If Tenant or any party claiming under Tenant remains in
possession of the Premises or any part thereof after any termination or
expiration of this Lease, Landlord, in its sole discretion, may treat such
holdover as a month-to-month tenancy subject to all the terms and conditions of
this Lease provided herein except Base Rent shall be a sum equal to one hundred
fifty (150%) of the Rent most recently paid by Tenant to Landlord.
29. COVENANT OF TITLE AND QUIET ENJOYMENT. Upon Tenant paying the rent
and charges for the Premises and observing and performing all of the covenants,
conditions, and provisions on
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Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease.
30. ESTOPPEL CERTIFICATE. Either party, upon request of the other party,
shall execute, acknowledge and deliver an instrument, stating, if the same is
true, that this Lease is a true and exact copy of the Lease between the parties
hereto, that there are no amendments hereof (or stating what amendments there
may be), that it is then in full force and effect and that, to the best of its
knowledge, there are no offsets, defense or counterclaims with respect to the
payment of Rent reserved hereunder or in the performance of the other terms,
covenants and conditions hereof on the part of Tenant or Landlord, as the case
may be, to be performed, and that as of such date no default has been declared
hereunder by either party or if not specifying the same. Such instrument will be
executed by other party and delivered to the requesting party within fifteen
(15) days of receipt, or else the statements made in the proposed estoppel
request shall be deemed to be correct.
31. FORCE MAJEURE. In the event that either party hereto shall be delayed
or hindered in or prevented from the performance required hereunder by reason of
strikes, lockouts, labor troubles, failure of power, riots, insurrection, war,
acts of God, or other reason of like nature not the fault of the party delayed
in performing work or doing acts (herein collectively, "Permitted Delay"), such
party shall be excused for the period of time equivalent to the delay caused by
such Permitted Delay. Notwithstanding the foregoing, any extension of time for a
Permitted Delay shall be conditioned upon the party seeking an extension of time
delivering written notice of such Permitted Delay to the other party within ten
(10) days of the event causing the Permitted Delay, and the maximum period of
time which Landlord shall be permitted to delay any act or performance of work
due to a Permitted Delay shall be sixty (60) days.
32. LIMITATIONS ON LANDLORD'S LIABILITY. Notwithstanding anything to the
contrary contained in this Lease, in the event of any default or breach by
Landlord with respect to any of the terms, covenants and conditions of this
Lease to be observed, honored or performed by Landlord, Tenant shall look solely
to the estate and property of Landlord in the Land and building(s) owned by
Landlord comprising the Premises for the collection of any judgment (or any
other judicial procedures requiring the payment of money by Landlord) and no
other property or assets of Landlord shall be subject to levy, execution, or
other procedures for satisfaction of Tenant's remedies.
33. WAIVER OF CONTRACTUAL OR STATUTORY LANDLORD'S LIEN. Any statutory or
contractual security interest or lien of Landlord against Tenant's property
shall be and is hereby expressly forever waived and released. Landlord agrees to
execute on demand any and all instruments as may be reasonably requested by
Tenant and/or Tenant's lender in connection with the provisions of this
paragraph.
34. COLLATERAL ASSIGNMENT. Tenant shall have the right, at any time and
from time to time during the Initial Term and the renewal terms, as security for
any indebtedness owed by Tenant to collaterally assign its right, title and
interest in and to this Lease to its lender and if such lender enforces its
rights and remedies under and pursuant to said assignment or encumbrance, this
Lease shall continue in full force and effect, subject to the terms of this
Lease. In connection with any such collateral assignment,
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Landlord agrees to execute within thirty (30) days of written demand an
agreement to provide such lender with notice and opportunity to cure any of
Tenant's defaults hereunder for an additional twenty (20) day period after
expiration of cure periods herein provided to Tenant. Nothing herein shall
entitle Tenant to encumber or mortgage Landlord's fee interest in the Premises,
including the improvements thereon.
35. BROKERS. Landlord covenants and agrees to pay broker's commissions,
if any, in accordance with a separate agreement executed by and between Landlord
and any brokers and, further, agrees to indemnify Tenant for all claims and
demands made by any such broker. In addition, Landlord and Tenant agree to
indemnify and hold each other harmless from and against any and all liability
and cost which Landlord or Tenant, as applicable, may suffer in connection with
any other real estate brokers claiming by, through, or under Landlord or Tenant,
as applicable, seeking any commission, fee or payment in connection with this
Lease.
36. TENANT'S CONDUCT OF BUSINESS. Notwithstanding anything in this Lease
to the contrary, nothing in this Lease shall be construed as an obligation for
Tenant to open or operate its business in the Premises. Tenant shall have the
right to remove Tenant's property and cease operations in the Premises at any
time and at Tenant's sole discretion. However, the right to cease to operate its
business shall not affect Tenant's obligation to pay all amounts due hereunder
and be obligated to perform all covenants and obligations hereunder. Tenant
shall give Landlord thirty (30) days' prior written notice of its intention to
cease its business operations on the Premises. At such time it is operating
its business in the Premises, Tenant agrees to conduct its business in a
first-class manner consistent with reputable business standards and practices.
Furthermore, in no event shall Tenant be liable to Landlord for damages as a
result of operating other stores in the area surrounding the Premises or any
other area, nor shall Tenant be limited or restricted in any way from opening or
operating other stores in the area surrounding the Premises or any other area.
37. CONSTRUCTION DISPUTES. Any disputes which may arise between Landlord
and Tenant concerning Landlord's Work or Tenant's Work shall be submitted to an
architect mutually selected by Landlord's architect and Tenant's architect,
within fifteen (15) days from notice of the existence of such dispute. Such
dispute shall be adjudicated by the appointed architect within thirty (30) days
of his or her appointment based upon any documentation submitted to him by
Landlord and Tenant. The appointed architect's adjudication of the dispute shall
be final and binding upon Landlord and Tenant who agree hereby to abide by such
decision.
38. LANDLORD'S ACQUISITION CONTINGENCY. The obligations of Landlord and
Tenant under this Lease are contingent upon Landlord's acquisition of the Land
on or before one hundred twenty (120) days from the execution of this Lease. If
said Land is not acquired within such 120-day period, then either Landlord or
Tenant shall have the right to terminate this Lease upon giving sixty (60) days'
prior written notice thereof to the other party hereto. Conversely, if Landlord
or Tenant fails to give such notice of termination within the 60-day period,
then this contingency shall be deemed to be thereafter and forever waived. If
the Lease is duly terminated pursuant to the terms of this paragraph, then the
Lease shall be considered null and void, any and all sums paid by Tenant to
Landlord shall be forthwith refunded and the parties shall have no further
obligations to the other with respect to this Lease.
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39. DROP BOX. Subject to compliance with the Project Documents and
applicable law, Tenant may install a drive-by drop box within the Common Area.
The drop box will measure approximately four feet (4') wide, forty-four inches
(44") tall, and thirty-five inches (35") in depth at a location visible from
Tenant's front door, easily accessible to vehicular traffic and within one
hundred feet (100') of the leased premises.
40. MISCELLANEOUS PROVISIONS.
A. ATTORNEYS' FEES. If either Landlord or Tenant institutes any
action or proceeding against the other relating to the provisions of this
Lease, or any default hereunder, the unsuccessful party in such action or
proceeding agrees to reimburse the prevailing party for the reasonable
expenses of attorneys' fees. Such reimbursement shall include all legal
expenses incurred prior to trial, at trial and at all levels of appeal and
post judgment proceedings.
B. CUMULATIVE RIGHTS AND REMEDIES. All rights and remedies of
Landlord and Tenant herein created or otherwise extending at law are
cumulative, and the exercise of one or more rights or remedies may be
exercised and enforced concurrently or consecutively and whenever and as
often as deemed desirable, except that to the extent any such rights and/or
remedies of Landlord or Tenant existing at law conflict with the terms of
this Lease, then the terms of this Lease shall control.
C. SUCCESSORS AND ASSIGNS. All covenants, promises, conditions,
representations and agreements herein contained shall be binding upon,
apply and inure to the parties hereto and their respective heirs,
executors, administrators, successors and assigns.
D. WAIVER. The failure of either Landlord or Tenant to insist upon
strict performance by the other of any of the covenants, conditions, and
agreements of this Lease shall not be deemed a waiver of any subsequent
breach or default in any of the covenants, conditions and agreements of
this Lease.
E. INTERPRETATION. The parties hereto agree that it is their
intention hereby to create only the relationship of Landlord and Tenant,
and no provision hereof, or act of either party hereunder, shall ever be
construed as creating the relationship of principal and agent, a
partnership, a joint venture or other enterprise between the parties
hereto.
F. RECORDING. Tenant shall not record this Lease. At Tenant's
request, the parties shall join in the execution of a memorandum or so-
called "short-form" of this Lease for the purposes of recordation in
accordance with the form attached hereto as Exhibit "F" and made a part
hereof. Any recording costs associated with the memorandum or short form of
this Lease shall be borne by the party requesting recordation.
G. CONSENT. In connection with any approval or consent of Landlord
required by the terms and conditions of the Lease, Landlord covenants and
agrees that it shall not unreasonably withhold or delay any such consent or
approval. Furthermore, in the event that Landlord fails to respond to any
request by Tenant for Landlord's consent or approval within thirty (30)
days of such request, the consent or approval of Landlord shall be deemed
given.
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H. SEVERABILITY. Any provision of this Lease which shall prove to
be invalid, void or illegal shall in no way affect, impair or invalidate
any other provisions hereof and such other provisions shall remain in full
force and effect.
I. GOVERNING LAW. This Lease shall be governed by the laws of the
state in which the Premises are located.
J. OBLIGATIONS WHICH SURVIVE EXPIRATION OF THE LEASE. The following
obligations of Landlord shall survive the expiration or termination of the
Lease: (a) any obligation herein permitted to be performed after the end of
the termination of this Lease; (b) any obligation not reasonably
susceptible of performance prior to the termination of this Lease; and (c)
any obligation to be performed pursuant hereto at or before the end of the
Initial Term or any renewal term which is not so performed. The provisions
of this Lease with respect to any obligation of Tenant to pay any sum owing
after the expiration or other termination of this Lease shall survive the
expiration or other termination of this Lease.
K. TIME OF THE ESSENCE. Time shall be of the essence in
interpreting the provisions of this Lease.
L. INTEREST ON PAST-DUE OBLIGATIONS. If Tenant shall fail to pay,
when the same is due and payable and after proper notice and the expiration
of all cure periods, Base Rent or any other payment due hereunder, said
unpaid amounts shall bear interest from the due date thereof to the date of
payment at an annual rate of interest equal to the lessor of the prime rate
of interest for commercial loans charged by First National Bank of Chicago
plus two percent (2.0%) or the maximum rate permitted by law. Tenant shall
in addition, pay as Additional Rent a fee of One Hundred Dollars ($100.00)
for processing of late payments.
M. ENTIRE AGREEMENT. This Lease contains all of the agreements of
the parties hereto with respect to matters covered or mentioned in this
Lease and no prior agreement, letters, representations, warranties,
promises, or understandings pertaining to any such matters shall be
effective for any such purpose. The Lease may be amended or added to only
by an agreement in writing signed by the parties hereto or their respective
successors in interest.
N. COUNTERPARTS. This Lease may be executed in any number of
counterparts with the same effect as if all parties hereto had signed the
same document. All counterparts shall be construed together and shall
constitute one Lease.
O. SECURITY MEASURES. Tenant hereby acknowledges that Landlord
shall have no obligation whatsoever to provide guard service or other
security measures for the benefit of the Premises or the Project. Tenant
assumes all responsibility for the protection of Tenant, its agents, and
invitees and the property of Tenant and of Tenant's agents and invitees
from acts of third parties.
P. RENT. All monetary obligations or charges to be paid by Tenant
to Landlord under the terms of this lease shall be treated like "rent"
hereunder.
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Q. AUTHORITY TO EXECUTE. The individuals executing this Lease on
behalf of Landlord represent and warrant to Tenant that they are fully
authorized and legally capable of executing this Lease on behalf of Lessor
and that such execution is binding upon all parties holding an ownership
interest in the Project.
"LANDLORD"
HWD VIDEO PARTNERS, INC.
c/o James Jay Rubens, Esq.
934 San Vicente Boulevard, Ste. 1000
Santa Monica, California 90402-2004
Dated: 9/20/94 By: /s/ Walker LaBrunerie
------------ ------------------------
Walker LaBrunerie,
its Vice-President
"TENANT"
HOLLYWOOD ENTERTAINMENT CORPORATION
10300 S. W. Allen Boulevard
Beaverton, Oregon 97005
Dated: 9/20/94 By: /s/ Donald J. Ekman
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Donald J. Ekman,
-------------------
its Vice President
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<PAGE>
LEASE
THIS LEASE, made this 28th day of 1995, by and between OLD Iowa, Inc. a
Delaware corporation, sometimes hereinafter called "LANDLORD", and Audio King
Corporation, a Minnesota corporation, hereinafter called "TENANT".
ARTICLE I
PREMISES AND TERM
SECTION 1. LANDLORD hereby leases to TENANT, and TENANT hereby leases from
LANDLORD, approximately 1.518 acres as set forth on Exhibit "A" attached hereto
and made a part hereof, hereinafter called the "leased premises"; said leased
premises being situated in Cedar Rapids, Iowa, on land legally described in
Exhibit "B" attached hereto and made a part hereof, and improved by construction
of a building of approximately 15,400 square feet, with truck dock and parking
for no less than 77 automobiles, all as more particularly set forth on Exhibit
"C" attached hereto and incorporated herein.
SECTION 2. To have and to hold the leased premises unto TENANT for a term
of twenty (20) years and two (2) days commencing on the 29th day of June 1995,
and ending on the 30th day of June 2015, unless sooner terminated as hereinafter
provided.
SECTION 3. TENANT is hereby granted four consecutive options to extend,
each option being of five years duration. TENANT shall exercise each option by
giving notice to LANDLORD of TENANT'S intent to extend no later than one hundred
eighty (180) days prior to the end of the initial term or any extension period.
The terms and conditions of the extended term(s) shall be the same as set forth
herein, provided, however, that the annual rent for each option period shall be
increased by the greater of: (a) ten percent (10) of the annual rental
immediately preceding the commencement of each extended term; or (b) fifty
percent (50%) of the Consumer Price Index - Urban Consumers - increase from the
fifteenth lease year through the twentieth lease year and, thereafter, by fifty
percent (50%) of the Consumer Price Index - Urban Consumers - increase from the
beginning of each extension period to the next extension date. If Consumer
Price Index - Urban Consumers ceases to be published, its replacement or such
data as is used to measure consumer price increases, shall be used to determine
rental increases. To exercise the options herein granted, TENANT must not be in
default or breach of the Lease and must exercise each option consecutively.
<PAGE>
ARTICLE II
MINIMUM RENT
SECTION 1. The annual rent shall be payable by TENANT without notice,
offset, credit, reduction or abatement in equal monthly installments, on or
before the first day of each month in advance, at the office of LANDLORD or at
such other place designated by LANDLORD without prior demand therefore. Said
fixed annual rent for the initial term shall be as follows: Years one through
five $157,850 annually, $13,154.17 per month; years six through ten $180,950
annually, $15,079.16 per month; years eleven through fifteen $204,050 annually,
$17,004.17 per month; and years sixteen through twenty $227,150 annually,
$18,929.16 per month. Rent for any partial month shall be equitably prorated.
SECTION 2. All rental and other sums payable hereunder by TENANT which are
not paid when due shall bear interest from the date due to the date paid at the
rate of 15% per annum, or the highest rate permitted by law, whichever is less.
ARTICLE III
USE
SECTION 1. The leased premises shall be used for retail/commercial sales,
service, and installation of electronics. TENANT agrees to occupy the leased
premises upon the commencement date of the term hereof and to continuously
operate the entire leased premises, fully stocked and adequately staffed during
the term of this lease unless prevented from doing so by cause beyond the
TENANT'S reasonable control, and to conduct its business at all times in good
faith, in a high grade and reputable manner. TENANT shall promptly comply with
all laws, ordinances and regulations affecting the leased premises or TENANT'S
business therein.
SECTION 2. TENANT shall not, without LANDLORD'S prior written consent,
conduct any auction, fire, closing-out or bankruptcy sales in or about the
leased premises, nor abuse walls, ceilings, partitions, floors, wood, stone,
iron work, nor use plumbing for any purpose other than that for which
constructed, nor make or permit any noise or odor objectionable to the public or
the LANDLORD, nor create, maintain or permit a nuisance thereon, or cease to
operate at the leased premises. TENANT shall keep the leased premises and
loading platform areas clean and free from rubbish and dirt. TENANT shall not
burn any trash or garbage at any time.
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ARTICLE IV
UTILITIES
SECTION 1. TENANT shall pay for all heating, air-conditioning, electricity,
gas, water and sewer charges used in the leased premises.
SECTION 2. LANDLORD shall not be liable in damages or otherwise if the
furnishing by any supplier of any utility or other service to the leased
premises shall be interrupted or impaired by fire, repairs, accident, or by any
other cause.
ARTICLE V
REPAIRS AND MAINTENANCE
SECTION 1. TENANT shall have possession of the leased premises in its "as
is" condition. TENANT shall, except as otherwise provided, at all times, keep
the leased premises, including the foundation, exterior walls, roof and heating,
ventilating and air-conditioning system(s) and any equipment, facilities or
fixtures therein contained or serving the leased premises in good order,
condition and repair, and in a clean, sanitary and safe condition and in
accordance with all applicable laws and regulations. TENANT shall permit no
waste, damage or injury to the leased premises.
SECTION 2. Notwithstanding Section 1 above, LANDLORD shall, during the last
five (5) years of the initial term or during any extension term, be responsible
for the replacement of the foundation, exterior walls, roof and heating,
ventilating and air-conditioning system(s). LANDLORD'S obligation to replace
shall be conditioned upon the following: (1) that if the replacement is required
in the last year of any term, LANDLORD shall not be required to make the
replacement until TENANT exercises its next option to renew; and (2) that the
replacement has not become necessary by reason of the negligence of TENANT, its
agents, servants or employees.
SECTION 3. TENANT shall forthwith, at its own cost and expense, replace
with glass of the same or better quality, any cracked or broken glass, including
plate glass or glass or other special breakable materials used in structural
portions, and any interior and exterior windows and doors in the leased
premises.
ARTICLE VI
INSTALLATIONS, ALTERATIONS AND SIGNS
SECTION 1. TENANT, at its own expense, shall maintain its store fixtures,
floor coverings, interior painting and decorating
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in good condition.
SECTION 2. TENANT shall not erect or install: (1) any signs, except as are
in compliance with applicable ordinances, governmental rules and regulations;
(2) new signs that are not of the same or better quality than existing signs;
or, (3) make material changes to the leased premises without LANDLORD'S prior
written consent. TENANT shall have the right to install such antennae and
receiving equipment as is necessary for TENANT to demonstrate its products.
TENANT shall keep all exterior signs, exterior improvements, and its store front
in good condition and repair.
SECTION 3. TENANT shall not make any repairs, alterations or additions to
the leased premises or make any contract therefor in excess of Twenty-five
Thousand Dollars ($25,000.00) without first procuring LANDLORD'S written
consent. All of said TENANT improvements shall be at TENANTS cost and expense.
TENANT shall indemnify LANDLORD against liens and other claims and provide
LANDLORD lien waivers for all labor, material and improvements made to or upon
the leased premises at TENANT'S request or direction. In making any repairs,
alterations or additions to the leased premises, TENANT and TENANT'S
contractor(s) shall comply with all applicable laws and all work shall be done
in a prompt and workmanlike condition. TENANT will, in addition to all other
insurance coverages provided for in this Lease, obtain builder's risk coverage
if not included within TENANT'S insurance coverage then in effect, and obtain
satisfactory proof that all workmen of TENANT or TENANT'S contractors or
subcontractors are properly covered by workmen's compensation. All alterations,
additions, improvements and fixtures, other than trade fixtures, which may be
made or installed by either of the parties hereto upon the leased premises and
which in any manner are attached to the floors, walls or ceilings, at the
termination of this lease shall become the property of LANDLORD, and shall
remain upon and be surrendered with the leased premises as a part thereof; and
floor covering affixed to the floor shall likewise become the property of
LANDLORD, all without compensation or credit to TENANT.
SECTION 4. TENANT shall promptly pay all contractors and materialmen, so as
to minimize the possibility of a lien attaching to the leased premises, and
should any lien be made or filed, TENANT shall bond against or discharge the
same within thirty (30) days after written request by LANDLORD. Nothing in this
lease contained shall be construed as a consent on the part of the LANDLORD to
subject the LANDLORD'S estate in the leased premises to any lien or liability
under the lien laws of the state where the leased premises is located.
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<PAGE>
ARTICLE VII
INDEMNITY
Except for the negligence of LANDLORD, or breach or default of LANDLORD'S
obligations to replace, TENANT agrees to indemnify and save LANDLORD harmless
against any and all claims, demands, damages, costs and expenses, including
reasonable attorneys' fees for the defense thereof, arising from the conduct or
management of the business conducted by TENANT in the leased premises or from
any breach or default on the part of TENANT in the performance of any covenant
or agreement on the part of TENANT to be performed pursuant to the terms of this
lease, or from any act or negligence of TENANT, its agents, contractors,
servants, employees, sublessees, concessionaires, licensees, or customers in or
about the leased premises. In case of any action or proceeding brought against
LANDLORD by reason of any such claim, upon notice from LANDLORD, TENANT
covenants to defend such action or proceeding by counsel reasonably satisfactory
to LANDLORD. All property belonging to TENANT or any occupant of the leased
premises, shall be there at the risk of TENANT or such person only, and LANDLORD
shall not be liable for damage thereto or theft or misappropriation thereof.
Except for the negligence of TENANT, or TENANT'S breach or default of
TENANT'S obligation to maintain and repair and replace, LANDLORD agrees to
indemnify and save TENANT harmless against any and all claims, demands, damages,
costs and expenses, including reasonable attorneys' fees for the defense
thereof, arising from the conduct of LANDLORD in or about the leased premises or
from any breach or default on the part of LANDLORD in the performance of any
covenant or agreement on the part of LANDLORD to be performed pursuant to the
terms of this lease, or from any act or negligence of LANDLORD, its agents,
contractors, servants, employees, lessees, concessionaires or licensees, in or
about the leased premises. In case of any action or proceeding brought against
TENANT by reason of any such claim, upon notice from TENANT, LANDLORD covenants
to defend such action or proceeding.
ARTICLE VIII
INSURANCE
SECTION 1. During the lease term (as extended), TENANT shall maintain a
policy of commercial general liability insurance (sometimes known as broad form
comprehensive general liability insurance) insuring TENANT against liability for
bodily injury, property damage (including loss of use of property) and personal
injury arising out of the operation, use or occupancy of the premises. TENANT
shall name LANDLORD and agent, if any, as an additional insured under such
policy. The initial amount of such
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<PAGE>
insurance shall be One Million Dollars ($1,000,000) per occurrence and shall be
subject to periodic increase based upon inflation, increased liability awards,
recommendation of LANDLORD'S professional insurance advisors and other relevant
factors. The liability insurance obtained by TENANT under this Section 1 shall
(1) be primary and non-contributing; (2) contain cross-liability endorsements;
and (3) insure LANDLORD against TENANT'S performance under Article VII, if the
matters giving rise to the indemnity under Article VII result from negligence of
TENANT. The amount and coverage of such insurance shall not limit TENANT'S
liability nor relieve TENANT from any obligation under this Lease.
