SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 18, 1996
COMMERCIAL NET LEASE REALTY, INC.
(Exact Name of Registrant as Specified in Charter)
Maryland 0-12989 56-1431377
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
400 East South Street, Suite 500 32801
Orlando, Florida (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (407) 422-1574
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
Not applicable.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Not applicable.
ITEM 3. BANKRUPTCY OR RECEIVERSHIP.
Not applicable.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
Not applicable.
ITEM 5. OTHER EVENTS.
On July 20, 1995, Commercial Net Lease Realty, Inc. (the
"Company") filed a shelf registration statement on Form S-3, File No. 33-61165,
with the Securities and Exchange Commission that permits the issuance of a
combination of debt and equity securities of up to $200 million. Pursuant to a
prospectus supplement filed as part of this registration statement on January 5,
1995, the Company intends to offer 3 million shares of common stock from the
shelf registration (the "Offering"). The net proceeds from the Offering are
estimated to be approximately $36.6 million at an assumed Offering price of
$13.125 per share (approximately $42.2 million if the underwriters' over
allotment option to purchase up to 450,000 additional shares is exercised in
full), after deducting estimated offering expenses and underwriting discounts.
To secure long-term fixed rate financing, the Company has entered
into a $52.6 million mortgage loan commitment (the "Commitment") dated October
30, 1995 with Principal Mutual Life Insurance Company, the proceeds of which
will be used to pay down the balance on the Company's $100 million credit
facility. The permanent debt financing (the "Permanent Debt Financing") to be
made pursuant to the Commitment is secured by 42 properties designated in the
Commitment. The Permanent Debt Financing consists of two loans that will bear
interest at a fixed weighted average rate of approximately 7.26 percent and will
have a weighted average maturity of 7.2 years. The first loan of $13.2 million
was closed on December 14, 1995 and the second loan of $39.4 million is expected
to close in late January 1996.
During the period October 1, 1995 through December 31, 1995, the
Company purchased three properties. During January 1996, the Company intends to
purchase six properties and newly constructed buildings on seven land parcels it
currently owns. The acquisition of these properties plus the properties
acquired in December 1995 are hereinafter referred to as the "Acquisition
Properties." The total purchase price of the Acquisition Properties is expected
to be approximately $50.0 million. The Company anticipates that the purchase of
the Acquisition Properties will be funded by a combination of net proceeds from
the Offering, the Permanent Debt Financing and the Company's $100 million credit
facility.
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS.
Not applicable.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
INDEX TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
Page
COMMERCIAL NET LEASE REALTY, INC.
Pro Forma Financial Information (unaudited):
Pro Forma Balance Sheet as of September 30, 1995 4
Pro Forma Statement of Earnings for the nine months ended
September 30, 1995 5
Pro Forma Statement of Earnings for the year ended
December 31, 1994 6
Notes to Pro Forma Financial Statements for the nine months
ended September 30, 1995 and the year ended December 31, 1994 7