SECTION 2. During the lease term (as extended), LANDLORD shall maintain
policies of insurance covering loss of or damage to the property in the full
amount of its replacement value. Such policy shall contain an inflation guard
endorsement and shall provide protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief,
special extended perils (all risk), sprinkler leakage and any other perils which
LANDLORD deems reasonably necessary. LANDLORD shall have the right to obtain
flood and earthquake insurance if required by any lender holding a security
interest in the property. LANDLORD shall not obtain insurance for TENANT'S
fixtures or equipment or building improvements installed by TENANT on the
property.
SECTION 3. During the lease term (as extended), TENANT shall maintain a
small business owner's insurance policy which is to include fire insurance, with
extended coverage, vandalism, glass breakage, malicious mischief, sprinkler
leakage and flood endorsements attached as LANDLORD reasonably may, from time to
time, approve or require, covering all fixtures and equipment, stock-in-trade,
furniture, furnishings, improvements or betterments installed or made by TENANT
in, on or about the premises to the extent of at least one hundred percent
(100%) of their replacement value, without deduction for depreciation, but in
any event in an amount sufficient to prevent TENANT from becoming a co-insurer
under provisions of applicable policies.
SECTION 4. TENANT shall pay all premiums for the insurance policies
described in Section 1 and 3 within fifteen (15) days after TENANT'S receipt of
a copy of the premium statement or other evidence of the amount due. For
insurance policies maintained by LANDLORD, TENANT shall pay, as additional rent,
the premiums within fifteen (15) days of receiving a statement therefor. If
insurance policies maintained by LANDLORD cover improvements on real property
other than the property, LANDLORD shall deliver to TENANT a statement of the
premium applicable to the premises showing in reasonable detail how TENANT'S
share of the premium was
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computed. If the lease term expires before the expiration of an insurance
policy maintained by LANDLORD, TENANT shall be liable for TENANT'S prorated
share of the insurance premiums. Before the commencement date, TENANT shall
deliver to LANDLORD a copy of any policy of insurance which TENANT is required
to maintain. At least thirty (30) days prior to the expiration of any such
policy, TENANT shall deliver to LANDLORD a renewal of such policy. As an
alternative to providing a policy insurance, TENANT shall have the right to
provide LANDLORD a certificate of insurance, executed by an authorized officer
of the insurance company, showing that the insurance which TENANT is required to
maintain under this Article is in full force and effect and containing such
other information which LANDLORD reasonably requires.
SECTION 5. Any insurance which TENANT is required to maintain under this
Lease shall include a provision which requires the insurance carrier to give
LANDLORD not less than thirty (30) days' written notice prior to cancellation of
modification of such coverage.
If TENANT fails to deliver any policy, certificate or renewal to LANDLORD
required under this Lease within the prescribed time period or if any such
policy is canceled or modified during the lease term without LANDLORD'S consent,
LANDLORD may, upon five (5) days' written notice to TENANT, obtain such
insurance in which case TENANT shall reimburse LANDLORD for the cost of such
insurance within fifteen (15) days after receipt of a statement that indicates
the cost of such insurance.
TENANT shall maintain all insurance required under this Lease with
companies holding a "General Policy Rating" of A-12 or better, as set forth in
the most current issue of "Best Key Rating Guide" and with companies reasonably
satisfactory to LANDLORD. LANDLORD and TENANT acknowledge the insurance markets
are rapidly changing and that insurance in the form and amounts described in
this section may not be available in the future. TENANT acknowledges that the
insurance described in this section is for the primary benefit of LANDLORD. If
at any time during the lease term, TENANT is unable to maintain the insurance
required under the Lease, TENANT shall nevertheless maintain insurance coverage
which is customary and commercially reasonable in the insurance industry for
TENANT'S type of business, as that coverage may change from time to time.
LANDLORD makes no representation as to the adequacy of such insurance to protect
LANDLORD'S or TENANT'S interests. Therefore, TENANT shall obtain any such
additional property or liability insurance which TENANT deems necessary to
protect LANDLORD and TENANT.
Unless prohibited under any applicable insurance policies
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<PAGE>
maintained, LANDLORD and TENANT hereby waive any and all rights of recovery
against the other, or against the officers, employees, agents or representatives
of the other, for loss of or damage to its property or the property of others
under its control, if such loss is covered by any insurance policy in force
(whether or not described in this Lease) at the time of such loss or damage.
Upon obtaining the required policies of insurance, LANDLORD and TENANT shall
give notice to the insurance carriers of this mutual waiver of subrogation.
SECTION 6. LANDLORD and TENANT each hereby waive all rights of recovery
against the other and against the officers, employees, agents and
representatives of the other, on account of loss by or damage to the waiving
party of its property or the property of others under its control, to the extent
that such loss or damage is insured against under any fire and extended coverage
insurance policy which either may have in force at the time of the loss or
damage. TENANT shall, upon obtaining the policies of insurance required under
this Lease, give notice to its insurance carrier or carriers that the foregoing
mutual waiver of subrogation is contained in this Lease.
ARTICLE IX
DESTRUCTION OR DAMAGE
SECTION 1. If the premises or the portion of the building necessary for
TENANT'S occupancy is damaged by fire, earthquake, act of God, the elements or
other casualty, LANDLORD shall, subject to the provisions of this Article,
promptly repair the damage, if such repairs can, in LANDLORD'S opinion, be
completed within ninety (90) days. If LANDLORD determines that repairs can be
completed within ninety (90) days, this Lease shall remain in full force and
effect, except that if such damage is not the result of the negligence or
willful misconduct of TENANT or TENANT'S agents, employees, contractors,
licensees or invitees, the base rent shall be abated to the extent TENANT'S use
of the premises is impaired, commencing with the date of damage and continuing
until completion of the repairs required of LANDLORD under Section 3.
Notwithstanding anything in this Lease to the contrary and provided
LANDLORD has fully complied with Article VIII, Section 2 of this Lease, in no
event shall LANDLORD have any obligation to repair in the event that the
insurance proceeds it receives (if any and net of costs of collection) shall be
insufficient to cover the expected costs of repair. In the event that LANDLORD
shall make such repair, TENANT shall pay to LANDLORD within thirty (30) days of
the substantial completion of the repair, the amount of the deductible under the
applicable insurance policy up to a
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maximum of $10,000.
SECTION 2. If in LANDLORD'S opinion, such repairs to the premises or
portion of the building necessary for TENANT'S occupancy cannot be completed
within ninety (90) days, LANDLORD may elect, upon notice to TENANT given within
thirty (30) days after the date of such fire or other casualty, to repair such
damage, in which event this Lease shall continue in full force and effect but
the base rent shall be partially abated as provided in Section 1. If LANDLORD
does not elect to make such repairs, this Lease shall terminate as of the date
of such fire or other casualty.
SECTION 3. If the Premises are to be repaired under this Article, LANDLORD
shall repair, at its cost, any injury or damage, except that TENANT shall be
responsible, at its sole cost and expense, for the repair, restoration and
replacement of any leasehold improvements and TENANT'S property. LANDLORD shall
not be liable for any loss of business inconvenience or annoyance arising from
any repair or restoration of any portion of the premises, building or project as
a result of any damage from fire or other casualty.
SECTION 4. This Lease shall be considered an express agreement governing
any case of damage to or destruction of the premises, building or project by
fire or other casualty, and any present or future law which purports to govern
the rights of LANDLORD and TENANT in such circumstances in the absence of
express agreement, shall have no application.
ARTICLE X
EMINENT DOMAIN
SECTION 1. If the whole of the building or premises is lawfully taken by
condemnation or under threat thereof or in any other manner for any public or
quasi-public purpose, this Lease shall terminate as of the date of such taking,
and rent shall be prorated to such date. If less than the whole of the building
or premises is so taken, this Lease shall be unaffected by such taking, provided
that: a) TENANT shall have the right to terminate this Lease by notice to
LANDLORD given within ninety (90) days after the date of such taking if twenty
percent (20%) or more of the premises is taken and the remaining area of the
premises is not reasonably sufficient for TENANT to continue operation of its
business, and b) LANDLORD shall have the right to terminate this Lease by notice
to TENANT given within ninety (90) days after the date of such taking. If
either LANDLORD or TENANT so elects to terminate this Lease, the Lease shall
terminate on the thirtieth (30th) day after either such notice. The rent shall
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be prorated to the date of termination. If this Lease continues in force upon
such partial taking, the base rent and TENANT'S proportionate share shall be
equitably adjusted according to the remaining rentable area of the premises and
project.
SECTION 2. In the event of a partial taking of the premises, or transfer
under threat thereof, which does not result in a termination of this Lease,
LANDLORD shall restore the remaining portion of the premises as nearly as
practicable to its condition prior to the condemnation or taking. TENANT shall
be responsible, at its sole cost and expense, for the repair, restoration,
replacement of any leasehold improvements previously constructed by TENANT and
TENANT'S property.
SECTION 3. Except for the value allocated to alterations and additions made
by TENANT after the date of this Lease, all other damages awarded for such
taking under the power of eminent domain, whether for the whole or a part of the
leased premises, shall be the property of LANDLORD, whether such damages shall
be awarded as compensation for diminution in value of the leasehold or to the
fee of the leased premises; provided, however, that LANDLORD shall not be
entitled to any separate award made to TENANT for loss of business, depreciation
to and cost of removal of stock and fixtures or to other separate awards payable
to TENANT.
ARTICLE XI
ACCESS TO PREMISES
LANDLORD shall have the right to enter upon the leased premises during all
business hours for the purpose of inspecting the same and of making repairs and
alterations thereto, and during the last six (6) months of the lease and of any
extension renewal period for the purpose of exhibiting the same to prospective
tenants. LANDLORD shall not disrupt TENANT'S business in exercising LANDLORD'S
right of entry.
ARTICLE XII
REMEDIES
SECTION 1. LANDLORD may terminate this lease and the term demised or
TENANT'S right to possession hereunder: (1) upon the failure of TENANT to pay
rent within fifteen (15) days of when due; or, (2) upon the failure of TENANT to
perform any other of its covenants under this lease, and the same are not
remedied within thirty (30) days after written notice to TENANT. TENANT hereby
waives its right to a jury trial in any action by LANDLORD to terminate this
Lease.
SECTION 2. If, at any time during the term of this Lease (a)
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the TENANT who then is the holder of this Lease shall file in any court a
petition in bankruptcy or insolvency or for reorganization within the meaning of
said Bankruptcy Act (or for reorganization or arrangement under any future
Bankruptcy Act for the same or similar relief), or for the appointment of a
receiver or trustee of all or a portion of the TENANT'S property, or (b) an
involuntary petition of any kind referred to in Subdivision (a) of this Section
shall be filed against the TENANT, and such petition shall not be vacated or
withdrawn within thirty (30) days after the date of filing thereof, or (c) if
the TENANT shall make an assignment for the benefit of creditors, or (d) if the
TENANT shall be adjudicated a bankrupt, or (e) a receiver shall be appointed for
the property of the TENANT by order of a court of competent jurisdiction and
shall not be withdrawn within thirty (30) days from the date of appointment,
this Lease shall terminate upon the happening of any one of such events, and the
TENANT shall then quit and surrender the leased premises to the LANDLORD, but
the TENANT shall remain liable as hereinafter provided.
SECTION 3. Upon the termination of the estate as aforesaid, the LANDLORD
may re-enter the leased premises by any lawful means, and remove all persons and
chattels therefrom and LANDLORD shall not be liable for damages or otherwise by
reason of re-entry or termination. Notwithstanding such termination, the
liability of TENANT for the rent provided for hereinabove shall not be
extinguished for the balance of the term remaining after said termination.
Should LANDLORD elect to re-enter, as herein provided, or should it take
possession pursuant to legal proceedings or pursuant to any notice provided for
by law, it may either terminate this Lease or it may from time to time without
terminating this Lease, make such alterations and repairs as may be necessary in
order to relet the premises, and relet said premises or any part thereof for
such term or terms (which may be for a term extending beyond the term of this
Lease) and at such rental or rentals and upon such other terms and conditions as
LANDLORD in its sole discretion may deem advisable; upon each such reletting all
rentals received by the LANDLORD from such reletting shall be applied, first, to
the payment of any indebtedness other than rent due hereunder from TENANT to
LANDLORD; second, to the payment of any costs and expenses of such reletting,
including brokerage fees and attorneys' fees and of costs of such alterations
and repairs; third, to the payment of rent due and unpaid hereunder, and the
residue, if any shall be held by LANDLORD and applied in payment of future rent
as the same may become due and payable hereunder.
If such rentals received from such reletting during any month
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be less than that to be paid during that month by TENANT hereunder, TENANT shall
pay any such deficiency to LANDLORD. Such deficiency shall be calculated and
paid monthly. No such re-entry or taking possession of said premises by
LANDLORD shall be construed as an election on its part to terminate this Lease
unless the termination thereof be decreed by a court of competent jurisdiction.
Notwithstanding any such reletting without termination, LANDLORD may at any
time thereafter, elect to terminate this Lease for such previous breach. Should
LANDLORD at any time terminate this Lease for any breach, in addition to any
other remedies it may have, it may recover from TENANT all damages it may incur
by reason of such breach, including the cost of recovering the leased premises,
reasonable attorneys' fees, and in addition, LANDLORD, at its sole option, shall
be entitled to recover from TENANT and TENANT shall pay to LANDLORD, on demand,
as final and liquidated damages (and not as a penalty), a sum equal to the
aggregate amount of the rent, and all additional rents that would be payable for
the period from the date of such termination through the termination date,
reduced by the then reasonable rental value of the premises for the same period.
SECTION 4. In the event of any breach hereunder by TENANT, LANDLORD may,
upon ten (10) days' prior written notice (or less in the case of emergency),
cure such breach for the account and at the expense of TENANT. If LANDLORD at
any time by reason of such breach, is compelled to pay, or elects to pay, any
sum of money or do any act which will require the payment of any sum of money,
or is compelled to incur any expense, including reasonable attorneys' fees, the
sum or sums so paid by LANDLORD, with interest thereon at the rate of fifteen
percent (15%) per annum, shall be deemed to be due from TENANT to LANDLORD on
the first (lst) day of the month following the payment of such respective sums
or expenses.
SECTION 5. In the event of any breach hereunder by LANDLORD, TENANT may,
upon ten (10) days' prior written notice, cure such breach for the account of
and at the expense of LANDLORD. If TENANT, at any time, by reason of such
breach, is compelled to pay, or elects to pay, any sum of money or do any act
which will require the payment of any sum of money, or is compelled to incur any
expense, including reasonable attorneys' fees, the sum or sums so paid by
TENANT, with interest thereon at the rate of twelve percent (12%) per annum,
shall be deemed to be due from LANDLORD to TENANT within seven (7) days after
TENANT provides to LANDLORD notice of the sum due and owing.
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<PAGE>
ARTICLE XIII
SURRENDER OF POSSESSION
SECTION 1. At the expiration of the Lease term, whether by lapse of time or
otherwise, TENANT shall surrender the leased premises broom clean and in good
condition and repair, reasonable wear and tear and loss by fire or unavoidable
casualty excepted, provided the lease shall have been terminated on account of
fire or unavoidable casualty. TENANT shall promptly surrender all keys for the
leased premises to LANDLORD at the place then fixed for payment of rent.
SECTION 2. In the event TENANT remains in possession of the leased premises
after the expiration of the tenancy created hereunder with the written consent
of LANDLORD and without execution of a new lease, it shall be deemed to be
occupying the leased premises as a TENANT from month-to-month, subject to all
the other conditions, provisions and obligations of this Lease insofar as the
same are applicable to a month-to-month tenancy. If TENANT shall holdover
without the written consent of LANDLORD, then TENANT shall, in addition to all
other rights and remedies of LANDLORD, owe LANDLORD the sum of twice the
previous rental on a per them basis for each and every day that TENANT shall so
holdover.
ARTICLE XIV
SUBORDINATION
TENANT agrees that this Lease shall be subordinate to any mortgages or
trust deeds that may now or hereafter be placed upon said leased premises and to
any and all advances to be made thereunder, and to the interest thereon, and all
renewals, replacements and extensions thereof provided that the mortgagee or
trustee thereunder shall agree to recognize TENANT's rights hereunder as long as
TENANT is not in default hereunder, and TENANT shall attorn to such mortgagee or
trustee. TENANT further agrees that upon notification by LANDLORD to TENANT,
this Lease shall be or become prior to any mortgages or trust deeds that may
heretofore or hereafter be placed on the said leased premises. TENANT shall
execute and deliver whatever instrument may be required for the above purposes
within thirty (30) days after demand in writing. TENANT shall in the event of
the sale or assignment of LANDLORD's interest in the building of which the
leased premises form a part, or in the event of any proceedings brought for the
foreclosure of, or in the event of exercise of the power of sale under any
mortgage made by LANDLORD covering the leased premises, attorn to the purchaser
and recognize such purchaser as LANDLORD under this Lease.
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<PAGE>
ARTICLE XV
NOTICES
Whenever under this Lease provision is made for notice of any kind, such
notice shall be in writing and shall be deemed sufficient notice and service
thereof if such notice is to TENANT if actually delivered to TENANT, ATTENTION:
PRESIDENT, or sent by reputable overnight courier or registered or certified
mail, return receipt requested, postage prepaid, to the last Post Office address
of TENANT furnished to LANDLORD for such purpose; and if to LANDLORD if actually
delivered to LANDLORD or if sent by reputable overnight courier, registered or
certified mail, return receipt requested, postage prepaid, to the LANDLORD at
the address furnished for such purpose, or to the place then fixed for the
payment of rent.
ARTICLE XVI
CONSENTS
The parties agree that whenever under this Lease provision is made for
securing the written consent, permission or approval of either, that such
written consent, permission or approval shall not be unreasonably withheld or
delayed.
ARTICLE XVII
TAXES
LANDLORD shall timely direct all statements for payment of real property
taxes and special assessments to TENANT. TENANT shall timely pay directly to
the appropriate taxing authority, all real property taxes and installments of
special assessments on the leased premises during the lease term and any
extension. TENANT shall reimburse LANDLORD for rental taxes, and gross receipts
taxes, if any, paid by LANDLORD on rentals from the leased premises. If TENANT
shall have timely received tax statements from LANDLORD and shall fail to timely
pay real property taxes on two successive occasions, LANDLORD may, in addition
to its other remedies. require TENANT to thereafter escrow taxes by payment to
LANDLORD with each installment of rent of 1/12 of the actual or estimated real
property taxes.
ARTICLE XVIII
GENERAL
SECTION 1. Nothing contained herein shall be deemed or construed by anyone
as creating the relationship of principal and agent or of partnership or of
joint venture between the parties hereto.
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<PAGE>
SECTION 2. The various rights and remedies contained in this Lease shall
not be considered as exclusive of any other right or remedy, but shall be
construed as cumulative and shall be in addition to every other remedy now or
hereafter existing at law, in equity, or by statute. No delay or omission of
the right to exercise any power by either party shall impair any such right or
power, or shall be construed as a waiver of any default or as acquiescence
therein. One or more waivers of any covenant, term or condition of this Lease
by either party shall not be construed by the other party as a waiver of a
subsequent breach of the same covenant, term or condition. The consent or
approval by either party to or of any act by the other party of a nature
requiring consent or approval shall not be deemed to waiver or render
unnecessary consent to approval of any subsequent similar act.
SECTION 3. The heading of the several articles contained herein are for
convenience only and do not define, limit or construe the contents of such
articles. All negotiations, considerations, representations and understandings
between the parties are incorporated herein, and may be modified or altered only
by agreement in writing between the parties.
SECTION 4. The covenants, agreements and obligations herein contained shall
extend to, bind and inure to the benefit not only of the parties hereto but
their respective personal representatives, heirs, successors and assigns.
SECTION 5. Whenever a period of time is herein provided for either party to
do or perform any act or thing, that party shall not be liable or responsible
for any delays and applicable periods for performance shall be extended
accordingly, due to strikes, lockouts, riots, acts of God, shortages of labor
materials, national emergency, acts of a public enemy, governmental
restrictions, laws or regulations, or any other cause or causes, whether similar
or dissimilar to those enumerated, beyond its reasonable control.
SECTION 6. TENANT shall not record this Lease without the written consent
of LANDLORD.
SECTION 7. No payment or receipt by LANDLORD or TENANT of a lesser amount
than the amount then due under this Lease shall be deemed to be other than on
account of the earliest portion thereof due, nor shall any endorsement or
statement on any check or any letter accompanying any check or payment be deemed
an accord and satisfaction, and LANDLORD or TENANT may accept such check or
payment without prejudice to LANDLORD's or TENANT'S right to recover the balance
due or pursue any other remedy in this Lease provided.
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<PAGE>
SECTION 8. Each of the parties represents and warrants that there are not
any claims for brokerage commission or finder's fees in connection with the
execution of this Lease, except as listed below, and each of the parties agrees
to indemnify the other against and hold it harmless from, all liabilities
arising from any such claim for which such party is responsible, including,
without limitation, the cost of counsel fees in connection therewith.
LANDLORD BROKER - CB Commercial
TENANT BROKER - CB Commercial
TENANT agrees to pay the brokerage fees to CB Commercial associated with
this Lease and to hold harmless, indemnify and defend LANDLORD from any claim
for such fees.
SECTION 9. Unenforceability of any provision contained in this Lease shall
not affect or impair the validity of any other provision of this Lease.
SECTION 10. The laws of the State of Iowa shall govern the validity,
performance and enforcement of this Lease.
SECTION 11. Anything to the contrary herein notwithstanding, if LANDLORD,
its successors and assigns, is a mortgagee, an individual, a joint venture, a
tenancy in common, a firm or partnership, general or limited, it is specifically
understood and agreed that there shall be absolutely no personal liability on
the part of such LANDLORD or the members of such LANDLORD with respect to any of
the terms, covenants, conditions and provisions of this Lease, and TENANT shall
look solely to the equity of LANDLORD, its successors and assigns, in the
property of which the leased premises are a part for the satisfaction of each
and every remedy of TENANT in the event of any breach of LANDLORD, its
successors and assigns, of any of the terms, covenants, conditions and
provisions of this Lease to be performed by LANDLORD, such exculpation of
personal liability to be absolute and without exception whatsoever.
SECTION 12. TENANT will, upon the written request of LANDLORD, provide
LANDLORD with a report of monthly operations from the leased premises and such
other financial reports as LANDLORD may reasonably request, including financial
statements of Audio King Corporation.
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<PAGE>
ARTICLE XIX
ESTOPPEL CERTIFICATES
Within thirty (30) days after request therefor by LANDLORD, TENANT shall
provide an estoppel certificate to any proposed mortgagee or purchaser, or to
LANDLORD, certifying (if such be the case) that this lease is in full force and
effect and there are no defenses or offsets thereto, or stating those claimed by
TENANT and certifying to such other matters as such party shall reasonably
require.
ARTICLE XX
TITLE
LANDLORD covenants that it has full right and authority to enter into this
Lease for the full term hereof. LANDLORD further covenants that TENANT, upon
performing the covenants and agreements of this Lease to be performed by said
TENANT, will have, hold and enjoy quiet possession of the leased premises.
ARTICLE XXI
ASSIGNMENT OR SUBLETTING
SECTION 1. TENANT agrees not to sell, assign, mortgage, pledge, franchise
or in any manner transfer this Lease or any estate or interest thereunder and
not to sublet the premises or any part thereof or transfer possession of any
part thereof, and not to permit any licensee or concessionaire therein without
the previous written consent of the LANDLORD in each instance first obtained.
Consent by LANDLORD to one assignment of this Lease or to one subletting, sale,
mortgage, pledge or other transfer including licensing or the grant of a
concession shall not be a waiver of LANDLORD'S rights under this Article as to
any subsequent similar action. This prohibition includes any subletting or
assignment which would otherwise occur by operation of law.
SECTION 2. Without limitation of the foregoing, it shall constitute a
transfer of this Lease for purposes of Section 1 if, at any time during the
term, TENANT is (i) a corporation or a trust (whether or not having shares of
beneficial interest) and there shall occur a change in the ownership of the
majority of the shares or beneficial interest from the date of this Lease, which
shares or interest shall have the power to participate in the election or
appointment of the directors, trustees, or other persons exercising like
functions and managing the affairs of TENANT: provided, however, that this
clause (i) shall not apply if TENANT named herein is a corporation and the
outstanding voting stock thereof is listed on a recognized securities exchange
or is
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<PAGE>
wholly owned by another corporation whose outstanding voting stock is so listed;
or (ii) a partnership or association or otherwise not a natural person (but is
not a corporation or a trust) and there shall occur any change in the identity
of any of the persons or entities who then are members of such partnership or
association or who comprise TENANT.
ARTICLE XXII
ENVIRONMENT
TENANT hereby agrees to indemnify, defend and hold LANDLORD and its
successors, participants and assigns, and all of their officers, directors,
trustees, partners, employees, shareholders and representatives, harmless from
and against any and all damages, obligations, liabilities, claims, costs and
expenses of every kind and nature whatsoever, including without limitation,
attorneys' fees incurred or claimed by virtue of any part of the premises being
or having been used by TENANT for the disposal, generation, treatment or storage
of wastes or hazardous or toxic wastes. substances or materials of any kind
(including, without limitation, asbestos, petroleum derivatives and PCB's), or
by virtue of any hazardous or toxic wastes, substances or materials of any kind
(including, without limitation, asbestos, petroleum derivatives and PCB'S) from
the premises having been disposed of off site. This indemnification shall
remain in full force and effect forever and shall survive the termination of the
Lease.
LANDLORD TENANT
By ( ) By /s/ Henry Thorne
---------------------------- -----------------------------
Its President Its President
--------------------------- ----------------------------
And ( ) And Stuart Finney
--------------------------- ----------------------------
Its Secretary Its President
--------------------------- ----------------------------
STATE OF NY
------------------)
)SS.
COUNTY OF Nassau
-----------------)
The foregoing instrument was acknowledged before me this 29th day of June,
1995, by ( ) and ( ) (LANDLORD).
/s/Mary Flanagan
--------------------
Notary Public
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<PAGE>
STATE OF MINNESOTA)
) SS.
COUNTY OF HENNEPIN)
The foregoing instrument was acknowledged before me this 28th day of June,
1995, by Henry Thorne and Stuart L. Finney the President and Secretary of Audio
King Corporation, a Minnesota corporation, on behalf of the corporation.
(TENANT).
/s/Karen J. Harper
------------------
Notary Public
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<PAGE>
[MAP]
EXHIBIT A
AUDIO KING "AS CONSTRUCTED" SURVEY
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<PAGE>
LEGAL DESCRIPTION
Lot 1, Ryan/Highlander Second Addition to Cedar Rapids,
Iowa.
EXHIBIT B
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<PAGE>
EXHIBIT C
PLANS AND SPECIFICATIONS
The following plans made by Alberts Associates, Inc. as Design Architects (and
in part by Howard R. Green Company as Consulting Engineers) are, due to their
bulk and difficulty of being copied, incorporated herein by reference:
Page# Title Date Job#
- ----- ----- ---- ----
T-1 Title Sheet Undated 9431.000
C1 Site Plan 2/8/95 162650
C2 Grading/Drainage 2/8/95 162650
C3 Details 2/9/95 162650
A-2 Floor Plan 11/3/94 9431.000
A-3 Exterior Elevations 11/3/94 9431.000
A-4 Enlarged Entry 11/3/94 9405.000
A-5 Wall Sections at Entry 11/3/94 9431.000
A-6 Details 11/3/94 9431.000
A-7 Wall Section 11/3/94 9431.000
S1 Foundation Plan/
Structural Notes 2/9/95 162650
S2 Framing Plan 2/9/95 162650
S3 Framing Plan 2/9/95 162650
M1 Mechanical Plan 3/20/95 162650
E1 Electrical Plan 3/20/95 162650
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<PAGE>
CREDIT AGREEMENT
CREDIT AGREEMENT, dated as of March 1, 1996, between ONE LIBERTY
PROPERTIES, INC., a Maryland corporation having its principal office at 60
Cutter Mill Road, Great Neck, New York 11021 (the "Borrower"), and BANK LEUMI
TRUST COMPANY OF NEW YORK, a New York banking corporation having an office at
562 Fifth Avenue, New York, New York 10017 (the "Bank").
R E C I T A L S:
The Borrower desires the Bank, and the Bank is willing, subject to and
upon the terms and conditions set forth herein, to make "Revolving Loans" (as
hereinafter defined) in the aggregate principal amount not in excess of
$5,000,000 at any time outstanding. Accordingly, the Borrower and the Bank
hereby agree as follows:
SECTION I. DEFINITIONS AND ACCOUNTING TERMS.
1.1 DEFINED TERMS. As used in this Agreement, the following terms
shall have the following meanings, unless the context otherwise requires:
"AFFILIATE" shall mean, with respect to any specified Person, any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person. For purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlled by" and "under common control with") when used with respect to any
specified Person, shall mean the power to direct or cause the direction of the
actions, management or policies of such Person, directly or indirectly, whether
through the ownership of voting securities, by contract or otherwise and whether
or not such power is actually exercised.
"AGREEMENT" shall mean this Credit Agreement, as amended, modified or
supplemented from time to time in accordance with its terms.
"BANK" shall mean Bank Leumi Trust Company of New York.
"BORROWER" shall mean One Liberty Properties, Inc., a Maryland
corporation.
<PAGE>
"BORROWING NOTICE"-shall have the meaning set forth in Section 2.1.2
hereof.
"BUSINESS DAY" shall mean any day on which the Bank is not closed (as
required or permitted by law or otherwise).
"CASH EQUIVALENTS" shall mean:
(i) demand deposits at, or certificates of deposit in
dollars of, any Institutional Lender;
(ii) any security issued or guaranteed as to principal and
interest by the United States, or by a person controlled or supervised
and acting as an instrumentality of the Government of the United
States pursuant to authority granted by the Congress of the United
States;
(iii) investments in money market mutual funds having assets
in excess of $2,500,000,000;
(iv) commercial paper at the time of acquisition having the
highest rating obtainable from either Standard & Poor's Corporation or
Moody's Investor Service, Inc.;
(v) federally tax exempt securities rated A or better by
either Standard & Poor's Corporation or Moody's Investor Service,
Inc.; and
(vi) investments in the stock of any Subsidiary; provided
that prior to the making of such investment the Borrower and such
Subsidiary shall have complied in all respects with the provisions of
Section 5.12 of this Agreement;
PROVIDED that, in each case mentioned in (i), (ii), (iv) and (v) above, such
obligations shall mature not more than one year from the date of acquisition
thereof.
"CASH FLOW" shall mean, with respect to any specified period, the
excess (if any) of the cash gross revenues actually received by the Borrower
from the operation of its businesses during such period over the cash operating
expenses of the Borrower actually paid with respect to its businesses during
such period.
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<PAGE>
"COLLATERAL" shall mean that property of the Borrower or a Subsidiary
in which the Bank has been or shall hereafter be granted a lien or security
interest under the Security Agreement of the Borrower or such Subsidiary.
"COMMITMENT AMOUNT" shall mean, as to any Lender, the aggregate
outstanding principal amount of Revolving Credit Loans such Lender is obligated,
under the Lender Credit Agreement between such Lender and the Borrower, to
advance to the Borrower. The Commitment Amount of the Bank is $5,000,000.
"CONSOLIDATED" shall mean, in respect of any Person, as applied to any
financial or accounting term, such term determined on a consolidated basis in
accordance with GAAP for the Person and all consolidated Subsidiaries thereof.
"DEFAULT" shall mean any condition, act or event which, with notice or
lapse of time or both, would constitute an Event of Default.
"DEFICIENCY FEE AGREEMENT" shall have the meaning set forth in Section
3.1.5 hereof.
"ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations and published
interpretations thereof.
"ERISA AFFILIATE" shall mean any trade or business (whether or not
incorporated) which together with the Borrower would be treated as a single
employer under Section 4001 (b)(1) of ERISA.
"EVENT OF DEFAULT" shall have the meaning set forth in Section 7.1
hereof.
"EXISTING SUBSIDIARIES" shall have the meaning set forth in Section
4.1 hereof.
"EXPIRATION DATE" shall mean February 28, 1999; provided, however,
that if the Borrower duly exercises the Extension Option as provided in Section
2.3, then the Expiration Date shall mean February 29, 2000.
"EXTENSION OPTION" shall have the meaning set forth in Section 2.3
hereof.
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<PAGE>
"EXTENSION FEE" shall have the meaning set forth in Section 2.2.2
hereof.
"FACILITY FEE" shall have the meaning set forth in Section 2.2.1
hereof.
"FINAL YEAR" shall mean the period which commences on March 1,
1999 and ends February 29, 2000.
"FINANCING AGREEMENTS" shall mean the following agreements and
instruments (as such agreements and instruments may be hereafter amended,
modified or supplemented in accordance with their respective terms): (i) the
Security Agreements, (ii) the Note, (iii) the Guarantees, (iv) the Deficiency
Fee Agreement, and (v) any other supplementary security agreements or other
collateral documents now or hereafter delivered to the Bank by the Borrower or
any Subsidiary.
"GAAP" means generally accepted accounting principles applied on a
consistent basis.
"GUARANTEES" shall have the meaning set forth in Section 2.8 hereof.
"INDEBTEDNESS" shall mean (i) any obligation or liability for the
payment of borrowed money or for the deferred purchase price of property or
services (including trade obligations), (ii) obligations under any lease
required to be capitalized under GAAP, (iii) obligations under letters of
credit, (iv) obligations under acceptance facilities, (v) current liabilities in
respect of unfunded vested benefits under Plans covered by.ERISA, (vi) any
liabilities secured by any mortgage, pledge, lien or security interest existing
on property owned or acquired, whether or not such liability shall have been
assumed, and (vii) all obligations, guarantees, endorsements (other than
endorsements of checks or other negotiable instruments for collection or deposit
in the ordinary course of business) and other contingent obligations in respect
of the obligations of others.
"INSTITUTIONAL LENDER" shall mean (i) the Bank and any of its
Affiliates, and (ii) any other savings bank, savings and loan association,
commercial bank or trust company, insurance company, or any holding or service
company of any of the foregoing, in each case having capital of not less than
$40,000,000 and authorized to do business in the United States.
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<PAGE>
"INTERCREDITOR AGREEMENT" shall have the meaning
set forth in Section 3.1.8 hereof.
"LENDER" shall mean the Bank and each of the Other Lenders.
"LENDER CREDIT AGREEMENTS" shall mean this Agreement and each of the
Other Lender Credit Agreements.
"MANDATORY PREPAYMENT EVENT" shall mean any of the following events:
(i) the sale, conveyance, exchange, leasing (other than
leasing in the ordinary course) or other disposition by the Borrower
or any Subsidiary of any Property or the sale, conveyance, exchange
or other disposition by the Borrower or any Subsidiary of any
Mortgage Note and/or Mortgage;
(ii) the prepayment of any Mortgage Note or the payment of
the principal balance due thereunder upon its stated maturity or
following an acceleration thereof;
(iii) the issuance by the Borrower or any Subsidiary of any
of its securities (other than (x) the issuance of securities to
employees of the Borrower or any such Subsidiary, (y) the issuance by
any Subsidiary of its securities to the Borrower, or (z) securities
issuable to the holders of the preferred stock of the Borrower upon
any conversion thereof); and
(iv) the incurrence by the Borrower or any Subsidiary of any
Indebtedness which is secured, in whole or in part, by a Property;
provided, however, that in the case of any refinancing of any existing
Indebtedness on such Property, only to the extent the Indebtedness
exceeds the principal amount being refinanced.
"MORTGAGE" shall have the meaning set forth in the Security
Agreement of the Borrower.
"MORTGAGE NOTE" shall have the meaning set forth in the Security
Agreement of the Borrower.
"MORTGAGED PROPERTY" shall have the meaning set forth in the Security
Agreement.
-5-
<PAGE>
"MULTIEMPLOYER PLAN" shall mean a Plan described in Section 4001(a)(3)
of ERISA which covers employees of the Borrower or any ERISA Affiliate.
"NET PROCEEDS" shall mean, with reference to any Mandatory Prepayment
Event, the aggregate proceeds received by the Borrower or a Subsidiary (as the
case may be) in cash with respect to such Mandatory Prepayment Event less the
costs incurred by Borrower or such Subsidiary (as the case may be) to consummate
such Mandatory Prepayment Event, including attorney's fees, accounting fees,
title fees, brokerage fees and other similar expenses paid by the Borrower or
such Subsidiary (as the case may be); provided, however, that any costs paid by
the Borrower or such Subsidiary (as the case may be) to itself, any Affiliate of
the Borrower or such Subsidiary (as the case may be) or to any employee of the
Borrower or such Subsidiary shall not be deductible in determining Net Proceeds.
"NET WORTH" shall mean the excess of Consolidated total assets over
total Consolidated liabilities of the Borrower, Consolidated total assets and
total Consolidated liabilities each to be determined as to both classification
of items and amounts in accordance with GAAP; provided that there shall be
excluded from Consolidated total assets (i) all assets which would be classified
as intangible assets under GAAP, including, but not limited to, goodwill,
organization expense and deferred charges (ii) cash set apart and held in a
sinking or other analogous fund established for the purposes of redemption or
other retirement of capital stock, (iii) any revaluation or other write-up in
book value of assets subsequent to December 31, 1994, and (iv) amounts due to
the Borrower or any Subsidiary from any of the officers, directors or employees
of the Borrower or such Subsidiary.
"NOTE" shall have the meaning set forth in Section 2.1.2 hereof.
"OBLIGATIONS" means all obligations, liabilities and indebtedness of
the Borrower or any Subsidiary to the Bank, whether now existing or hereafter
created, direct or indirect, due or not, whether created directly or acquired by
assignment or otherwise, including, without limitation, all obligations,
liabilities and indebtedness of the Borrower or any Subsidiary with respect to
the Revolving Loans, and the payment and performance of all other obligations,
liabilities, and indebtedness of the Borrower or any Subsidiary to the Bank
hereunder, under any one or more of
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<PAGE>
the Financing Agreements, including, without limitation, all fees, costs,
expenses and indemnity obligations hereunder or thereunder.
"OTHER LENDER" shall mean each Institutional Lender (other than the
Bank) which enters into an Other Lender Credit Agreement with the Borrower.
"OTHER LENDER CREDIT AGREEMENT" shall mean the credit agreement or
other financing documents between the Borrower and each Other Lender which (i)
provides for the extension of Other Revolving Loans by such Other Lender to the
Borrower, and (ii) satisfies the conditions set forth in Section 2.5 hereof.
"OTHER REVOLVING LOANS" shall mean cash advances made by an Other
Lender under the Other Lender Credit Agreement of such Other Lender.
"PBGC" shall mean the Pension Benefit Guaranty Corporation, or any
successor thereto.
"PERSON" shall mean an individual, partnership, joint venture, firm,
corporation, trust, or other business or legal entity.
"PLAN" shall mean any employee benefit plan as defined in Section 3(2)
of ERISA.
"PRO RATA SHARE" shall mean, with respect to any Lender, as at any
date at which the same is to be determined, the percentage obtained by dividing
(i) such Lender's Commitment Amount at such time by (ii) the Total Commitment
Amount.
"PROHIBITED TRANSACTION" shall mean any transaction set forth in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code of 1986, as
amended from time to time.
"PROPERTY" shall mean any real property in which the Borrower or any
Subsidiary has acquired fee title, including, without limitation, investments in
residential, commercial and mixed-use real property.
"REFERENCE RATE,, shall mean the rate of interest designated by the
Bank, and in effect from time to time, as its "Reference Rate", adjusted when
said Reference Rate changes.
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<PAGE>
"REPORTABLE EVENT",shall mean any of the events set forth in Section
4043 of ERISA.
"REVOLVING CREDIT LOANS" shall mean the Revolving Loans and the Other
Revolving Loans.
"REVOLVING LOANS" shall have the meaning set forth in Section 2.1.1
hereof.
"SECURITY AGREEMENTS" shall have the meaning set forth in Section 2.7
hereof.
"SUBSIDIARY" means, as to the Borrower, a corporation of which shares
of stock having ordinary voting power (other than stock having such power only
by reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation are at the time owned, or the
management of which is otherwise controlled, directly or indirectly, through one
or more intermediaries, or both, by the Borrower.
"TOTAL COMMITMENT AMOUNT" shall mean, as at any date at which the same
is to be determined, the sum of the Commitment Amounts at such time of all of
the Lenders, the aggregate of which shall not exceed $15,000,000.
1.2 ACCOUNTING TERMS. All accounting terms not specifically defined
herein shall be construed in accordance with GAAP consistent with those applied
in the preparation of the financial statements referred to in Section 4.10, and
all financial data submitted pursuant to this Agreement shall be prepared in
accordance with such principles.
SECTION II. FINANCING.
2.1 REVOLVING CREDIT FACILITY.
2.1.1 REVOLVING LOANS. Subject to and upon the terms and
conditions of this Agreement, the Bank agrees to make cash advances (each a
"Revolving Loan" and collectively the "Revolving Loans") to the Borrower at any
time and from time to time from the date hereof to, but not including, the
Expiration Date; provided, however, that the aggregate principal sum of (i) the
Revolving Loans outstanding at any time shall in no event exceed $5,000,000, and
(ii) the Revolving Credit Loans outstanding at any time shall in no event exceed
$15,000,000. The Borrower may borrow, repay and reborrow Revolving Loans as
provided in this Agreement; provided, however, that the Borrower shall
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not be entitled to borrow Revolving Loans on more than two (2) occasions each
month. Each Revolving Loan shall be in the minimum principal sum of $200,000 or
in integral multiples of $10,000 in excess thereof.
2.1.2 BORROWING NOTICE. The Borrower shall give the Bank
notice of each proposed borrowing of Revolving Loans, not later than 11:00 a.m.,
New York City time, at least one (1) Business Day before such proposed Revolving
Loan borrowing. The notice of borrowing shall specify (i) the date of such
borrowing (which shall be a Business Day), (ii) the amount thereof (which shall
be in accordance with the provisions of this Agreement), (iii) the bank account
to be credited with the proceeds of such Revolving Loan, and (iv) shall
otherwise be in the form of Exhibit B hereto (the "Borrowing Notice"). Each
Notice of Borrowing shall be effective upon receipt and shall irrevocably commit
the Borrower to borrow in accordance with the terms of this Agreement.
2.1.3. REVOLVING CREDIT NOTE. Concurrently with the
execution and delivery of this Agreement, the Borrower shall evidence its
obligation to pay the principal of and interest on the Revolving Loans by
executing and delivering to the Bank a promissory note in the principal sum of
$5,000,000 in the form annexed hereto as Exhibit A (the "Note"). Except as
otherwise provided in this Agreement, the outstanding principal balance of each
Revolving Loan shall mature and be due and payable on the Expiration Date.
2.1.4. RATES OF INTEREST. (i) Except as provided in Section
2.1.4(ii), the outstanding principal balance of each Revolving Loan shall bear
interest until maturity (whether by acceleration or otherwise) at a rate per
annum of one-half of one percent (0.50'5) in excess of the Reference Rate, which
rate per annum shall change as and when the Reference Rate shall change.
Interest on Revolving Loans shall be calculated on the basis of the actual days
elapsed on a year of 360 days.
(ii) Upon the occurrence and during the continuance of
an Event of Default, the Borrower shall pay on demand interest, to the extent
permitted by applicable law, on the outstanding principal balance of the
Revolving Loans, at a rate per annum equal to three (3%) percent per annum above
the rate set forth in Section 2.1.4(i).
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2.1.5 INTEREST PAYMENTS. Interest in respect of the
aggregate principal amount of all Revolving Loans outstanding from time to time
during each calendar month shall be payable monthly in arrears on the first
Business Day of the following calendar month, at maturity and at the time of any
prepayment of principal to the extent accrued on the principal amount prepaid.
2.2 FEES.
2.2.1 FACILITY FEE. Concurrently with the execution and
delivery of this Agreement, the Borrower shall pay to the Bank a facility fee
(the "Facility Fee") of $50,000, of which $25,000 has already been received by
the Bank.
2.2.2 EXTENSION 0PTION FEE. In the event the Borrower
exercises the Extension Option, then the Borrower shall pay to the Bank a fee
(the "Extension Option Fee") of $12,500, payable in full at the time the
Borrower provides notice of its intention to exercise the Extension option in
accordance with Section 2.3 hereof.
2.3 EXTENSION OPTION. The Borrower may, at its option, extend the
date of maturity of the Revolving Loans from February 28, 1999 to February 29,
2000 by giving notice of exercise of such option (the "Extension Option") to the
Bank not later than November 1, 1998 but not before March 1, 1998; provided that
(i) at the time of exercise of the Extension Option, no Default or Event of
Default shall then exist, and (ii) the Borrower shall pay to the Bank the
Extension Fee concurrently with giving such notice. Upon the satisfaction of
the foregoing conditions, the maturity date of the Revolving Loans shall be so
extended, provided that prior to February 28, 1999 the Borrower shall have
executed and delivered to the Bank an amendment to the Note, in form and
substance satisfactory to the Bank, which appropriately extends the maturity
date of the Note to February 29, 2000.
2.4 PREPAYMENT OF REVOLVING LOANS.
2.4.1 OPTIONAL. The Borrower shall have the right to prepay
the outstanding principal sum of the Revolving Loans in whole at any time or in
part from time to time (but if in part, in the minimum principal amount of
$100,000) in each case upon not less than one (1) Business Day prior notice to
the Bank, without penalty or premium.
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2.4.2 MANDATORY. (i) In the event that the aggregate
principal sum of the Revolving Loans shall ever exceed $5,000,000, the Borrower
shall make a prepayment of the Revolving Loans, on demand, in an amount equal to
such excess.
(ii) Immediately upon the occurrence of a Mandatory Prepayment
Event there shall become due and payable on the Revolving Loans an amount equal
to the product of (1) the Net Proceeds of the Mandatory Prepayment Event,
multiplied by (2) the Bank's Pro Rata Share of such Net Proceeds; provided that
if at the time of such prepayment the provisions of Section 2.6(i) are then
applicable to such prepayment, the amount of the prepayment due the Bank shall
be computed and paid in accordance with the provisions of said Section 2.6(i).
2.4.3 NOTICE OF PREPAYMENT. Prior to making any prepayment
of the Revolving Loans or the Other Revolving Loans the Borrower shall notify
the Bank of such prepayment and the amount thereof. The Borrower shall also
supply the Bank with such evidence as the Bank may reasonably request evidencing
the Borrower's compliance with the provisions of Section 2.6 with respect to
such prepayment.
2.5 OTHER LENDER CREDIT AGREEMENTS. Prior to entering into any Other
Lender Credit Agreement, the Borrower shall provide the Bank with a correct and
complete copy of such Other Lender Credit Agreement and all documents and
instruments executed and delivered by the Borrower in connection therewith.
Each such Other Lender Credit Agreement shall provide that, among other things,
(i) the aggregate principal amount at
any time outstanding under the
Lender Credit Agreements shall not
exceed $15,000,000;
(ii) except as provided in Section 2.6,
all borrowings made by the Borrower
at any time under the Lender
Credit Agreements shall be made in
proportion to the Pro Rata Share of
each Lender of the Total
Commitment Amount;
(iii) except as provided in Section 2.6,
all payments and prepay-
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ments of principal of the Revolving
Credit Loans made by the Borrower
at any time under any Lender Credit
Agreement shall be made in
proportion to the Pro Rata Share of
each Lender of the Total Commitment
Amount; and
(iv) the Borrower shall be required to
provide notice of proposed
borrowings and prepayments to each
Lender substantially as set forth
in this Agreement.
2.6 ADMINISTRATION OF LENDER CREDIT AGREEMENTS. The Borrower agrees
to administer the Lender Credit Agreements so that all borrowings of Revolving
Credit Loans and all payments of principal in respect of Revolving Credit Loans
shall be made among the Lenders in proportion to their Pro Rata Share of the
Total Commitment Amount; provided, however, that (i) if immediately prior to
giving effect to any payment of principal amounts due a Lender in respect of
Revolving Credit Loans, the aggregate principal amount of the Revolving Credit
Loans shall not be in proportion to the Pro Rata Share of the Lenders in the
Total Commitment Amount, then such payment shall be made to the Lenders in such
manner as shall result, as nearly as practicable after giving effect to such
payment, to the principal amount of outstanding Revolving Credit Loans held by
each such Lender after such payment being in proportion to their Pro Rata Share
of the Total Commitment Amount, and (ii) if the Borrower shall enter into an
Other Lender Credit Agreement following the date hereof (the date of the initial
borrowing under such Other Lender Credit Agreement, the "New Loan Date"), the
Borrower shall borrow from such Other Lender and prepay the outstanding
principal sum of the Revolving Credit Loans of the Bank and each Other Lender a
party to a Revolving Credit Agreement prior to the New Loan Date, such amounts
as shall be necessary so that after giving effect to such borrowing and
prepayment the outstanding principal sum of the Revolving Credit Loans held by
each Lender are in proportion to their Pro Rata Share of the Total Commitment
Amount.
2.7 SECURITY AGREEMENTS. Concurrently with the execution and
delivery of this Agreement, the Borrower and each Existing Subsidiary shall
grant a valid and perfected security interest to the Bank in their respective
Collateral
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pursuant to a separate security agreement from each of them to the Bank, each
such agreement dated as of even date herewith, in the form annexed hereto as
Exhibit C (such security agreements, inclusive of any security agreement
executed by a Subsidiary pursuant to Section 5.12, collectively, the "Security
Agreements").
2.8 GUARANTEES. Concurrently with the execution and delivery of this
Agreement, each Existing Subsidiary shall unconditionally guarantee all of the
Obligations of the Borrower to the Bank pursuant to a guarantee from each of
them to the Bank, each such guarantee dated as of even date herewith, in the
form annexed hereto as Exhibit D (such guarantees, inclusive of any guarantee
delivered pursuant to Section 5.12, collectively, the "Guarantees").
2.9 RIGHT TO DEBIT ACCOUNT. The Borrower authorizes (but shall not
require) the Bank to debit any account maintained by the Borrower with the Bank,
on any date on which a payment or fee is due hereunder or under any of the
Financing Agreements, in an amount equal to any unpaid portion of such payment
or fee.
SECTION III. CONDITIONS PRECEDENT.
3.1 CONDITIONS TO THE MAKING OF REVOLVING LOANS. The obligation of
the Bank to make the initial Revolving Loan to the Borrower is subject to the
conditions precedent that:
3.1.1 FINANCING AGREEMENTS. The Borrower and each Existing
Subsidiary shall have executed and delivered to the Bank the Financing
Agreements to be executed by it, and all other agreements, instruments and
documents required or contemplated by this Agreement and the Financing
Agreements.
3.1.2 OPINION OF THE BORROWER'S COUNSEL. The Bank shall
have received a written opinion of the Borrower's in-house counsel, dated as of
even date herewith, in form and substance satisfactory to the Bank and its
counsel.
3.1.3 EVIDENCE OF CORPORATE ACTION; CERTIFICATE OF
INCORPORATION AND BY-LAWS. The Bank shall have received (i) copies of all
corporate action taken by the Borrower and each Existing Subsidiary to authorize
the execution, delivery and performance of this Agreement and the Financing
Agreements to be executed by it; (ii) a copy
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of the Borrower's and each Existing Subsidiary's Certificate of Incorporation,
as amended to date; and (iii) a copy of the By-Laws of the Borrower and each
Existing Subsidiary, as amended to date. All of the documents listed in
subsections (i), (ii) and (iii) shall be certified by the Borrower's and each
Existing Subsidiary's Secretary in a Certificate dated as of even date herewith.
3.1.4 INSURANCE. The Bank shall have received correct and
complete copies of all insurance policies of the Borrower and each Existing
Subsidiary with endorsements wherein the Bank shall be named as a loss payee, in
compliance with Section 5.2.2 hereof.
3.1.5 DEFICIENCY FEE AGREEMENT. The Borrower shall have
executed and delivered to the Bank the Bank's standard form of Deficiency Fee
Agreement (the "Deficiency Fee Agreement") which provides for a Balance
Level (as defined therein) of $250,000.
3.1.6 GRANT OF SECURITY INTEREST. The Borrower and each
Existing Subsidiary shall have granted to the Bank, pursuant to the Security
Agreements, a first priority security interest in their respective Collateral.
3.1.7 DELIVERY OF DOCUMENTS AT THE CLOSING. The Borrower
shall have delivered to the Bank the following documents: (i) originals of the
Mortgage Notes and Mortgages together with an allonge to each Mortgage Note
endorsing the same to the Bank and an assignment of each Mortgage by the
Borrower to the Bank (with all documents and fees required to record said
assignment); (ii) a policy of title insurance or endorsement to the Borrower's
title insurance policy, with respect to each Mortgage, containing only such
exceptions to title as are acceptable to the Bank, naming the Bank as mortgagee,
as its interest may appear (along with the payment of the fee to be charged by
the title company, if any, for providing such insurance coverage); (iii) a
survey of the property encumbered by the Mortgage (the "Mortgaged Property);
(iv) a fire and hazard insurance policy for the Mortgaged Property naming the
Bank as mortgagee, as its interest may appear; (v) a flood insurance policy for
the Mortgaged Property if the same is in a special flood hazard area, naming the
Bank as mortgagee, as its interest may appear, or a certificate or other
evidence satisfactory to the Bank that the Mortgaged Property is not in a
special flood hazard area; (vi) certificates of occupancy for the structures
located on the Mortgaged Property; (vii) an estoppel certificate from the fee
owner of the
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<PAGE>
Mortgaged Property in the form required by the Bank; and (viii) a letter of
direction to the mortgagor under each Mortgage directing them to pay to the
Bank, upon receipt of a notice from the Bank that a Default or an Event of
Default has occurred, all payments of principal and interest due under the
Mortgage and the Mortgage Note.
3.1.8 INTERCREDITOR AGREEMENT. Each Other Lender (if any)
shall have entered into an intercreditor agreement (the "Intercreditor
Agreement") with the Bank in form and substance satisfactory to the Bank.
3.1.9 ESTOPPEL CERTIFICATE. With respect to each Mortgage
and Mortgage Note, the Bank shall have received from the mortgagor thereunder an
estoppel certificate (a) confirming that (i) such Mortgage and Mortgage Note
have not been modified except as disclosed therein; and (ii) the principal
balance due thereunder and the interest rate and interest and principal payments
required thereunder are substantially the same as the figures shown on Schedule
3.1.9 annexed hereto and made a part hereof, and (b) certifying that the
mortgagor has no defenses, offsets or credits against its payment obligations
under the Mortgage and Mortgage Note and no claims against the Borrower or any
Subsidiary thereunder.
3.1.10 PLEDGE OF STOCK OF EXISTING SUBSIDIARIES. Pursuant to
the Security Agreement from the Borrower to the Bank, the Borrower shall have
delivered to the Bank stock certificates accompanied by duly executed stock
powers in blank for all of the issued and outstanding shares of capital stock of
each Existing Subsidiary.
3.2 ADDITIONAL PRECONDITIONS. As of the date of the making of any
Revolving Loan to the Borrower, as a condition to the making of any Revolving
Loan:
3.2.1 REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained herein or otherwise made to the Bank pursuant to this
Agreement or any of the Financing Agreements shall be true, complete and
correct.
3.2.2 DEFAULT OR EVENT OF DEFAULT. There shall exist no
Default or Event of Default.
3.2.3 OTHER DOCUMENTS. The Bank and its counsel shall have
received all information and copies of all documents, including records of
Borrower's and each Subsidiary's corporate proceedings, which the Bank or its
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<PAGE>
counsel may have reasonably requested in connection therewith, such documents
where requested by the Bank or its counsel to be certified by appropriate
corporate or governmental authorities.
3.2.4 NO ADVERSE CHANGE. There shall have been no material
adverse change in the operations, business, property or assets or in the
condition (financial or otherwise) of the Borrower or any Subsidiary.
3.2.5 NOTICE REQUIREMENTS; PRO RATA TREATMENT FOR BORROWINGS.
The Bank shall have received a copy of each borrowing notice sent by the
Borrower to each other Lender in connection with such proposed borrowing as
contemplated by Section 2.6.
3.2.6 INTERCREDITOR AGREEMENT. Each Other Lender (if any)
shall have entered into the Intercreditor Agreement.
3.2.7 REVIEW OF TERMS AND CONDITIONS OF PROPOSED
ACQUISITIONS. The Bank shall have reviewed all of the material terms relating
to the acquisition of the Property to be acquired with the proceeds of such
Revolving Loan, including the latest drafts of any acquisition documents
prepared therefor. The Bank shall have received projections with respect to the
Property to be acquired with the proceeds of such Revolving Loan which reflect,
in the first twelve (12) months following the acquisition, Cash Flow equal to
not less than 9 1/2% of the purchase price of the Property being acquired (net
of secured debt on the Property at the time of its purchase). Such projections
shall be prepared in accordance with GAAP. Cash Flow for this purpose shall
mean the excess of the cash gross revenues to be received by the Borrower during
the twelve month period from the Property to be acquired less the cash operating
expenses of the Borrower to be paid during such twelve month period relating to
such Property.
3.2.8 MORTGAGOR NOT IN DEFAULT. With respect to each
Mortgage and Mortgage Note, the mortgagor thereunder shall not be in default
under any of the material terms, conditions or covenants of such Mortgage or
Mortgage Note.
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<PAGE>
SECTION IV. REPRESENTATIONS AND WARRANTIES.
In order to induce the Bank to enter into this Agreement and to make
the Revolving Loan hereunder, the Borrower represents and warrants to the Bank
as follows:
4.1 ORGANIZATION. The Borrower and each Subsidiary is a duly
organized and validly existing corporation in good standing under the laws of
its jurisdiction of incorporation with perpetual corporate existence and has all
requisite right, power and authority and all necessary licenses and permits to
own and operate its assets and properties and to carry on its business as now
conducted and as presently proposed to be conducted. The Borrower and each
Subsidiary has qualified and is in good standing as a foreign corporation in
each state or other jurisdiction where the nature of its business or the
ownership or use of its property requires such qualification, except such
jurisdictions, if any, in which the failure to be so qualified will not have a
material and adverse effect on either the conduct of its business or the
ownership of its properties. As of the date hereof, the Borrower has the
Subsidiaries listed on Schedule 4.1 hereof (each an "Existing Subsidiary").
4.2 AUTHORIZATION. The Borrower and each Subsidiary has all
requisite legal right, power and authority to execute, deliver and perform the
terms and provisions of this Agreement, the Financing Agreements executed by it
and all other instruments and documents delivered by it pursuant hereto and
thereto. The Borrower and each Subsidiary has taken or caused to be taken all
necessary action to authorize the execution, delivery and performance of this
Agreement, the Financing Agreements executed by it and any other related
agreements, instruments or documents delivered or to be delivered by the
Borrower or such Subsidiary pursuant hereto and thereto. This Agreement, the
Financing Agreements executed by the Borrower and each Subsidiary and all
related agreements, instruments or documents delivered or to be delivered
pursuant hereto or thereto constitute and will constitute legal, valid and
binding obligations of the Borrower or such Subsidiary (as the case may be),
enforceable in accordance with their respective terms, subject to bankruptcy,
insolvency, reorganization, moratorium and other similar laws affecting the
enforcement of creditors' rights generally.
4.3 NO CONFLICTS. Neither the execution and delivery of this
Agreement, the Financing Agreements, or any of the instruments and documents
delivered or to be deliv-
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ered pursuant hereto or thereto, by the Borrower or any Subsidiary, nor the
consummation of the transactions herein or therein contemplated, nor compliance
with the provisions hereof or thereof, will violate any law, statute or
regulation, or any order, writ or decree of any court or governmental
instrumentality, or will conflict with, or result in the breach of, or
constitute a default in any respect under, any indenture, mortgage, deed of
trust, agreement or other instrument to which the Borrower or any Subsidiary is
a party, or by which any of its respective properties may be bound or affected,
or will result in the creation or imposition of any lien, charge or encumbrance
upon any of their respective properties (except as contemplated hereunder or
under the Financing Agreements) or will violate any provision of the Certificate
of Incorporation or By-Laws of the Borrower or any Subsidiary, as amended to
date.
4.4 COMPLIANCE AND OTHER AGREEMENTS.
4.4.1 Neither the Borrower nor any Subsidiary is in default
under any indenture, mortgage, deed of trust, agreement or other instrument to
which it is a party, or by which it or any of its properties may be bound or
affected, except for such defaults which, individually or in the aggregate, will
not have a material and adverse effect on the business, operations, property or
assets or on the condition, financial or otherwise, of the Borrower or any
Subsidiary.
4.4.2 Neither the Borrower nor any Subsidiary is in default
with respect to any order, writ, injunction or decree of any court or of any
federal, state, municipal or other governmental department, commission, board,
bureau, agency or authority, domestic or foreign, or in violation of any law,
statute or regulation, domestic or foreign, to which it is, or any of its
properties are, subject, except for such defaults or violations which, in the
aggregate, will not have a material and adverse effect on the business,
operations, property or assets or on the condition, financial or otherwise, of
the Borrower or any Subsidiary.
4.4.3 Neither the Borrower nor any Subsidiary is a party to
or bound by, nor are any of their respective properties bound or affected by,
any agreement, deed, lease or other instrument, or subject to any charter or
other corporate restriction or any judgment, order, writ, injunction, decree or
award, or any law, statute, rule or regulation, any of which materially and
adversely affects or
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in the future may (so far as the Borrower may now foresee) materially and
adversely affect the business, operations, prospects, properties or assets, or
the condition, financial or otherwise, of the Borrower or any Subsidiary.
4.5 ERISA. The Borrower is in compliance in all material respects
with all applicable provisions of ERISA. Neither a Reportable Event nor a
Prohibited Transaction has occurred and is continuing with respect to any Plan;
no notice of intent to terminate a Plan has been filed nor has any Plan been
terminated; no circumstances exist which constitute grounds under Section 4042
of ERISA entitling the PBGC to institute proceedings to terminate, or appoint a
trustee to administrate, a Plan, nor has the PBGC instituted any such
proceedings; neither the Borrower nor any ERISA Affiliate has completely or
partially withdrawn under Sections 4201 or 4204 of ERISA from a Multiemployer
Plan; the Borrower and each ERISA Affiliate have met their minimum funding
requirements under ERISA with respect to all of their Plans and the present fair
market value of all Plan assets exceeds the present value of all vested benefits
under each Plan, as determined on the most recent valuation date of the Plan and
in accordance with the provisions of ERISA and the regulations thereunder for
calculating the potential liability of the Borrower or any ERISA Affiliate to
PBGC or the Plan under Title IV of ERISA; and neither the Borrower nor any ERISA
Affiliate has incurred any liability to the PBGC under ERISA.
4.6 INVESTMENT COMPANY. Neither the Borrower nor any Subsidiary is
an "investment company" or a company "controlled" by an "investment company"
within the meaning of the Investment Company Act of 1940, as amended.
4.7 APPROVALS AND CONSENTS. All authorizations, consents,
registrations, exemptions, approvals and licenses (governmental or otherwise) or
the taking of any other action (including, without limitation, by the
shareholders of the Borrower and each Subsidiary) which are required as a
condition to the validity or enforceability of this Agreement, the Financing
Agreements or any of the instruments or documents delivered or to be delivered
pursuant hereto or thereto, have been effected or obtained and are in full force
and effect.
4.8 REGULATION U; SECURITIES EXCHANGE ACT OF 1934. Neither the
Borrower nor any Subsidiary is engaged principally, or as one of its more
important activities, in the business of extending credit for the purpose of
purchas-
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ing or carrying any margin stock (within the meaning of Regulation U or G of the
Board of Governors (the "Board") of the Federal Reserve System). None of the
proceeds of the Revolving Loans will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin stock or for any other purpose
which might constitute this transaction a "purpose credit" within the meaning of
such Regulation U. Neither the Borrower nor any Subsidiary will take, nor will
it permit any agent acting on its behalf to take, any action which might cause
this Agreement or any of the Financing Agreements to violate any regulation of
the Board or to violate the Securities Exchange Act of 1934, in each case as in
effect on the date hereof or as amended hereafter.
4.9 USE OF FUNDS. The proceeds of the Revolving Loans shall be used
to finance the acquisition by the Borrower of fee title to Properties.
4.10 FINANCIAL STATEMENTS. The Borrower has heretofore delivered to
the Bank the financial statements of the Borrower on a Consolidated basis for
its fiscal year ended December 31, 1994, and for the six-month period ending
June 30, 1995 (consisting of balance sheets and related statements of income,
retained earnings, stockholders, equity and changes in cash flows for the fiscal
year or period then ended, including the related schedules annexed thereto)
which year-end financial statements were audited by Kenneth Leventhol & Co.
(presently known as Ernst & Young LLP) independent certified public accountants.
Such financial statements are correct and complete and were prepared in
accordance with GAAP and present fairly the financial position and results of
operations of the Borrower and each Subsidiary as of the dates of and for the
periods involved. There are no material liabilities, direct or indirect, fixed
or contingent, of the Borrower or any Subsidiary as of the date of such
financial statements which were not reflected therein or in the notes thereto in
accordance with GAAP. There has been no material adverse change since June 30,
1995 in the business, operations, prospects, property or assets of the Borrower
or any Subsidiary.
4.11 TAXES. The Borrower and each Subsidiary has filed or caused to
be filed all tax returns required to be filed by it. Except as permitted by
Section 5.3 hereof, the Borrower and each Subsidiary has paid all taxes
(including interest and penalties) as shown on such returns or any assessment or
notice of tax claim or deficiency received by it to the extent that such taxes
have become due. Neither
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the Borrower nor any Subsidiary has any knowledge of any proposed tax assessment
against or affecting it and is otherwise obligated by any agreement, instrument
or otherwise to contribute to the payment of taxes owed by any other Person.
All material tax liabilities are adequately provided for or reserved against on
the books of the Borrower and each Subsidiary in accordance with GAAP.
4.12 TITLE TO PROPERTIES/PRIORITY OF LIENS.
4.12.1 The Borrower and each Subsidiary has good and
marketable title to, or valid leasehold interests in, all of the properties and
assets reflected on the most recent of the financial statements delivered to the
Bank pursuant to Section 4.10 or acquired by it after the date of such financial
statement and prior to the date hereof, except for those properties and assets
which have been disposed of since such date in the ordinary course of business.
All such properties and assets are owned or leased by the Borrower or a
Subsidiary free and clear of all mortgages, pledges, liens, security interests
or charges of any kind, except (i) such as are disclosed on Schedule 4.12
hereto, (ii) such as are in favor of the Bank, and (iii) such as are permitted
under the provisions of Section 6.2 hereof.
4.12.2 The liens and security interests granted to the
Bank by the Borrower and each Subsidiary under the Security Agreements
constitute valid and perfected liens and security interests in the Collateral
covered thereby.
4.13 LITIGATION. Except as set forth on Schedule 4.13,
there are no actions, suits, investigations or administrative proceedings of or
before any court, arbitrator or governmental authority, pending or, to
Borrower's knowledge threatened, against the Borrower or any Subsidiary or any
of their respective properties or assets which (i) either in any case or in the
aggregate, if adversely determined, would materially and adversely affect the
business, operations, prospects, properties or assets or the condition,
financial or otherwise, of the Borrower or any Subsidiary, or (ii) question the
validity or enforceability of this Agreement, the Financing Agreements, or any
action to be taken in connection with the transactions contemplated hereby or
thereby.
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4.14 INSURANCE. All physical properties and assets of the
Borrower and any Subsidiary are insured in accordance with the requirements of
Section 5.2.2 hereof.
4.15 ENVIRONMENT. Except as disclosed on Schedule 4.15
hereof, the Borrower and each Subsidiary has duly complied with, and its
business, operations, assets, equipment, property, leaseholds, or other
facilities are in compliance with, the provisions of all federal, state and
local environmental, health, and safety laws, codes and ordinances, and all
rules and regulations promulgated thereunder. The Borrower and each Subsidiary
has been issued and will maintain all required federal, state, and local
permits, licenses, certificates, and approvals relating to (i) air emissions;
(ii) discharges to surface water or groundwater; (iii) noise emissions; (iv)
solid or liquid waste disposal; (v) the use, generation, storage,
transportation, or disposal of toxic or hazardous substances or wastes (intended
hereby and hereafter to include any and all such materials listed in any
federal, state, or local law, code or ordinance, and all rules and regulations
promulgated thereunder as hazardous or potentially hazardous); or (vi) other
environmental, health, or safety matters. Except as disclosed on Schedule 4.15
hereof, neither the Borrower nor any Subsidiary has received notice of, nor
knows of, or suspects, facts which might constitute any violations of any
federal, state, or local environmental, health, or safety laws, codes or
ordinances, and any rules or regulations promulgated thereunder with respect to
its business, operations, assets, equipment, property, leaseholds, or other
facilities. Except in accordance with a valid governmental permit, license,
certificate, or approval issued to the Borrower and each Subsidiary and except
as disclosed on Schedule 4.15 hereof, there has been no emission, spill,
release, or discharge into or upon (i) the air; (ii) soils, or any improvements
located thereon; (iii) surface water or groundwater; or (iv) the sewer, septic
system or waste treatment, storage or disposal system servicing any of the
premises of the Borrower and each Subsidiary, of any toxic or hazardous
substances or wastes at or from the premises of the Borrower and each
Subsidiary; and accordingly all of the premises of the Borrower and each
Subsidiary are free of all such toxic or hazardous substances or wastes. Except
as disclosed on Schedule 4.15 hereof, there has been no complaint, order,
directive, claim, citation, or notice by any governmental authority or any
person or entity with respect to (i) air emissions; (ii) spills, releases, or
discharges to soils or improvements located thereon, surface water, groundwater
or the sewer,
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septic system or waste treatment, storage or disposal systems servicing the
premises; (iii) noise emissions; (iv) solid or liquid waste disposal; (v) the
use, generation, storage, transportation, or disposal of toxic or hazardous
substances or waste; or (vi) other environmental, health, or safety matters
affecting the Borrower and each Subsidiary, or its business, operations, assets,
equipment, property, leaseholds, or other facilities. Except as disclosed on
Schedule 4.15 hereof, neither the Borrower nor any Subsidiary has any
indebtedness, obligation, or liability, absolute or contingent, matured or not
matured, with respect to the storage, treatment, cleanup, or disposal of any
solid wastes, hazardous wastes, or other toxic or hazardous substances
(including without limitation any such indebtedness, obligation, or liability
with respect to any current regulation, law, or statute regarding such storage,
treatment, cleanup, or disposal).
4.16 DISCLOSURE. No certificate, statement, report or other document
furnished to the Bank by or on behalf of the Borrower or any Subsidiary in
connection herewith or in connection with any transaction contemplated hereby,
or this Agreement, or any Financing Agreement, contains any untrue statement of
a material fact or omits to state any material fact necessary in order to make
the statements contained therein not misleading.
4.17 MORTGAGES. There does not exist at the date hereof any
default under any Mortgage or any condition, event or act which, with the
passage of time or giving of notice, or both, would constitute such a default.
4.18 NO EVENT OF DEFAULT. After giving effect to the
transactions contemplated by this Agreement, the Financing Agreements and the
other instruments or documents delivered in connection herewith and therewith,
there does not exist at the date hereof any condition, event or act which
constitutes an Event of Default hereunder or a Default.
SECTION V. AFFIRMATIVE COVENANTS.
The Borrower covenants and agrees that, until all of the
Obligations are paid and satisfied in full, it shall comply, or cause compliance
with, and shall cause each Subsidiary to comply with the following covenants:
5.1 PRESERVATION OF EXISTENCE. The Borrower and each Subsidiary
will preserve and maintain its corporate
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existence, rights, franchises and privileges in the jurisdiction of its
incorporation and will qualify and remain qualified as a foreign corporation in
each jurisdiction in which such qualification is necessary or desirable in view
of its business and operations or in view of the ownership of its properties.
5.2 MAINTENANCE OF PROPERTIES; INSURANCE.
5.2.1 The Borrower and each Subsidiary will maintain in
good repair, working order and condition each Property and all other properties
used or useful in its business (ordinary wear and tear excepted) and from time
to time will make or cause to be made all appropriate repairs, renewals and
replacements, additions and improvements thereto, except where such failure
would not have a material adverse effect on the business, operations, property
or assets or on the condition, financial or otherwise, of the Borrower or any
Subsidiary.
5.2.2 The Borrower and each Subsidiary will maintain at
its expense, with financially sound and reputable insurers reasonably acceptable
to the Bank, insurance, with respect to each Property and all of its other
properties and business, against loss or damage of the kinds and in the amounts
customarily insured against by businesses of established reputation engaged in
the same or a similar business and similarly situated. All such insurance of
the Borrower and each Subsidiary shall name the Bank as loss payee and shall
contain such other provisions as the Bank may reasonably require to fully
protect its interest in the Collateral.
5.3 PAYMENT OF TAXES. The Borrower and each Subsidiary will pay
and discharge promptly all taxes (including, without limitation, all payroll
withholdings), assessments and governmental charges or levies imposed upon it or
upon its income or profits or upon each Property or any of its other property,
real, personal or mixed, or upon any part thereof, before the same shall become
in default; provided, however, that neither the Borrower nor any Subsidiary
shall be required to pay any such tax, assessment, charge, levy or claim if the
validity or amount thereof shall be contested in good faith by proper
proceedings and if the Borrower or such Subsidiary shall have set aside on its
books appropriate reserves.
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5.4 INSPECTION. Without in any way limiting the Bank's right
to inspection under the Financing Agreements, the Borrower will permit the Bank
to have one or more of its officers and employees, or any other Person
designated by the Bank, at the Bank's expense, visit and inspect any of the
properties of the Borrower and any Subsidiary, as applicable (subject to the
rights of tenants of any such property under their respective leases), and to
examine the minute books, books of account and other records of the Borrower and
to make copies thereof or extracts therefrom, and discuss its affairs, finances
and accounts with its officers and, at the request of the Bank, with the
Borrower's independent accountants, in each case upon the giving of reasonable
advance notice and during normal business hours and at such other reasonable
times and as often as the Bank may reasonably desire.
5.5 ACCOUNTING; FINANCIAL STATEMENTS AND OTHER INFORMATION.
The Borrower and each Subsidiary will maintain a system of
accounting established and administered in accordance with GAAP and will set
aside on its books all such proper reserves for each fiscal year for
depreciation, obsolescence, amortization, bad debts and other purposes as shall
be required by GAAP. The Borrower will deliver, or cause to be delivered, to
the Bank:
5.5.1 As soon as practicable following the end of each
calendar quarter, but in any event not later than 60 days thereafter, an
unaudited balance sheet of the Borrower as at the end of such quarter and the
related statements of income, retained earnings, stockholders equity and changes
in cash flows of the Borrower for such quarter, all in reasonable detail and
satisfactory in scope to the Bank, setting forth for each such period in
comparative form the corresponding figures for the appropriate period of the
preceding fiscal year, which statements shall be prepared on a Consolidated and
Consolidating basis and in accordance with GAAP and, subject to normal year-end
adjustments, present fairly the financial position of the Borrower as at the end
of the period involved. Such statements shall be accompanied by a schedule of
all Properties then owned by the Borrower;
5.5.2 As soon as practicable after the end of each
fiscal year of the Borrower, but in any event not later than 120 days
thereafter, a balance sheet of the Borrower as at the end of such fiscal year
and the related
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statements of income, retained earnings, stockholders equity and changes in cash
flows of the Borrower for such year, all in reasonable detail and satisfactory
in scope to the Bank, setting forth in each case in comparative form the
corresponding figures for the preceding fiscal year, which statements shall be
prepared on a Consolidated and Consolidating basis and in accordance with GAAP
and audited by a firm of independent certified public accountants of recognized
standing selected by the Borrower and acceptable to the Bank;
5.5.3 Promptly upon receipt thereof, copies of all
financial reports (including, without limitation, management letters, if any)
submitted to the Borrower and each Subsidiary by its auditors, in connection
with each annual or interim audit review of its books by such auditors;
5.5.4 Promptly upon the issuance thereof, copies of all
regular, periodic and special reports, and all registration statements, which
the Borrower and each Subsidiary files with the Securities and Exchange
Commission or any other governmental agency or any securities exchange.
5.5.5 (i) Concurrently with the delivery of the
financial statements required to be furnished by Sections 5.5.1 and 5.5.2
hereof, a certificate signed by the chief executive officer or chief financial
officer of the Borrower, stating (a) that a review of the activities of the
Borrower during such period has been made under his immediate supervision with a
view to determining whether the Borrower and each Subsidiary has observed,
performed and fulfilled all of its obligations under this Agreement, and (b)
that there existed during such period no Default or Event of Default or if any
such Default or Event of Default did exist, specifying the nature thereof, the
period of existence thereof and what action the Borrower proposes to take, or
has taken, with respect thereto; and (ii) promptly upon the occurrence of any
Default or Event of Default, a certificate signed by the chief executive officer
or chief financial officer of the Borrower specifying the nature thereof and the
action the Borrower proposes to take or has taken with respect thereto;
5.5.6 Concurrently with the delivery of the annual
financial statements referred to in Section 5.5.2 a letter from the firm of
independent certified public accountants auditing such statements stating
whether such accountant's examination has revealed the occurrence of a
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Default or an Event of Default and if so, stating the facts with respect thereto
and what action, if any, has been or will be taken by the Borrower to cure such
Default or Event of Default;
5.5.7 With reasonable promptness, such other information
respecting the business, operations and financial condition of the Borrower and
each Subsidiary as the Bank may reasonably from time to time request; and
5.5.8 Immediately upon becoming aware of any development
or other information which may materially and adversely affect any Property or
any of the other properties, business, prospects, profits or condition
(financial or otherwise) of the Borrower and each Subsidiary or the ability of
the Borrower and each Subsidiary to perform or comply with this Agreement or to
pay any of the Obligations, telephonic or telegraphic notice specifying the
nature of such development or information and such anticipated effect.
5.6 COMPLIANCE. The Borrower and each Subsidiary will comply
with the requirements of all applicable laws, rules, regulations, orders of any
governmental authority, and all agreements to which it is a party, the
noncompliance with which laws, rules, regulations, orders and agreements would
materially adversely affect the business, operations, prospects or assets, or
the condition, financial or otherwise, of the Borrower or any Subsidiary.
5.7 ERISA. The Borrower shall maintain compliance in all
material respects with the applicable provisions of ERISA. The Borrower will
deliver to the Bank, promptly after the filing or receiving thereof, copies of
all reports, including annual reports and notices, which the Borrower files with
or receives from the PBGC or the U.S. Department of Labor under ERISA; and as
soon as possible and in any event within 30 days after the Borrower knows or has
reason to know that any Reportable Event or Prohibited Transaction has occurred
with respect to any Plan or that the PBGC or the Borrower has instituted or will
institute proceedings under Title IV of ERISA to terminate any Plan, the
Borrower will deliver to the Bank a certificate of the chief executive officer
or chief financial officer of the Borrower setting forth the details as to such
Reportable Event or Prohibited Transaction or Plan termination and the action
the Borrower proposes to take with respect thereto.
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5.8 CHANGE IN BUSINESS. The Borrower will not make any material
change in the character of its business as carried on at the date hereof.
5.9 NOTIFICATION TO BANK. The Borrower shall promptly notify
the Bank of (i) any Default or Event of Default hereunder, (ii) any litigation
or proceedings that are instituted or threatened (to the knowledge of the
Borrower) against the Borrower or any Subsidiary or any of their respective
assets, (iii) each and every default by the Borrower under any obligation for
borrowed money which would permit the holder of such obligation to accelerate
its maturity, including the names and addresses of the holders of such
obligation and the amount thereof, and (iv) any change in the chief executive
office of the Borrower or location of any of the Borrower's Collateral from that
listed in any of the Financing Agreements.
5.10 ENVIRONMENT. The Borrower and each Subsidiary shall remain
in compliance with the provisions of all federal, state, and local
environmental, health, and safety laws, codes and ordinances, and all rules and
regulations issued thereunder; notify the Bank immediately of any notice of a
hazardous discharge or environmental complaint received from any governmental
agency or any other party; notify the Bank immediately of any hazardous
discharge from or affecting any of its premises; immediately contain and remove
the same, in compliance with all applicable laws; promptly pay any fine or
penalty assessed in connection therewith; permit the Bank to inspect any of the
Borrower's or any Subsidiary's premises, to conduct tests thereon, and to
inspect all books, correspondence, and records pertaining thereto; and at the
Bank's request, and at the Borrower's expense, provide a report of a qualified
environmental engineer, satisfactory in scope, form, and content to the Bank,
and such other and further assurances reasonably satisfactory to the Bank that
the condition has been corrected.
5.11 FURTHER ASSURANCES. The Borrower will duly execute and
deliver, or will cause to be duly executed and delivered, such further
instruments and documents, including, without limitation, additional security
agreements relating to the Collateral, Uniform Commercial Code financing
statements or amendments or continuations thereof, and will do or use its best
efforts to cause to be done such further acts as may be necessary or proper in
the Bank's opinion to effectuate the provisions or purposes of this Agreement
and the Financing Agreements.
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5.12 ADDITIONAL BANK GUARANTORS. The Borrower shall promptly
inform the Bank of the creation or acquisition of any direct or indirect
Subsidiary and cause each direct or indirect Subsidiary not in existence on the
date hereof to enter into a guarantee of the Obligations in form and substance
satisfactory to the Bank, and to execute and deliver to the Bank a form of
security agreement in form and substance similar to a Security Agreement, and
cause the direct parent of each such Subsidiary to pledge all of the capital
stock of such Subsidiary pursuant to a pledge agreement in form and substance
satisfactory to the Bank.
SECTION VI. NEGATIVE COVENANTS
The Borrower covenants and agrees that, until all of the Obligations
are paid and satisfied in full, it shall comply, or cause compliance, with the
following covenants:
6.1 INVESTMENTS AND GUARANTEES.
6.1.1 Neither the Borrower nor any Subsidiary will
directly or indirectly, make or permit to be outstanding any loan or advance to
any Person or purchase or acquire any capital stock, assets, obligations or
other securities of, or make any capital contribution to, or otherwise invest
in, or acquire any interest in, any Person, or participate as a partner or joint
venturer with any other Person, other than (i) Cash Equivalents, (ii) ordinary
and reasonable travel expense advances made to employees in the ordinary course
of business, (iii) loans to employees of the Borrower; provided, however, that
the aggregate outstanding principal sum of all such loans shall not exceed
$250,000, (iv) investments in stock of any Subsidiary; provided that the
Borrower complies with the provisions of Section 5.12 in connection with such
investment, and (v) the acquisition of fee title to Properties.
6.1.2 Neither the Borrower nor any Subsidiary will
directly or indirectly, assume, guarantee, endorse or otherwise be or become
directly or contingently responsible or liable for the obligations of any Person
(including, but not limited to, an agreement to purchase any obligation, stock,
assets, goods or services or to supply or advance any funds, assets, goods, or
services other than in the ordinary course of business, or otherwise to assure
the creditors of any Person against loss) other than (i) guarantees by
endorsement of negotiable instruments for deposit or collection or similar
transactions in the ordinary course of
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business, (ii) guarantees in favor of the Bank, or (iii) the guarantee by the
Borrower (for mortgage loans to Borrower or to any Subsidiary of Borrower) of
items that are commonly excepted by institutional lenders from their otherwise
nonrecourse mortgage loans which shall be deemed to including the following: (A)
misrepresentation in connection with the loan application, (B) misappropriation
of security deposits, insurance proceeds and condemnation proceeds, (C)
misappropriation of rents following default, (D) losses due to the environmental
contamination of the subject property and (E) waste to the subject property.
6.2 LIMITATION ON LIENS. Neither the Borrower nor any
Subsidiary will create, assume or suffer to exist any security interest
mortgage, pledge or other lien of any kind (a "lien") with respect to its real
or personal property, whether now owned or hereafter acquired, except for: (i)
liens in favor of the Bank, (ii) liens in favor of the Other Lenders created
under the other Lender Credit Agreements; (iii) liens for taxes or assessments
or other government charges or levies not yet due and payable or if due and
payable being actively contested in good faith by appropriate proceedings and
for which appropriate reserves are maintained; (iv) liens imposed by law, such
as mechanics', materialmen's, landlords', warehousemen's and carriers' liens,
securing obligations incurred in the ordinary course of business which are not
past due or which are being actively contested in good faith by appropriate
proceedings and for which appropriate reserves have been established; (v) liens
under workmen's compensation, unemployment insurance, social security or similar
legislation; (vi) liens, deposits, or pledges to secure the performance of bids,
tenders, contracts (other than contracts for the payment of money), leases,
statutory obligations, surety and appeal bonds or other similar obligations
arising in the ordinary course of business; (vii) judgment and other similar
liens arising in connection with court proceedings, provided the execution or
other enforcement of such liens is effectively stayed and the claims secured
thereby are being actively contested in good faith and by appropriate
proceedings; (viii) liens existing on the date hereof and listed on Schedule
4.12 hereto (and extension, renewal and replacement liens upon the same property
subject to such listed lien, provided that, subject to the provisions of Section
6.3(vi), the amount secured by each such lien constituting such an extension,
renewal or replacement lien shall not exceed the amount secured by the lien
theretofore existing); and (ix) liens securing Indebtedness permitted under the
provisions of Section 6.3(vi).
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6.3 ADDITIONAL OBLIGATIONS. Neither the Borrower nor any
Subsidiary shall create, incur, assume or permit to exist any Indebtedness,
except: (i) Indebtedness incurred under this Agreement and the Financing
Agreements or any other agreement with the Bank; (ii) Indebtedness incurred
under the Other Credit Agreements provided that such Indebtedness does not
exceed the principal sum of $10,000,000; (iii) trade payables and current
operating liabilities (other than for borrowed money), in each case incurred in
the ordinary course of business and not more than 90 days past due (or if past
due the obligation with respect thereto is being actively contested in good
faith by appropriate proceedings and for which appropriate reserves are
maintained), (iv) Indebtedness secured by liens referred to in Section 6.2, (v)
any other Indebtedness which is subordinate in right of payment to the
Indebtedness of the Borrower hereunder, provided that the terms of such
Indebtedness and its subordination are previously approved by the Bank in
writing, and provided that no such Indebtedness shall be paid or prepaid other
than in accordance with such terms as have been previously approved in writing
by the Bank, and (vi) Indebtedness incurred or created after the date hereof and
secured by a specified Property, so long as the loan to value ratio does not
exceed 70%. with respect to such Indebtedness and, to the extent the incurrence
or creation of such Indebtedness constitutes a Mandatory Prepayment Event, the
prepayment required by Section 2.4.2(ii) is made to the Bank.
6.4 REIT. The Borrower shall not at any time fail to qualify as
a REIT, as defined in Section 856 of the Internal Revenue Code of 1986.
6.5 MERGERS, ETC. Neither the Borrower nor any Subsidiary will
dissolve or otherwise sell or dispose of all or any substantial part of its
assets, including its accounts receivable (except that any such sale or
disposition shall be permitted if it is a Mandatory Prepayment Event and the
prepayment required by Section 2.4.2(ii) is made to the Bank), and will not
consolidate with or merge into another entity or business or permit one or more
entities to consolidate with or merge into it.
6.6 NET WORTH. From the date hereof through February 28,
1999, the Net Worth of the Borrower shall not at any time be less than the
greater of (i) $28,000,000; or (ii) an amount equal to two (2) times the
outstanding principal amount of Revolving Credit Loans. At all times
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during the Final Year, the Net Worth of the Borrower shall not at any time be
less than the greater of (i) $30,000,000; or (ii) an amount equal to two (2)
times the outstanding principal amount of the Revolving Credit Loans.
6.7 CASH FLOW. As of the end of each fiscal year of the Borrower
ending prior to February 28, 1999, the Cash Flow of the Borrower for such fiscal
year shall not be less than $3,000,000. As of the end of any fiscal year of the
Borrower ending after February 28, 1999, the Cash Flow of the Borrower for such
fiscal year shall not be less than $3,400,000.
6.8 MANAGEMENT.
6.8.1 At least two of Messrs. Frederic H. Gould, Matthew J.
Gould, and Jeffrey A. Gould shall at all times be actively involved in the day-
to-day management of the business and affairs of the Borrower, subject to
absence as a result of reasonable vacation or illness, and shall hold the office
(or a higher office) set forth opposite his name.
Frederic H. Gould Chairman of the Board of
Directors
Matthew J. Gould President and CEO
Jeffrey A. Gould Vice President
6.9 TRANSACTIONS WITH AFFILIATES. The Borrower shall not enter into
any transactions, including, without limitation, the lease, purchase, sale or
exchange of property or any agreement or arrangement for the payment, directly
or indirectly, of any fees, charges or other expenses resulting from any
allocation of general overhead, management fees or other similar services, with
any stockholder, director, officer, partner, employee or agent of the Borrower,
or any Affiliate of the Borrower, except in the ordinary course of and pursuant
to the reasonable requirement of the businesses of the Borrower and upon fair
and reasonable terms no less favorable than it would obtain in a comparable
arm's length transaction with a non-Affiliate.
6.10 WAIVER OF RIGHTS UNDER THE MORTGAGE NOTES. The Borrower shall
not modify, extend or amend any of the Mortgage Notes or Mortgages or waive any
of its rights thereunder without obtaining the prior written consent of the Bank
in each instance.
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SECTION VII. EVENTS OF DEFAULT/REMEDIES.
7.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
7.1.1 any representation or warranty made or deemed made in
or in connection with this Agreement or any of the Financing
Agreements shall prove to have been materially incorrect when made or
deemed to be made;
7.1.2 default shall be made in the payment of any principal
of the Note when and as the same shall become due and payable, whether
at the due date thereof or at a date fixed for prepayment thereof or
by acceleration thereof or otherwise, and such default shall continue
unremedied for a period of five or more days;
7.1.3 default shall be made in the payment of any interest
on the Note, or any fee or any other amount payable hereunder, or
under any Financing Agreements, when and as the same shall become due
and payable, and such default shall continue unremedied for a period
of five (5) or more days;
7.1.4 default shall be made in the due observance or
performance of covenant, agreement or provision contained in this
Agreement (other than as described in Section 7.1.1 through 7.1.3
above) or any of the Financing Agreements by the Borrower or a
Subsidiary, and (except with respect to defaults under Section 5.2.2,
Section 5.12 or Section 6 hereof, the fifth sentence of Section 4 and
the second and fourth sentences of Section 13 of the Security
Agreements, as to which no grace period shall be applicable) such
default shall continue unremedied for thirty (30) or more days, or if
this Agreement or any Financing Agreements shall terminate, be
terminable or be terminated or become void or unenforceable for any
reason whatsoever without the prior written consent of the Bank; or
7.1.5 the Borrower or any Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code or any other Federal, state
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or foreign bankruptcy, insolvency, liquidation or similar law, (ii)
consent to the institution of, or fail to contravene in a timely and
appropriate manner, any such proceeding or the filing of any such
petition, (iii) apply for or consent to the appointment of a receiver,
trustee, custodian, sequestrator or similar official for the Borrower
or any Subsidiary or for a substantial part of its property or assets,
(iv) file an answer admitting the material allegations of a petition
filed against it in any such proceeding, (v) make a general assignment
for the benefit of creditors, (vi) become unable, admit in writing its
inability or fail generally to pay its debts as they become due or
(vii) take corporate action for the purpose of effecting any of the
foregoing;
7.1.6 an involuntary proceeding shall be commenced or an
involuntary petition shall be filed in a court of competent
jurisdiction seeking (i) relief in respect of the Borrower or any
Subsidiary, or of a substantial part of the property or assets of the
Borrower or any Subsidiary, under Title 11 of the United States Code
or any other Federal state or foreign bankruptcy, insolvency,
receivership or similar law, (ii) the appointment of a receiver,
trustee, custodian, sequestrator or similar official for the Borrower
or any Subsidiary or for a substantial part of the property of the
Borrower or any Subsidiary or (iii) the winding-up or liquidation of
the Borrower or any Subsidiary; and such proceeding or petition shall
continue undismissed for 30 days or an order or decree approving or
ordering any of the foregoing shall continue unstayed and in effect
for 30 days;
7.1.7 default shall be made with respect to any
Indebtedness (excluding Indebtedness outstanding hereunder) in an
aggregate amount exceeding $50,000 if the effect of any such default
shall be to accelerate, or to permit the holder or obligee of any such
Indebtedness (or any trustee on behalf of such holder or obligee) at
its option to accelerate, the maturity of such Indebtedness;
7.1.8 a judgment or decree for the payment of money, a fine
or penalty which when taken together with all other such judgments,
decrees, fines and penalties shall exceed $50,000 shall be
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rendered by a court or other tribunal against the Borrower or any
Subsidiary and (i) shall remain undischarged or unbonded for a period
of 30 consecutive days during which the execution of such judgment,
decree, fine or penalty shall not have been stayed effectively or (ii)
any judgment creditor or other person shall legally commence actions
to collect on or enforce such judgment, decree, fine or penalty;
7.1.9 this Agreement, the Note, any of the Security
Agreements, or any other Financing Agreements shall for any reason
cease to be, or shall be asserted by the Borrower or any Subsidiary
not to be, a legal, valid and binding obligation of the Borrower or
such Subsidiary (as the case may be), enforceable in accordance with
its terms, or the security interest or lien purported to be created by
any Security Agreement shall for any reason cease to be, or be
asserted by the Borrower or any Subsidiary not to be, a valid, first
priority perfected security interest in any of the Collateral covered
thereby (except to the extent otherwise permitted under this
Agreement);
7.1.10 the Bank shall determine in the exercise of its
reasonable judgment that a material adverse change has occurred in the
financial condition or business or prospects of the Borrower or any
Subsidiary or in the value of the Collateral or prospects for
repayment in full when due of any other Obligations;
7.1.11 If (i) a reportable event (within the meaning of
Section 4043(b) of ERISA) (whether or not waived) shall have occurred
with respect to a Plan which could, in the opinion of the Bank, have a
material adverse effect on the financial condition of the Borrower or
any of its ERISA Affiliates, (ii) the filing by the Borrower or any of
its ERISA Affiliates or an administrator of any Plan of a notice of
intent to terminate such Plan in a "distress termination" under the
provisions of Section 4041 of ERISA, (iii) the receipt of notice by
the Borrower or any of its ERISA Affiliates or an administrator of a
Plan that the PBGC has instituted proceedings to terminate (or appoint
a trustee to administer) such a Plan, (iv) any other event or
condition exists which might, in the opinion of the
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Bank, constitute grounds under the provisions of Section 4042 of ERISA
for the termination of (or the appointment of a trustee to administer)
any Plan by the PBGC, (v) a Plan shall fail to maintain the minimum
funding standard required by Section 412 of the Internal Revenue Code
for any plan year or a waiver of such standard is sought or granted
under the provisions of Section 412(d) of the Internal Revenue Code
which could, in the opinion of the Bank, have a material adverse
effect on the financial condition of the Borrower or any of its ERISA
Affiliates, (vi) the Borrower or any of its ERISA Affiliates has
incurred, or is likely to incur, a liability under the provisions of
Sections 4062, 4063, 4064 or 4201 of ERISA which could, in the opinion
of the Bank, have a material adverse effect on the financial condition
of the Borrower or any of is ERISA Affiliates; and in each case in
clauses (i) through (vi) of this Section 7.1.11, such event or
condition, together with all other such events or conditions, if any,
could subject the Borrower or any of its ERISA Affiliates to any tax,
penalty or other liabilities in the aggregate material in relation to
the business, operations, property or financial or other condition of
the Borrower or any of its ERISA Affiliates; or
7.1.12 If any federal, state, or local agency asserts or
creates a lien upon any or all of the assets, equipment, property,
leaseholds, or other facilities of the Borrower by reason of the
occurrence of a hazardous discharge or an environmental complaint; or
if any federal, state, or local agency asserts a claim against the
Borrower and/or its assets, equipment, property, leaseholds, or other
facilities for damages or cleanup costs relating to a hazardous
discharge or an environmental complaint; provided, however, that such
claim shall not constitute a default if, within five (5) business days
of the occurrence giving rise to the claim, (i) the Borrower can prove
to the Bank's satisfaction that the Borrower has commenced and is
diligently pursuing either: (a) a cure or correction of the event
which constitutes the basis for the claim, and continues diligently to
pursue such cure or correction to completion or (b) proceedings for an
injunction, a restraining order, or other appropriate emergent relief
preventing such agency or agencies from asserting such claim, which
relief is
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<PAGE>
granted within ten (10) business days of the occurrence giving rise to
the claim and the injunction, order, or emergent relief is not
thereafter resolved or reversed on appeal; and (ii) in either of the
foregoing events, the Borrower has posted a bond, letter of credit, or
other security satisfactory IN form, substance, and amount of both the
Bank and the agency or entity asserting the claim to secure the proper
and complete cure or correction of the event which constitutes the
basis for the claim.
7.2 REMEDIES. Upon the occurrence of any one or more of such
Events of Default, the Bank may, at its option, without presentment for payment,
demand, notice of dishonor or notice of protest or any other notice, all of
which are hereby expressly waived by the Borrower, declare any and all of the
Revolving Loans to be due and payable; provided, however, that if such event is
an event specified in Section 7.1.5 or 7.1.6, then the Revolving Loans shall
automatically become due and payable. The Bank shall have all of the rights and
remedies of a Secured Party under the Uniform Commercial Code of the State of
New York and under the Uniform Commercial Code of any other state in which any
Collateral may be situated, and, additionally, all of the rights and remedies
set forth in this Agreement and the Financing Agreements, and in any instrument
or document referred to herein or therein, and under any other applicable law
relating to this Agreement or the Financing Agreements. The Bank may, at its
option, cure any default by the Borrower or a Subsidiary under any agreement
with a third party which constitutes, or would with notice or lapse of time or
both constitute, an Event of Default hereunder, and may add the amount expended
in such cure to the Obligations and charge the Borrower's account therefor, such
amounts to be repayable by the Borrower on demand; the Bank shall be under no
obligation to effect such cure and shall not by making any payment for the
Borrower's account be deemed to have assumed any obligation or liability of the
Borrower.
SECTION VIII. MISCELLANEOUS.
8.1 EX-PENSES. The Borrower, whether or not the transactions
contemplated hereby are consummated, shall pay to the Bank, or reimburse the
Bank for, all out-ofpocket expenses incurred by the Bank in connection with the
preparation, administration and enforcement of this Agreement, the Financing
Agreements, all other agreements, instruments and documents executed and
delivered in connection herewith and therewith, and the transactions contem-
-37-
<PAGE>
plated hereunder and thereunder, together with any amendments, supplements,
consents or modifications which may be hereafter made or entered into in respect
thereof, including, but not limited to, filing fees, expenses for searches, and
the reasonable fees and disbursements of counsel to the Bank. The Bank is
hereby authorized to charge any amounts payable hereunder directly to the
account(s) of the Borrower maintained with the Bank.
8.2 SURVIVAL OF AGREEMENT. All agreements, representations and
warranties contained herein or made in writing by the parties hereto in
connection with the transactions contemplated hereby shall survive the execution
and delivery of this Agreement, the Financing Agreements and the consummation of
the transactions contemplated herein or therein regardless of any investigation
made by or on behalf of the Bank.
8.3 NO WAIVER; CUMULATIVE REMEDIES. No failure to exercise, and
no delay in exercising on the part of the Bank, any right, power or privilege
under this Agreement or under any of the Financing Agreements or other documents
referred to herein or therein shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power or privilege hereunder or
thereunder preclude any other or further exercise thereof or the exercise of any
other right, power and privilege. The rights and remedies of the Bank hereunder
and under the Financing Agreements and under any other present and future
agreements between the Bank and the Borrower are cumulative and not exclusive of
any rights or remedies provided by law, or under any of said Financing
Agreements or agreements and all such rights and remedies may be exercised
successively or concurrently.
8.4 NOTICES. All notices, approvals, consents, requests,
demands or other communications (collectively, "Communications") to or upon the
respective parties hereto shall be made in writing in one of the following ways
and shall be deemed to have been given, received and dated: if by hand (with
receipt acknowledged), immediately upon delivery; if by express mail or any
other overnight delivery service, one day after dispatch; and if by certified
mail, return receipt requested, four days after mailing. All Communications are
to be given to the following addresses (or to such other address as any party
may designate by Communication in accordance with this Section):
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<PAGE>
If to the Bank: Bank Leumi Trust Company of
New York
562 Fifth Avenue
New York, New York 10017
Attn: Stuart Lifson,
Vice President
with copies to: Warshaw Burstein Cohen
Schlesinger & Kuh, LLP
555 Fifth Avenue
New York, New York 10017
Attn: Timothy Gilbert, Esq.
If to Borrower: One Liberty Properties,
Inc.
60 Cutter Mill Road
Great Neck, New York 11021
Attn: Matthew J. Gould,
President
8.5 AMENDMENTS AND WAIVERS. Neither this Agreement, nor any of
the Financing Agreements or any other instrument or document referred to herein
or therein may be changed, waived, discharged or terminated orally, except by an
instrument in writing signed by the party against whom enforcement of the
change, waiver, discharge or termination is sought.
8.6 APPLICABLE LAW. This Agreement and the Financing
Agreements and any other document referred to herein or therein and the
obligations of the parties hereunder or thereunder are being executed and
delivered in New York, New York and shall be construed and interpreted in
accordance with the laws of the State of New York applied to agreements entered
into and performed therein.
8.7 SUCCESSORS. This Agreement, the Financing Agreements and
any other document referred to herein or therein shall be binding upon and inure
to the benefit of and be enforceable by the parties and their respective heirs,
successors and assigns, except that the Borrower may not assign its rights under
this Agreement, the Financing Agreements and any other document referred to
herein or therein without the prior written consent of the Bank.
8.8 PARTIAL INVALIDITY. If any provision of this Agreement or
the Financing Agreements is held to be invalid or unenforceable, such invalidity
or unenforceability shall not invalidate this Agreement or the Financing
-39-
<PAGE>
Agreements as a whole but this Agreement or the particular Financing Agreement,
as the case may be, shall be construed as though it did not contain the
particular provision or provisions held to be invalid or unenforceable and the
rights and obligations of the parties shall be construed and enforced only to
such extent as shall be permitted by law.
8.9 HEADINGS AND WORD MEANINGS. The headings used herein are
for convenience only and do not constitute matters to be considered in
interpreting this Agreement. The words "herein," "hereinabove," "hereof," and
"hereunder," when used anywhere in this Agreement, refer to this Agreement as a
whole and not merely to a subdivision in which such words appear, unless the
context otherwise requires. The singular shall include the plural, the
masculine gender shall include the feminine and neuter and the disjunctive shall
include the conjunctive, and vice versa, unless the context otherwise requires.
8.10 WAIVER OF JURY TRIAL. THE PARTIES HERETO HEREBY WAIVE TRIAL
BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR
ARISING OUT OF THIS AGREEMENT, THE FINANCING AGREEMENTS OR ANY AGREEMENT,
INSTRUMENT OR DOCUMENT DELIVERED PURSUANT HERETO OR THERETO, OR THE VALIDITY,
PROTECTION, INTERPRETATION, ADMINISTRATION, COLLECTION OR ENFORCEMENT HEREOF OR
THEREOF, OR ANY OTHER CLAIM OR DISPUTE HEREUNDER OR THEREUNDER.
8.11 JURISDICTION; SERVICE OF PROCESS. The Borrower hereby
irrevocably consents to the jurisdiction of the Supreme Court of the State of
New York for the County of New York, and the United States District Court for
the Southern District of New York in connection with any action or proceeding
arising out of or relating to this Agreement, the Financing Agreements or any
agreement, document or instrument delivered pursuant hereto or thereto. In any
such litigation, Borrower waives personal service of any summons, complaint or
other process and agrees that the service thereof may be made by certified mail
directed to it at its address set forth herein, or designated in writing
pursuant to, this Agreement or in any other manner permitted by the rules of
either of said courts.
8.12 INDEMNITY. The Borrower hereby agrees to defend, indemnify,
and hold the Bank harmless from and against any and all claims, damages,
judgments, penalties, costs and expenses (including reasonable attorney fees and
court costs now or hereafter arising from the aforesaid enforcement of this
clause) arising directly or indirectly
-40-
<PAGE>
from the activities of the Borrower, its predecessors in interest, or third
parties with whom it has a contractual relationship, or arising directly or
indirectly from the violation of any environmental protection, health, or safety
law, whether such claims are asserted by any governmental agency or any other
Person. This indemnity shall survive termination of this Agreement.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered as of the day and year first above written.
One Liberty Properties,
By: /s/ Matthew Gould
-------------------------
Matthew Gould
Title: President
Bank Leumi Trust Company of New York
By: /s/ Stuart Lifson
-------------------------
Stuart Lifson
Title: Vice President
-41-
<PAGE>
EXHIBIT A
NOTE
$5,000,000 New York, New York
March 1, 1996
A. GENERAL; TERMS OF PAYMENT
1. FOR VALUE RECEIVED, the undersigned, ONE LIBERTY PROPERTIES,
INC., a corporation organized under the laws of the State of Maryland (the
"Borrower"), promises to pay to the order of Bank Leumi Trust Company of New
York (the "Bank"), at its office at 562 Fifth Avenue, New York, New York 10017,
or at such other place as may be designated by the holder hereof in writing, the
principal sum of FIVE MILLION ($5,000,000) DOLLARS or, if less, the aggregate
unpaid principal sum of all Revolving Loans made by the Bank to the Borrower
from time to time pursuant to a credit agreement, dated the date hereof, between
the Borrower and the Bank (the "Credit Agreement"), in one installment on
February 28, 1999.
The Bank is hereby authorized to enter on the schedule attached hereto
the amount of each Revolving Loan and each payment of principal thereon, without
any further authorization on the part of the Borrower or any endorser of this
Note, but the Bank's failure to make such entry shall not limit or otherwise
affect the obligations of the Borrower or any endorser of this Note.
The Borrower will pay interest on the unpaid principal amount of each
Revolving Loan from time to time outstanding, computed on the basis of a 360-day
year, at a rate per annum which shall be equal to one-half of one percent
(0.50%) above the rate of interest designated by the Bank, and in effect from
time to time, as its "Reference Rate", adjusted when said Reference Rate
changes, but in no event in excess of the maximum rate permitted by law. The
Borrower acknowledges that the Reference Rate may not necessarily represent the
lowest rate of interest charged by the Bank to its customers. Interest on the
unpaid principal amount of this Note shall be payable the first day of each
month in each year, commencing on the first day of the first full calendar month
after the date of this Note, at maturity (whether by acceleration or otherwise)
and upon the making of any prepayment, as herein provided. In addition, the
Borrower will pay interest on any overdue installment of principal for the
period for which overdue, on demand, at a rate equal to 3% per annum above the
rate of interest hereinabove indicated.
-1-
<PAGE>
2. PREPAYMENT. (a) The Borrower shall have the right to prepay this
Note as provided in Section 2.4.1 of the Credit Agreement.
(b) The outstanding principal sum of this Note is subject to
mandatory prepayment as provided in Section 2.4.2 of the Credit Agreement.
3. MANNER OF PAYMENT. All payments by the Borrower on account of
principal, interest or fees hereunder shall be made in lawful money of the
United States of America, in immediately available funds. The Borrower
authorizes (but shall not require) the Bank to debit any account maintained by
the Borrower with the Bank, at any date on which a payment is due under this
Note, in an amount equal to any unpaid portion of such payment. If any payment
of principal or interest becomes due on a day on which the Bank is closed (as
required or permitted by law or otherwise), such payment shall be made not later
than the next succeeding business day, and such extension shall be included in
computing interest in connection with such payment.
B. DEFAULT
Upon the occurrence of an Event of Default, as defined in the Credit
Agreement, and during the continuance thereof, the entire unpaid principal
amount of this Note and all interest and fees accrued and unpaid hereon may be
declared to be (or shall immediately become) due and payable in the manner and
with the effect provided in the Credit Agreement.
C. MISCELLANEOUS
1. NO WAVIER: RIGHTS AND REMEDIES CUMULATIVE. No failure on the
part of the Bank to exercise, and no delay in exercising any right hereunder
shall operate as a waiver thereof; nor shall any single or partial exercise by
the Bank of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The rights and remedies herein provided are
cumulative and not exclusive of any remedies or rights provided by law or by any
other agreement between the Borrower and the Bank.
2. COSTS AND EXPENSES. The Borrower shall reimburse the Bank for
all costs and expenses incurred by it and shall pay the reasonable fees and
disbursements of counsel to the Bank in connection with the enforcement of the
Bank's rights hereunder.
3. AMENDMENTS. No amendment, modification or waiver of any
provision of this Note nor consent to any departure by the
-2-
<PAGE>
Borrower therefrom shall be effective unless the same shall be in writing and
signed by the Bank and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
4. CONSTRUCTION. This Note shall be governed by the laws of the
State of New York, without giving effect to its choice of law principles. The
Borrower hereby irrevocably consents to the jurisdiction of the Supreme Court of
the State of New York for the County of New York, and the United States District
Court for the Southern District of New York, in connection with any action or
proceeding arising out of or relating to this Note, and the Borrower further
irrevocably consents to the service or process in any such action or proceeding
by the mailing of a copy of such process to the Borrower by Certified Mail,
Return Receipt Requested, at the address set forth below. In the event of
litigation between the Bank and the Borrower over any matter connected with this
Note, the right to a trial by jury is hereby waived by the Bank and the
Borrower.
5. SUCCESSORS AND ASSIGNS. This Note shall be binding upon the
Borrower and its successors and assigns and the terms hereof shall inure to the
benefit of the Bank and its successors and assigns, including subsequent holders
hereof.
6. SEVERABILITY. The provisions of this Note are severable, and if
any provision shall be held invalid or unenforceable in whole or in part in any
jurisdiction, then such invalidity or unenforceability shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Note in any jurisdiction.
7. WAIVER OF NOTICE; SET-OFF. The Borrower hereby waives
presentment, demand for payment, notice of protest and all other demands in
connection with the delivery, acceptance, performance, default or enforcement of
this Note. The balance of every account of the Borrower with, and each claim of
the Borrower against, the Bank existing from time to time shall be subject to a
lien and subject to be set-off against any and all liabilities of the Borrower
to the Bank, including those hereunder.
-3-
<PAGE>
8. CREDIT AGREEMENT. This Note is the Note referred to in the
Credit Agreement and the holder hereof is entitled to the benefits thereof and
of the other Financing Agreements (as defined in the Credit Agreement).
One Liberty Properties, Inc.
By:
----------------------------------------------------
,President
Address:
60 Cutter Mill Road
Great Neck, New York 11021
-4-
<PAGE>
Exhibit B to
Credit Agreement
Form of Notice of Borrowing
NOTICE OF BORROWING
________________ __, 19__
BANK LEUMI TRUST COMPANY OF NEW YORK
562 Fifth Avenue
New York, New York 10017
Attention:__________________________
1. (a) One Liberty Properties, Inc., ("Company") pursuant to the
Credit Agreement dated as of March 1, 1996, hereby requests Bank Leumi Trust
Company of New York to make a Revolving Loan on the following terms:
<TABLE>
<S> <C>
Principal Amount of Revolving Loan: $
Date of Revolving Loan:
</TABLE>
(b) The Company requests Bank Leumi Trust Company of New York
to apply the proceeds of the Revolving Loan as follows:
<TABLE>
<S> <C>
Transfer to financial institution and account
shown below:
Financial Institution:
Account No.: $
Total (same as principal amount of Revolving Loan): $
</TABLE>
B-1
<PAGE>
2. Capitalized terms used in this Notice shall have the meanings
set forth in the Credit Agreement.
ONE LIBERTY PROPERTIES, INC.
By:
------------------------------------------
Name:
----------------------------------------
Title:
---------------------------------------
B-2
<PAGE>
EXHIBIT C
[Logo]
SECURITY AGREEMENT
In consideration of financial accommodation heretofore extended or to be
extended or continued to the undersigned by BANK LEUMI TRUST COMPANY OF NEW YORK
(the "Bank"), the undersigned hereby agrees as follows:
1. As security for the full and prompt payment of any and all Liabilities
(as hereinafter defined), the undersigned hereby assigns and transfers to the
Bank and grants the Bank a security interest in all Security (as hereinafter
defined). Said grant is made for the benefit of the Bank and/or any others
having a participation or other interest in any of the Liabilities, in such
proportions as the Bank shall in its sole discretion determine.
2. The term "Liabilities" as used herein shall include all liabilities and
obligations of any kind of the undersigned (or any partnership or other group of
which the undersigned is a member) to (i) the Bank, (ii) any group of which the
Bank is a member or (iii) any other person if the Bank has a participation or
other interest in such liabilities or obligations, whether (a) for the Bank's
own account or as agent for others, (b) acquired directly or indirectly by the
Bank from the undersigned or others, (c) absolute or contingent, joint or
several, secured or unsecured, liquidated, due or not due, contractual or
tortious, now existing or hereinafter arising, or (d) incurred by the
undersigned as principal, surety, endorser, guarantor or otherwise, and
including without limitation all expenses, including attorneys' fees, incurred
by the Bank in connection with any such liabilities or obligations or any
Security therefor.
3. The term "Security" as used herein shall include all of the property
described in Schedule A hereto.
4. The right is granted to the Bank, in its discretion, to file one or more
financing statements (with or, to the extent permitted by law, without the
signature of the undersigned) under the Uniform Commercial Code naming the
undersigned as debtor and the Bank as secured party and indicating therein the
types of describing the items of Security herein specified. The undersigned will
execute, file and record any notices, affidavits or other documents and take all
such other undersigned hereby agrees to pay on demand, and/or authorizes the
Bank to charge its account with the cost of, any and all filing, recording and
other fees and expenses which the Bank deems appropriate in order to protect or
perfect its security interest in the Security or to otherwise accomplish the
purposes of this notify the Bank of the imposition at any time of any lien or
encumbrance upon any of the Security. Notwithstanding the foregoing, the
undersigned will promptly notify the Bank of the imposition at any time of any
lien or encumbrance upon any of the Security. Notwithstanding the foregoing, the
undersigned represents, warrants and covenants that all of the Security now
existing or hereafter arising or acquired is and will be owned by the
undersigned free and clear of all security interests, liens and encumbrances of
any kind, except for the security interest herein granted to the Bank. The
undersigned shall promptly pay when due all taxes and transportation, storage
and warehousing charges affecting or arising out of the Security. The
undersigned will defend the Security against all claims and demands of all
persons at any time claiming the same or any interest therein adverse to the
Bank.
Notwithstanding the foregoing, the Bank shall have no obligation to comply
with any recording, re-recording, filing, re-filing, or other legal requirements
necessary to establish or maintain the validity, priority or enforceability of,
or the Bank's right in or to, the Security or any part thereof.
5. The right is granted to the Bank, its discretion, at any time, (a) to
transfer to or register in the name of itself or any of its nominees any of the
Security, and whether or not so transferred or registered, to receive the income
and dividends thereon, including stock dividends and rights to subscribe, and to
hold the same as a part of the Security and/or apply the same as hereinafter
provided; (b) to exchange any of the Security for other property upon any
reorganization, recapitalization, or other readjustment and in connection
therewith to deposit any of the Security with any committee or depositary upon
such terms as the Bank may determine; (c) in any bankruptcy or similar
proceeding to file a proof of claim for the full amount of the Security and to
vote such claim for or against any arrangement or with respect to any other
matter; (d) in its own name or in the name of the undersigned or any other
appropriate person, to demand, sue for, collect or receive any money or property
at any time payable or receivable on account of or in exchange for, or make any
compromise or settlement it may deem desirable with respect to, any of the
Security, (e) to extend the time of payment, arrange for payment in
installments, or otherwise modify the terms of, or release, any of the Security;
(f) to contest, pay and/or discharge all liens, encumbrances, taxes or
assessments on, or claims, actions or demands against, any of the Security and
to take all actions and proceedings in its own name or in the name of the
undersigned or any other appropriate person in order to remove or contest such
liens, encumbrances, taxes, assessments, claims, actions or demands; or to
refrain from doing any of the foregoing, all without affecting the Liabilities
and the Security and without notice or liability to or the consent of the
undersigned except to account for property actually received by the Bank. The
undersigned hereby irrevocably appoints the Bank its attorney-in-fact, with
authority to receive, open and dispose of all mail addressed to the undersigned
and to notify the Post Office authorities to change the address for delivery of
mail addressed to the undersigned to such address as the Bank may designate; to
endorse the name of the undersigned on any instruments that may come into the
bank's possession; to sign the name of the undersigned on any notices to account
debtors of the undersigned and requests for verification of accounts; to sign
the name of the undersigned on any assignment or other instruments of conveyance
or transfer of any of the Security; and to take all such other actions as the
Bank may deep appropriate to carry out and enforce this agreement and to
exercise the Bank's rights hereunder. The Bank shall not be obligated to
exercise any authority or right granted to it hereunder and shall not be liable
for any action taken or omitted or the manner of taking any action, except for
its willful misconduct, and in no event for consequential damages.
6. The undersigned will pay to the Bank all costs and expenses incurred and
sums paid by the Bank (including without limitation reasonable attorneys' fees,
insurance premiums and sales commissions) in connection with the custody, care,
collection, repair, storage or preparation for or any actual or attempted
disposition of any of the Security, the collection of any proceeds of insurance
with respect to the Security or otherwise in connection with this agreement.
7. At any time and from time to time, upon demand by the Bank, the
undersigned will (a) deliver to the Bank, endorsed and/or accompanied by
instruments of assignment and transfer, in such form and containing such terms
as the Bank may request, any and all instruments, documents and/or chattel paper
constituting part of the Security, as the Bank may specify in its demand, (b)
mark all Security and all books and records relating thereto in such manner as
the Bank may require, and (c) permit representatives of the BANK at any time to
inspect the Security and to inspect and make abstracts from any of the
undersigned's books and records and to answer promptly all of the Bank's written
or oral inquiries with respect thereto. If the undersigned, as registered holder
of any of the Security, shall receive any stock certificate, option or right,
whether as an addition to, or in substitution or exchange for, any Security, or
otherwise, the undersigned agrees to accept the same as the Bank's agent and to
hold the same in trust for the Bank, and to forthwith deliver the same to the
Bank in the exact form received, with the undersigned's endorsement thereof if
requested by the Bank, to be held by the Bank as part of the Security. The
undersigned assigns to the Bank all of the undersigned's rights (but none of its
obligations) in, to and under all collateral, guarantees, subordinations and
other rights and benefits now or hereafter received by the undersigned with
respect to the Security and agrees to deliver to the Bank, upon demand, all
agreements, instruments and/or documents evidencing same, endorsed and/or
accompanied by instruments of assignment and transfer, in such form and
containing such terms as the Bank may request.
8. Upon demand from the Bank at any time that any of the Liabilities are
outstanding, the undersigned will assign and transfer to the Bank and grant to
the Bank a security interest in additional Security of a value and character
satisfactory to the Bank or make such payment on account of the Liabilities as
the Bank may require.
9. Upon the occurrence of an Event of Default (as hereinafter defined), (a)
any or all of the Liabilities shall, at the option of the Bank and
notwithstanding any time or credit allowed by any instrument evidencing a
Liability, be immediately due and payable without notice, demand or presentment;
(b) the Bank may, in its discretion, take possession of the Security and, for
that purpose, may enter, with the assistance of any persons, any premises where
the Security or any part thereof may be located, and retain possession of the
Security at such premises or remove the same therefrom; (c) the undersigned
shall, at the request of the Bank assemble the Security at such places as the
Bank may designate and cooperate in all other respects with the Bank in the
exercise of its rights hereunder; (d) the Bank may vote any shares of stock or
other securities and exercise all or any powers with respect hereto with the
same force and effect as an absolute owner thereof; (e) the Bank may sell any of
the Security or cause the same to be sold in the Borough of Manhattan, New York
City, or elsewhere, in one or more sales or parcels, at such price and on such
terms as the Bank may deem advisable, for cash or on credit, for immediate or
future delivery, without assumption of any credit risk, at any public or private
sales or other dispositions, without demand of performance (which demand is
hereby expressly waived), on at least 5 days notice to the undersigned (if any
notice is required by law) of any public sale or the time after which a private
sale or other disposition may be made (which notice the undersigned acknowledges
is reasonable), and in connection therewith may grant options and may impose
reasonable conditions thereon, and the purchasers of
<PAGE>
any of the Security so sold shall thereafter hold the same absolutely, free from
any claim or right of any kind, including any equity of redemption of the
undersigned (any such equity being hereby expressly waived and released), and
the Bank or any of its nominees or agents may buy at any public sale and if the
Security is of a type sold in a recognized market, or is of a type which is the
subject of widely distributed standard price quotations, buy at private sale;
and (f) in addition to and notwithstanding any other rights granted by law or
herein (or any limitations contained herein on any such rights), the Bank shall
have the rights and remedies with respect to the Security of a secured party
under the Uniform Commercial Code of the State of New York. The undersigned
agrees that any action taken by the Bank in accordance with this paragraph shall
be deemed to be commercially reasonable.
10. As used in this agreement, the term "Event of Default" shall have the
meaning ascribed to it in that certain Credit Agreement dated of even date
herewith between the Bank and undersigned (the "Credit Agreement").
11. Notwithstanding the continued possession of the Security by the Bank,
whether on its own behalf or on behalf of others, the undersigned shall remain
liable for the payment in full of the Liabilities. The undersigned assumes all
liability and responsibility for the Security, and the obligation of the
undersigned to pay the Liabilities shall in no way be affected or diminished by
reason of the fact that any of the Security may be lost, destroyed, stolen,
damaged or for any other reason whatsoever unavailable to the undersigned or the
at the value of the Security shall be diminished. In the event of any partial or
complete loss or destruction of any of the Security by any means, the
undersigned shall, at its own expense, cause such repairs to be made as the Bank
may deem appropriate fro its protection or, at the option of the Bank, replace
the security with new Security having a value equal to the value of the lost or
destroyed Security prior to such loss or destruction. The undersigned agrees, at
its own expense, to keep all insurable Security insure against loss or damage by
fire, theft or any other risk to which the Security may be subject ( including
without limitation such hazards as the Bank may specify), for the full insurable
value thereof, under policies and with insurers acceptable to the Bank, which
policies shall provide for all losses to be payable to the Bank and for at least
30 days prior notice to the Bank of any intended cancellation or modification of
the policy. The undersigned will deliver to the Bank on request policies or
certificates of such insurance with evidence of payment of the premium thereon.
If the undersigned fails to maintain said insurance, then, in addition to any
other right or remedy tat the Bank may have and without waiving the
consequences of such default, the bank may but need not obtain and maintain said
insurance, at the expense of the undersigned, which expense shall be deemed one
of the Liabilities and shall be payable to the BANK on demand. The Bank is
irrevocably authorized to fill claims and shall have the sole right to adjust,
settle and collect claims under said insurance by such means, at such times, on
such terms and in the name of the Bank or the undersigned, as the Bank may see
fit, and in the name and on behalf of the undersigned to execute releases and
endorse checks or drafts payable in respect of any such insurance claims. All
sums received by the Bank from any such insurance may be held as part of the
Security and/or applied as hereinafter provided.
12. The Bank, at any time, at its option, may apply all of any net cash
receipts from the Security (whether received on a sale of the Security in
accordance with paragraph 9 hereof, on collection in accordance with paragraph 5
hereof, as proceeds of insurance in accordance with paragraph 11 hereof, or
otherwise) to the payment, in whole or in part, of principal of and/or interest
on any or all of the Liabilities, whether or not then due, allocating the same
as it shall elect, making rebate of interest or discount to the extent required
by law and so as not to make the rate of interest charged unlawful with respect
to the undersigned. If any Liabilities shall be contingent, the Bank may retain
a sufficient amount of the net cash receipts from the Security to cover the
largest aggregate sum which may become due or owing thereunder with prospective
interest, cost, expenses and attorneys' fees and shall not be charged with any
interest with respect thereto.
13. The undersigned may not sell, lease, assign or otherwise dispose of any
of the Security without the prior written consent of the Bank. In addition, the
undersigned may not sell, assign or otherwise dispose of any shares of stock or
other securities now owned or hereafter acquired by the undersigned which are
issued by the same issuer and are of the same class as any shares of stock or
other securities constituting a part of the Security. The undersigned shall keep
all of the Non-possessory Security (as described in Schedule A hereto) at the
undersigned's premises listed in Schedule A hereto and shall not remove any of
the Non-Possessory Security therefrom without the Bank's prior written consent.
14. In any litigation or legal proceeding arising out of, or relating to ,
this agreement or any of the Liabilities or Security, in which the Bank and the
undersigned shall be adverse parties, the undersigned waives the right to
interpose any defense, set-off or counterclaim of any kind not directly arising
herefrom or therefrom, as the case may be, and also waives the right to a trial
by a jury. In the event that the Bank brings any action or suit in any court of
record of New York State or the Federal Government to enforce any or all of the
Liabilities or any of the Bank's rights hereunder, service of process may be
made upon the undersigned by mailing a copy of the summons to the undersigned at
its chief executive office set forth in Schedule A hereto, and the undersigned
hereby irrevocably submits to the jurisdiction of any New York State or Federal
court located in New York City over any action, suit or proceeding arising out
of any dispute between the undersigned and the Bank.
15. If in its sole discretion the Bank deems it desirable, it may remove
any Security held by it from the place where it may now or hereafter be located
to any other place and deal with it there as herein provided.
16. Upon the occurrence of an Event of Default, and at any time thereafter,
the Bank shall have and may exercise, without further notice, a right of set-off
and/or banker's lien against and in respect of any of the Security then or
thereafter held by the Bank. Any right of set-off exercised by the Bank shall be
deemed to have been exercised immediately on the occurrence of an Event of
Default, even though such set-off is made or entered on the books of the Bank
subsequent thereto.
17. If the time for payment of principal of or interest on any of the
Liabilities or any other money payable hereunder or with respect to any of the
Liabilities is extended because said sum becomes due on a Saturday, Sunday or
public holiday, interest shall be payable for such extended time.
18. The Bank shall not be deemed to have modified or waived any of its
rights hereunder or any terms or conditions hereof unless such modification or
waiver is in writing and signed by a duly authorized officer of the Bank. No
such modification or waiver, unless so expressly stated herein, shall be
effective as to any transaction which occurs subsequent to the date of such
modification or waiver nor shall it constitute a continuing modification or
waiver. No delay on the part of the Bank in exercising any power or right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any power or right hereunder preclude any other or further exercise
thereof or the exercise of any other power or right. All rights and remedies of
the Bank with respect to the Liabilities or Security, Whether evidenced hereby
or by any other instrument or paper, shall be cumulative and may be exercised
singularly or concurrently.
19. The Bank may assign and/or transfer to any assignee or transferee of
any of the Liabilities any or all of the Security and the BANK's rights
hereunder with respect thereto, and thereafter the Bank shall be fully
discharged from all responsibility with respect to the Security so assigned
and/or transferred. Such assignee
<PAGE>
or transferee shall be vested with all the powers and rights of the Bank
hereunder with respect to such Security, but the Bank shall retain all rights
and powers hereby given with respect to any of the Security not so assigned or
transferred. The undersigned will not assert against any assignee or transferee
of any of the Liabilities any claims or defenses it may have against the Bank.
20. The undersigned hereby waives presentment, notice of dishonor and
protest with respect to all instruments included in or evidencing the
Liabilities or the Security and except as specified herein, any and all other
notices and demands whatsoever, whether or not relating to such instruments.
21. The undersigned will indemnify and save the Bank harmless from and
against all loss or damage to it and any claims and actions, whether groundless
or otherwise, arising in connection with this agreement, the Liabilities or the
Security, and all costs and expenses (including attorneys' fees) incurred by the
Bank in respect thereof.
22. If any term, condition or provision of this agreement or document
executed in connection herewith or in connection with any of the Liabilities or
Security is determined to be invalid or unenforceable, such determination shall
not affect the validity or enforceability of any other term, condition or
provision.
23. Any demand upon or notice to the undersigned that the Bank may elect to
give shall be effective if deposited by certified mail addressed to or otherwise
delivered to the undersigned at its chief executive office or if the undersigned
has notified the Bank in writing by registered mail of a change of address, at
the last address of which the Bank has received notice. Demands or notices
addressed or otherwise delivered to the address at which the Bank customarily
communicates with the undersigned shall also be effective.
24. If any of the Security is or is to be attached to or installed or
located on real estate, the undersigned will upon demand furnish the Bank with a
disclaimer signed by all persons having an interest in said real estate of any
interest prior to the Bank's interest in the Security.
25. From and after maturity (whether by acceleration or otherwise) of any
of the Liabilities, any unpaid balance remaining shall bear interest at the rate
provided in Section 2.1.4(ii) of the Credit Agreement. Anything in this
agreement or any other agreement, instrument or document to the contrary
notwithstanding, in no event shall interest on any Liability exceed the maximum
rate permitted under any applicable law or regulation, and if any provision of
this agreement, instrument or document is in contravention of any such law or
regulation, such provision shall be deemed amended to provide for interest at
said maximum rate.
26. The undersigned, if more than one, shall be jointly and severally
liable hereunder and all provisions hereof regarding the liabilities or Security
shall apply to any Liability or any Security of any or all of them. This
agreement shall be binding upon the heirs, executors, administrators, successors
and assigns of the undersigned and shall inure to the benefit of the its
successors and assigns. For purposes of this agreement, the term "Bank" shall
include the Bank and any and all subsidiaries of the Bank. If all Liabilities
shall at any time be paid in full, this agreement shall nonetheless remain in
full force and effect with respect to any Liabilities thereafter incurred. If
the undersigned is a corporation, this agreement shall be binding upon any other
corporation into or with which the undersigned shall be merged, consolidated,
reorganized or absorbed, or which shall acquire the undersigned's business or
substantially all of its assets. If the undersigned is a partnership, the
members thereof shall also be individually bound and liable hereunder and this
agreement shall continue in force notwithstanding any change in or termination
of such partnership, whether such change occurs through death, retirement or
otherwise. Except as otherwise provided herein, all terms used herein which are
defined in the Uniform Commercial Code of the State of New York shall have the
meanings therein stated. If this agreement shall differ in terms with any other
agreement or obligation or the terms of any of the Liabilities, that which gives
the Bank the greater right shall prevail.
27. If any of the Security is applied on account of any of the Liabilities,
the undersigned shall not have any right of subrogation to the Bank's right in
any other Security held by the Bank with respect to the Liabilities or any right
of contribution from the Bank by reason thereof.
28. The Bank is authorized to correct patent errors herein. This agreement
shall take effect immediately upon execution by the undersigned, and the
execution hereof by the Bank shall not be required as a condition to the
effectiveness of this agreement.
29. Notwithstanding anything to the contrary contained herein, the term
"Security" as used herein shall be deemed to include any and all book-entry U.S.
at a bank which is a member of the Federal Reserve System. The undersigned
authorizes the Bank to serve as its bailee and agent with respect to the
aforementioned book-entry Treasury bills and other book-entry securities and to
take such action and to execute and deliver such documents on behalf of the
undersigned as the Bank deems necessary or desirable in order to perfect the
Bank's security interest therein. The undersigned hereby gives notice to the
Bank, in the Bank's capacity as bailee and agent, of the Bank's security
interest in the aforementioned book-entry Treasury bills and other book-entry
securities.
30. This agreement shall be interpreted, and all the rights and obligations
arising hereunder or from any document relating hereto shall be determined, in
accordance with the laws of the State of New York.
SEE RIDER ATTACHED HERETO AND MADE A PART HEREOF.
SCHEDULE A
The term "Security" shall include:
(1) All Possessory Security identified in paragraph (a) below,
(2) Unless box (v) below is checked and initialled by the Bank and the
undersigned, all Non-Possessory Security identified in paragraph(b) below
wherever located and whether now owned or hereafter acquire, and
(3) All substitutions for, all additions to (including without limitation
all dividends and other distributions on and all rights, privileges and
options relating to or declared or granted in connection with) and all
proceeds of insurance thereon).
(a) Possessory Security shall mean the balance of every deposit account of
the undersigned with the Bank or any of the Bank's nominees or agents and all
other obligations of the Bank or any of its nominees or agents to the
undersigned, whether now existing or hereafter arising, and all other personal
property of the undersigned (including without limitation all money, accounts,
general intangibles, goods, instruments, documents and chattel paper) which, or
any evidence of which, are now or at any time in the future shall come into the
possession or under the control of or be in transit to the Bank or any of its
nominees or agents for any purpose, whether or not accepted for the purposes for
which it was delivered.
(b) Non-Possessory Security. Unless one or more boxes below are checked and
initialled by the Bank and the undersigned, Non-Possessory Security shall mean
all personal property of the undersigned, including without limitation all
accounts, general intangibles, goods, instruments, documents and chattel paper.
ONLY IF THE NON-POSSESSORY SECURITY IS TO BE LIMITED, SHOULD ANY OF THE BOXES
BELOW BE CHECKED AND INITIALLED. If any of boxes (i) through (iv) below are
checked and initialed by the Bank and the undersigned, the Non-Possessory
Security shall be limited to whatever is checked.
BANK UNDERSIGNED DESCRIPTION
- ----------------------------------------- / / (i) All Inventory and Documents
/ / (ii) All Accounts, Chattel Paper
and Instruments and all Goods
returned to or repossessed or
otherwise reacquired by the
undersigned which relate to the
foregoing.
- -----------------------------------------
/ / (iii) All Equipment and Fixtures,
including without limitation the
equipment shown on the attached
schedule (if any)
- ----------------------------------------- / / (iv) All Property shown on any
attached schedule.
- ----------------------------------------- / / (v) POSSESSORY SECURITY ONLY
<PAGE>
The undersigned represents and warrants to the Bank that (a)the location of the
undersigecd's chief executive office is as set forth below, (b) except as set
forth below, all of the Non-Possessory Security is located at the undersigned's
chief executive office, and (c) each premises where any of the Non-Possessory
Security is located is owned or leased by the undersigned.
Chief Executive Office--(strect address; county; state; zip code):
60 Cutter Mill Road
- ----------------------------------------
Great Neck, New York 11021
- ----------------------------------------
- ----------------------------------------
Other promises where Security is located--(street address; county; state; zip
code):
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
New York, New York
March 1 .1996
- -------------------------------- --
(Individuals sign below)
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
- ----------------------------------------
(Corporations or Partnerships sign below)
- ----------------------------------------
(Name of Corporation or Partnership)
By:-------------------------------------
- ----------------------------------------
(Title)
By:-------------------------------------
- ----------------------------------------
(Title)
By:-------------------------------------
- ----------------------------------------
(Title)
<PAGE>
RIDER ATTACHED TO AND MADE A PART OF SECURITY
AGREEMENT DATED MARCH 1, 1996, BETWEEN
AND BANK LEUMI
-------------------------
TRUST COMPANY OF NEW YORK
-------------------------------------------
31. DEFINITIONS. Any initially capitalized term used in this Rider
without definition shall have the same meaning herein as in the Credit
Agreement, unless the context otherwise requires.
32. CONFLICT. In the event of any conflict between the terms of this
agreement and the Credit Agreement, the terms of the Credit Agreement shall
prevail.
33. SECURITY. The Security shall include, without limitation, all
the right, title and interest of the undersigned in and to each and every
mortgage, deed of trust, land sale contract or similar instrument ("Mortgage")
and promissory note or similar instrument or obligation ("Mortgage Note")
secured thereby which are heretofore or hereafter owned by the undersigned and
all security agreements, guaranties, insurance policies, agreements and all
other documentation delivered to the undersigned in connection with such
Mortgage and Mortgage Note (collectively, the "Mortgage Collateral").
Simultaneously with the execution of this agreement, the undersigned is
delivering and assigning to the Bank the Mortgage Collateral described on
Schedule 1 annexed hereto and made a part hereof.
34. ADDITIONAL DOCUMENTS. Concurrently with the undersigned
acquiring a Note and Mortgage, the undersigned shall collaterally assign to the
Bank all of its right, title and interest as mortgagee under the Mortgage, the
accompanying Mortgage Note secured thereby, and the other Mortgage Collateral.
In addition, the undersigned shall deliver to the Bank the following
documentation in a form acceptable to the Bank:
(a) the original Mortgage Note being assigned, signed by the
mortgagor thereunder, together with an allonge to such Mortgage
Note endorsing the same to the Bank;
(b) a recorded original signed copy of the Mortgage being assigned
or, if the Mortgage being assigned has not yet been recorded, a
copy of the executed Mortgage being assigned
<PAGE>
in the form delivered for recording (with all documents and fees
required to record said Mortgage unless previously delivered for
recording);
(c) an original signed assignment of the Mortgage in form acceptable
for recording, with covenants, by which the undersigned's
interest in such Mortgage is assigned to the Bank (with all
documents and fees required to record said assignment);
(d) Uniform Commercial Code Financing Statements, which financing
statements shall give, when filed, the Bank a perfected security
interest in the undersigned's interest in the Mortgage Collateral
being assigned;
(e) a policy of title insurance, with respect to the Mortgage being
assigned, issued by a title insurance company reasonably
satisfactory to the Bank and containing only such exceptions to
title as are acceptable to the Bank, naming the Bank as
mortgagee, as its interest may appear, or a commitment by such
title insurance company to issue such a policy upon the recording
of the assignment of the Mortgage provided for in subparagraph
(c) hereof, along with the payment of the fee to be charged by
such title company, if any, for providing such insurance
coverage;
(f) a survey of the real property encumbered by the Mortgage (the
"Mortgaged Property") being assigned to the Bank;
(g) a fire and hazard insurance policy for the Mortgaged Property in
an amount acceptable to the Bank naming the Bank as a mortgagee,
as its interest may appear;
(h) a flood insurance policy if the Mortgaged Property encumbered by
the Mortgage being assigned is located in an area identified by
the Secretary of Housing and Urban Development as an area having
special flood hazards, naming the Bank as a mortgagee, as its
interest may appear, or a certificate from the appropriate
municipal agency, or
2
<PAGE>
other evidence satisfactory to the Bank, stating that such
premises are not in a special flood hazard area;
(i) permanent Certificates of occupancy for the structures located on
the Mortgaged Property encumbered by the Mortgage being assigned;
(j) an estoppel certificate from the fee owner of the Mortgaged
Property encumbered by the Mortgage being assigned in a form
acceptable to the Bank;
(k) a letter of direction regarding the payments due under the
Mortgage (and Mortgage Note secured thereby) being assigned,
acknowledged by the mortgagor thereunder (the
"Mortgagor"), in the form annexed hereto as Exhibit 1 or in such
other form as the Bank may reasonably require; and
(l) such other documents as the Bank may reasonably request, in form
and substance acceptable to the Bank.
35. COVENANTS. The undersigned further warrants, covenants and
agrees as follows:
(a) The undersigned shall not modify, extend or amend any of the
terms or provisions of any Mortgage Mote or any Mortgage and shall not waive any
of its rights under any of the Mortgage Notes or Mortgages without obtaining the
prior written consent of the Bank in each instance;
(b) The undersigned shall perform all of the terms, covenants and
conditions on its part to be performed, if any, under the Mortgage Notes and/or
Mortgages;
(c) Within five (5) days of its receipt of knowledge thereof, the
undersigned shall notify the Bank of the occurrence of a default under any of
the Mortgage Notes and/or the Mortgages and shall take such action with respect
thereto as the Bank may direct;
(d) Within five (5) days of its receipt or delivery thereof, as the
case may be, the undersigned shall forward to the Bank copies of all notices or
demands received or sent by the undersigned under or with respect to any of the
Mortgage Notes and/or Mortgages;
3
<PAGE>
(e) With regard to the Mortgages, the undersigned hereby authorizes
the Bank to give written notice of this assignment, at any time, to any or all
of the Mortgagors, or their successors, as the owners of the various Mortgaged
Properties. The undersigned hereby authorizes and directs each of the
Mortgagors to pay all installments of principal and/or interest due under its
respective Mortgage Note directly to the Bank upon receipt from the Bank of a
written statement that an Event of Default has occurred, accompanied by a demand
for such payment, without any further proof of the undersigned's default, and
the undersigned covenants and agrees that the Mortgagors shall not be liable to
the undersigned for any payments made to the Bank pursuant to such written
notice; and
(f) the undersigned hereby certifies to the Bank that to the best of
its knowledge no default (or any event which, with the passage of time or the
giving of notice, or both, would constitute a default) has occurred under any of
the Mortgage Notes or Mortgages.
36. REPRESENTATIONS AND WARRANTIES. The undersigned hereby
represents and warrants to the Bank as follows:
(i) The shares of common stock of each Existing Subsidiary
identified on Schedule 2 annexed hereto and made a part hereof, which constitute
part of the Security (the "Pledged Shares"), have been validly issued by such
Existing Subsidiary and are fully paid and nonassessable. The Pledged Shares
identified opposite the name of each Existing subsidiary on said Schedule
constitute all of the issued and outstanding shares of capital stock of such
Existing Subsidiary. There are no existing options, warrants or rights of any
kind to purchase or acquire shares of the capital stock of any Existing
Subsidiary.
(ii) The undersigned is the legal record and beneficial owner of,
and has good and marketable title to, the Pledged Shares, free and clear of all
liens and encumbrances of every nature (except for the liens of the Bank).
(iii)The undersigned has full power, authority and legal right to
pledge the Pledged Shares to the Bank pursuant to this agreement.
(iv) The pledge of the Pledged Shares pursuant to this agreement
creates a valid and perfected
4
<PAGE>
first priority security interest in favor of the Bank in the Pledged Shares.
37. RIGHTS OF PARTIES.
37.1 Notwithstanding anything to the contrary contained in this
agreement, so long as an Event of Default has not occurred:
(i) The undersigned shall be entitled to exercise any and
all voting rights pertaining to the Pledged Shares or any part thereof for any
purpose not inconsistent with the terms of this agreement or the Credit
Agreement; provided that, the undersigned shall not exercise or refrain from
exercising any such voting right if, in the Bank's judgment, such action would
have a material and adverse effect on the value of the Pledged Shares or any
part thereof.
(ii) Any stock dividends on the outstanding shares of
capital stock of each Existing Subsidiary shall forthwith be delivered to the
Bank to hold as Pledged Shares hereunder (with any necessary endorsement and
stock powers) and shall, if received by the undersigned, be received in trust
for the benefit of the Bank, be segregated from the other property of the
undersigned, and be forthwith delivered to the Bank as Pledged Shares in the
same form as so received (with any necessary endorsement and stock powers).
37.2 Upon the occurrence of an Event of Default all rights of the
undersigned to exercise the voting rights which it would otherwise be entitled
to exercise pursuant to Section 37.1(i) shall cease, and all such rights shall
thereupon become vested in the Bank which shall thereupon have the sole right to
exercise such voting rights. The rights of the Bank pursuant to the provisions
of the preceding sentence shall be in addition to any other rights or remedies
the Bank may have as a result of such Event of Default.
38. MISCELLANEOUS.
38.1 The Bank shall not be responsible or liable to the
undersigned with respect to the Pledged Shares except in the case of the Bank's
gross negligence or willful misconduct, it being understood that the Bank shall
not have any responsibility for ascertaining or taking action with
5
<PAGE>
respect to calls, conversions, exchanges, maturities, tenders or other matters
relative to any Pledged Shares.
38.2 If the Bank shall determine to exercise its right to sell
all or any of the Pledged Shares pursuant to Section 9 of this agreement, the
undersigned agrees that, upon request of the Bank, the undersigned will, at its
expense, do or cause to be done all such acts and things as may be necessary to
make such sale of the Pledged Shares or any part thereof valid and binding and
in compliance with applicable law.
6
<PAGE>
SCHEDULE 1
[To be completed]
<PAGE>
SCHEDULE 2
[To be completed]
<PAGE>
EXHIBIT I
BANK LEUMI TRUST COMPANY OF NEW YORK
562 Fifth Avenue
New York, New York 10036
March 1, 1996
___________________
___________________
___________________
Re: Mortgage Note and Mortgage shown on Schedule 1 annexed hereto,
encumbering premises described on said Schedule 1 (COLLECTIVELY,
"MORTGAGE")
Gentlemen:
This will inform you that the Mortgage has today been collaterally assigned to
Bank Leumi Trust Company of New York (the "Bank"). A copy of such assignment is
enclosed herewith. Accordingly, you are hereby instructed as follows:
A. Effective immediately, all prepayments made by you under the Mortgage
and principal payments made upon the maturity of the Mortgage (whether stated or
by acceleration), are to be paid to the order of the Bank and sent to the Bank
at 562 Fifth Avenue, New York, New York 10036, Attention: Stuart Lifson; and
B. Upon receipt by you of notice from the Bank that an event of default
has occurred under that certain Security Agreement dated March 1, 1996, between
the Bank and One Liberty Properties, Inc., all payments of principal and
interest due under the Mortgage not previously paid are to be sent to the order
of the Bank at the address provided for in said notice.
Very truly yours,
BANK LEUMI TRUST COMPANY OF NEW YORK
By:____________________________
Name:__________________________
Title:_________________________
The foregoing is consented and agreed to:
ONE LIBERTY PROPERTIES, INC.
By:_________________________
Name:_______________________
Title:______________________
____________________________
By:_________________________
Name:_______________________
Title:______________________
<PAGE>
[Logo] EXHIBIT D
UNLIMITED GUARANTY
In consideration of financial accommodations given or to be given or
continued to ONE LIBERTY PROPERTIES, INC., herein called "Borrower" by BANK
LEUMI TRUST COMPANY OF NEW YORK herein called "Bank", the undersigned
irrevocably and unconditionally guarantee to the Bank, payment when due, whether
by acceleration or otherwise, of any and all liabilities of the Borrower to the
Bank, together with all interest thereon and all attorneys' fees, costs and
expenses of collection incurred by the Bank in enforcing any of such
liabilities.
The term "liabilities of the Borrower" shall include all liabilities,
direct, indirect, or contingent, joint, several or independent, of the Borrower
now or hereafter existing, due or to become due to, or held or to be held by,
the Bank for its own account or as agent for another or others, whether created
directly or acquired by assignment or otherwise.
The undersigned waive notice of acceptance of this guaranty and notice of
any liability to which it may apply, and waive presentment, demand of payment,
protest, notice of dishonor or nonpayment of any such liabilities, suit or
taking other action by the Bank against, and any other notice to, any party
liable thereon (including the undersigned).
The Bank may at any time and from time to time (whether or not after
revocation or termination of the guaranty) without the consent of, or notice to,
the undersigned, without incurring responsibility to the undersigned, without
impairing or releasing the obligations of the undersigned hereunder, upon or
without any terms or conditions and in whole or in part.
(1) change the manner, place or terms of payment, and/or exchange or
extend the time of payment of, renew or alter, any liability of the Borrower,
any security therefor, or any liability incurred directly or indirectly in
respect thereof, and the guaranty herein made shall apply to the liabilities of
the borrower as so changed, extended, renewed, or altered;
(2) sell, exchange, release, surrender, realize upon or otherwise deal
with in any manner and in any order any property by whomsoever at any time
pledged or mortgaged to secure, or however securing, the liabilities hereby
guaranteed or any liabilities (including any of those hereunder) incurred
directly or indirectly in respect thereof or hereof, and/or any offset
thereagainst.
(3) exercise or refrain from exercising any rights against the Borrower or
others (including the undersigned) or otherwise act or refrain from acting;
(4) settle or compromise any liability hereby guaranteed, any security
therefor or any liability (including any of those hereunder) incurred directly
or indirectly in respect thereof or hereof, and may subordinate the payment of
all or any part thereof to the payment of any liability (whether due or not) of
the Borrower to creditors of the borrower other than the Bank and the
undersigned; and
(5) apply any sums by whomsoever paid or howsoever realized to any
liability or liabilities of the Borrower to the Bank regardless of what
liability or liabilities of the Borrower remain unpaid.
No failure by the Bank to file, record or otherwise perfect any lien or
security interest, nor any improper filing or recording, nor any failure by the
Bank to insure or protect any security nor any other dealing (or failure to
deal) with any security by the Bank, shall impair or release the obligations of
the undersigned hereunder.
No invalidity, irregularity or unenforceability of all or any part of the
liabilities hereby guaranteed or of any security therefore shall affect, impair
or be a defense to this guaranty, and this guaranty is a primary obligation of
the undersigned.
This guaranty is a continuing one and all liabilities to which it applies
or may apply under the terms hereof shall be conclusively presumed to have ben
created in reliance hereon. As to each of the undersigned, this guaranty shall
continue until written notice of revocation signed by such undersigned, or until
written notice of the death of such undersigned (which shall be deemed a notice
of revocation hereunder) shall in each case have been actually received by the
Bank, notwithstanding a revocation by, or the death of, or complete or partial
release for any cause of, any one or more of the remainder of the undersigned,
or of the Borrower or of any one liable in any manner for the liabilities hereby
guaranteed or for the liabilities (including those hereunder) incurred directly
or indirectly in respect thereof or hereof, and notwithstanding the dissolution,
termination or increase, decrease or change in personnel of any one or more of
the undersigned which may be corporations or partnerships. Written notice as
above provided shall be the only means of revocation or termination of this
guaranty, notwithstanding the fact that for periods of time there may be no
outstanding liabilities of the Borrower. No revocation or termination hereof
shall affect in any manner the effectiveness and applicability of this guaranty,
or any rights of the Bank or the obligations of the undersigned hereunder, with
respect to (a) liabilities of the Borrower which shall have been created,
contracted, assumed or incurred prior to receipt by the Bank of written notice
of such revocation or termination, (b) all extensions, renewals or modifications
of any of the liabilities referred to in (a) above made after receipt by the
Bank of such written notice, or (c) liabilities of the Borrower which shall have
been created, contracted, assumed or incurred after receipt by the Bank of such
written notice pursuant to any contract entered into by the Bank prior to its
receipt of such notice or which are otherwise related to or connected with
liabilities of the Borrower theretofore arising or transactions theretofore
entered into.
The Bank at all times and from time to time shall have the right to require
the undersigned to deliver to the Bank as security for the liabilities of the
undersigned hereunder, collateral security, original or additional, satisfactory
to the Bank.
All property of the undersigned shall be held by the Bank subject to a lien
and as security for any and all liabilities of the undersigned. The term
"property of the undersigned" shall include all property of every description,
now or hereafter in the
Form No. 417 (R9/83)
<PAGE>
possession or custody of or in transit to the Bank for any purpose, including a
safekeeping, collection or pledge, for account of the undersigned, or as to
which the undersigned may have any right or power. The balance of every account
of the undersigned with, and each claim of the undersigned against, the Bank
existing from time to time, shall be subject to a lien and subject to be set off
against any and all liabilities of the undersigned, and the Bank may at any time
or from time to time at its option and without notice appropriate and apply
toward the payment of any of the liabilities of the undersigned the balance of
each such account of the undersigned with, and each such claim of the
undersigned against, the Bank. The term "property of the undersigned" shall also
include any and all book-entry U.S. Treasury bills and other book-entry
securities purchased on behalf of the undersigned and maintained in an account
at the Bank, which may have a related account at a bank which is a member of the
Federal Reserve System. The undersigned authorizes the Bank to serve as its
bailee and agent with respect to the aforementioned book-entry Treasury bills
and other book-entry securities and to take such action and to execute and
deliver such documents on behalf of the undersigned as the Bank deems necessary
or desirable in order to perfect the Bank's security interest therein. The
undersigned hereby gives notice to the Bank, in the Bank's capacity as bailee
and agent, of the Banks security interest in the aforementioned book-entry
Treasury bills and other book-entry securities. The Bank may at any time and
from time to time, without notice, transfer into its own name or that of its
nominee any of the property of the undersigned.
Upon the happening of an Event of Default under the Credit Agreement, dated
even date herewith between the Borrower and the Bank, then and in any such
event, and at any time thereafter, the Bank may, without notice to the Borrower
or the undersigned, make the liabilities of the Borrower to the Bank, whether or
not then due, immediately due to and payable hereunder as the undersigned, and
the Bank shall be entitled to enforce the obligations of the undersigned
hereunder.
Upon nonpayment when due of any of the liabilities of the Borrower or the
undersigned to the Bank, the Bank may immediately or at any time or times
thereafter without demand or notice to the Borrower or the undersigned and
without advertisement, all of which are hereby expressly waived, sell, resell,
assign and deliver all or part of said "property of the undersigned" at an
Brokers' Board or Exchange, or at public or private sale, for cash, upon credit
or for future delivery, and in connection therewith may grant options. Upon each
such sale the Bank may purchase the whole or any part of such property, free
from any right of redemption, which is hereby waived and released.
In the case of each such sale, or of any proceedings to collect any
liabilities of the undersigned, the undersigned shall pay all costs and expenses
of every kind for collection, sale or delivery, including reasonable attorneys'
fees, and after deducting such costs and expenses from the proceeds of sale or
collection, the Bank may apply any residue to pay any liabilities of the
undersigned, who shall continue liable for any deficiency, with interest.
If claim is ever made upon the Bank for repayment or recovery of any amount
or amounts received by the Bank in payment or on account of any of the
liabilities of the Borrower and the Bank repays all or part of said amount by
reason of (a) any judgment, decree or order of any court or administrative body
having jurisdiction over the Bank or any of its property, or (b) any settlement
or compromise of any such claim effected by the Bank with any such claimant
(including the Borrower), then and in such event the undersigned agree that any
such judgment, decree, order, settlement or compromise shall be binding upon the
undersigned, notwithstanding any revocation hereof or the cancellation of any
note or other instrument evidencing any liability of the Borrower, and the
undersigned shall be and remain liable to the Bank hereunder for the amount so
repaid or recovered to the same extent as if such amount had never originally
been received by the Bank.
No delay on the part of the Bank in exercising any of its options, powers
or rights, or partial or single exercise thereof, shall constitute a waiver
thereof. No waiver of any of its rights hereunder, and no modifications or
amendment of this guaranty, shall be deemed to be made by the Bank unless the
same shall be in writing, duly signed on behalf of the Bank, and each such
waiver, if any, shall apply only with respect to the specific instance involved,
and shall in no way impair the rights of the Bank or the obligations of the
undersigned to the Bank in any other respect at any other time.
The term "Bank" as used throughout this instrument shall be deemed to
include the BANK LEUMI TRUST COMPANY OF NEW YORK, and all its agencies, branches
and departments wherever located.
Whenever in this instrument the words "attorneys' fees" are used, such fees
shall be computed as follows: 15% of the principal, interest and all other sums
due and owing to the Bank, or the reasonable value of the services of the
attorneys, whichever is greater. The term "Borrower" as used throughout this
instrument shall be deemed to include any (a) successor partnership or
partnerships if the Borrower is a partnership, and (b) corporation or
corporations which succeed to all or substantially all of the assets or business
of the Borrower by merger, consolidation or sale of assets if the Borrower is a
corporation.
This guaranty and the rights and obligations of the Bank and of the
undersigned hereunder shall be governed and construed in accordance with the
laws of the State of New York; and this guaranty is binding upon the
undersigned, his, their or its executors, administrators, successors, or
assigns, and shall inure to the benefit of the Bank, its successors or assigns.
The undersigned hereby irrevocably submits to the jurisdiction of any New York
State or Federal Court located in New York City over any action or proceeding
arising out of any dispute between the undersigned and the Bank, and the
undersigned further irrevocably consents to the service of any process in any
such action or proceeding by the mailing of a copy of such process to the
undersigned at the address set forth below.
<PAGE>
The undersigned, if more than one, shall be jointly and severally
liable, hereunder, and the term "undersigned" wherever used herein shall mean
the undersigned or any one or more of them. Any one signing this guaranty shall
be bound hereby, whether or not any one else signs this guaranty at any time.
Dated: New York,New York
the day of , 19
--------------------- ----------------------- ------
(Individuals sign below) (Corporation or partnerships sign below)
- ------------------------------------- ----------------------------------------
(Name of Corporation or Partnership)
By:
- -------------------------------------- -------------------------------------
(Address) (Title)
- -------------------------------------- -------------------------------------
(Title)
- -------------------------------------- -------------------------------------
(Address) (Address)
Signature(s) Guaranteed
--------------------------------------------------
(Name of Bank)
By:
----------------------------------------------
(Authorized Signature)
<PAGE>
SCHEDULE 3.1.9
--------------
(Payments Due on Mortgage Notes)
See Attached.
<PAGE>
SCHEDULE 3.1.9
MORTGAGE LOANS
<TABLE>
<CAPTION>
Constant
Original 2/1/96 Interest Monthly
Instruments: Property: Balance: Balance: Rate: Payment:
- ----------- -------- ------- ------- ---- -------
<S> <C> <C> <C> <C> <C>
1. Subtitute Subordinate Wrap 109 East 16th St $23,000,000 [1] $20,038,509 [2] 8.0% $236,666.00 [3]
Mortgage, Security Agreement New York, NY
and Assignment of Leases and Rents
dated as of July 30,1993 by
57-115 Associates L.P to OLP
2. Mortgage dated January 4,1982 commercial condo/ $1,700,000 $845,000 11.0% Interest plus
by 320 East 86th Street Company pledge of mrtge on $5,000.00
to Berjac Holding Corp., as residental condo
amended, now held by OLP 320 East 86th St
New York, NY
3. Deed of Trust dated September 23, 2131 Sixth Avenue $125,000 $58,889.39 10.25% $1,157.98
1976 by Bristol Shopping Centers, Seattle, WA
Inc. to Pioneer National Title
Insurance Company, as trustee
</TABLE>
- ---------------------
1. Includes balance of underlying mortgage of $13,181,000.
2. Includes balance on underlying mortgage of $11,327,155.
3. The underlying mortgage bears interest at 9.5% with a $157,327.97 constant
monthly payment, which is included within the payment noted.
<PAGE>
SCHEDULE 4.1
(Existing Subsidiaries)
OLP Dixie Drive Houston, Inc.
OLP - TSA Georgia, Inc.
OLP - Arby's II, Inc.
OLP Action, Inc.
OLP Iowa, Inc.
OLP Texas, Inc.
OLP 47th Avenue Corp.
OLP Greenwood Village Colorado, Inc.
<PAGE>
SCHEDULE 4.12
(Existing UCC Security Interests)
<TABLE>
<CAPTION>
SECURED DEBTOR LOCATION OF DATE OF FILING COLLATERAL
PARTY FILING FILING NO.
<S> <C> <C> <C> <C> <C>
Bank One OLP Texas, New York August 22, 171434 All personal
Texas, N.A. Inc. Dept. of 1995 property of
State Debtor
located at
certain
property
located in
Texas
Bank One, OLP Texas, Nassau August 23, 013039 All personal
Texas, N.A. Inc. County 1995 property of
Clerk's Debtor
Office located at
certain
property
located in
Texas
The East New One Liberty New York June 27, 131093 All
York Savings Properties, Dept. of 1994 machinery,
Bank Inc. State equipment,
fixtures
located at
119-125
Madison and
27-29 East
30th Street,
NY, NY
</TABLE>
<PAGE>
SCHEDULE 4.12
EXISTING MORTGAGES/DEEDS OF TRUST
<TABLE>
<CAPTION>
Current Original
Property: Lender: Loan Amount:
- -------- ------ -----------
<S> <C> <C>
119-121 Madison Avenue East New York $4,250,000
New York, New York Savings Bank
4701 First Avenue, SE Firstar Bank Cedar $990,000
Cedar Rapids, Iowa Rapids, N.A.
900 W. Cent. Texas Expressway Bank One, Texas, N.A. $731,250
Killeen, Texas
27070 SW Freeway Bank One, Texas, N.A. $692,100
Rosenberg, Texas
6660 Broughton Avenue John Hancock Life $1,800,000
Columbus, Ohio Insurance Co.
2131 Sixth Avenue MBL Life $1,050,000(lst)
Seattle, Washington Assurance Co.
2131 Sixth Avenue One Liberty $125,000(2nd)
Seattle, Washington Properties, Inc.
</TABLE>
OTHER ENCUMBRANCES:
In addition to the mortgages and deeds of trust above listed, the properties of
the Borrower and its Subsidiaries are encumbered by easements, survey
exceptions, encroachments and other minor title imperfections which do not
render title to such properties unmarketable.
<PAGE>
SCHEDULE 4-13
(Litigation)
- None -
<PAGE>
SCHEDULE 4.15
(Environment)
See Attached.
<PAGE>
[Letterhead] [Logo]
November 16, 1995
Mr. Dan Lembo 0100261000
One Liberty Properties, Inc.
60 Cutter Mill Road, Suite 303
Great Neck, New York 11021
Dear Dan:
As you requested, EnecoTech Inc. (EnecoTech), has revised the 1994 Cost
Estimates to perform activities directed toward site remediation and closure at
each of the former Action Auto facilities. These costs have been developed
following an evaluation of project activities conducted to date, and based on
anticipated activities necessary to satisfy the new Risk Based Corrective Action
(RBCA) site closure requirements of the Michigan Department Environmental
Quality (MDEQ, formerly MDNR). Costs may differ as a result of changing
conditions, additional information which may be collected, and changes in MDEQ
regulations. Specifically, the MDEQ will be publishing revised Risk Based
Screening Levels (RBSL's) in January that are anticipated to be less restrictive
than current maximum contaminant levels. After the information becomes
available, we will provide an update to this cost estimate.
These estimates may be subject to change in response to MDEQ regulations and
directives or unforeseen site-specific circumstances. As always, these costs
are based on the data gathered to date, the current regulatory climate, and
remediation methods currently acceptable. Numerous factors were considered in
the development of the cost estimates; these included the technical feasibility
of the remediation alternatives, the economic feasibility of the remediation
alternatives available, the regulatory status of each site; and the
idiosyncracies of MDEQ personnel specific to each region. Costs of any
potential third party claims can not be estimated, but are not anticipated based
on the current condition sites.
A summary of the estimated costs is provided in the attached table. Under the
new RBCA regulation, EnecoTech expects site closure with no remediation
activities at stations #37 and #42. Since the date of our last cost estimate,
site closure has been achieved at stations #11 and #22. The final invoice for
#11 was issued several months ago, and you will receive the final invoice for
#22 before the end of the year(for approximately $3,000). Please contact me at
(303) 861-8096, ext. 179 if you have any questions. EnecoTech appreciates the
opportunity to be of service to you.
Sincerely,
ENECOTECH, INC.
/s/ Ann
Ann C. Eckman
Project Geoscientist
Attachment
[Logo]
Recycled Paper
<PAGE>
---------------------------------------------------------
NOVEMBER 16, 1995
<TABLE>
<CAPTION>
Facility Site Status Cost Closure Date
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
#37 Midland Limited onsite soil and $10,000 Six months
ground water impact.
Remediation not anticipated.
#39 Grand Rapids Onsite and offsite soil and $358,985 Four years
ground water impact, free
phase hydrocarbons present
onsite.
#51 St. Johns Limited onsite and offsite $92,895 Two years
soil and ground water
impact.
#55 Battle Creek Offsite and significant $347,755 Four Years
onsite soil and ground
water impact.
#59 Imlay City Limited onsite soil and $85,540 Two years
ground water impact.
#42 Flushing Limited onsite soil and $10,000 Six moths
ground water impact.
Remediation not anticipated.
#58 Bad Axe Limited soil and ground $90,000 Two years
water impact.
</TABLE>
[Logo] [Logo]
Recycled Paper
<PAGE>
Exhibit 21.1
Subsidiaries of the Company
Company State of Incorporation
- ------- ----------------------
OLP Action, Inc. Michigan
OLP Arby's II South Carolina
OLP Iowa, Inc. Delaware
OLP Texas, Inc. Texas
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000712770
<NAME> ONE LIBERTY PROPERTIES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 3,844
<SECURITIES> 1,402
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 38,040
<CURRENT-LIABILITIES> 0
<BONDS> 6,590
12,796
0
<COMMON> 1,416
<OTHER-SE> 16,295
<TOTAL-LIABILITY-AND-EQUITY> 38,040
<SALES> 0
<TOTAL-REVENUES> 4,891
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,795
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 3,096
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,096
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,096
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.17
</TABLE>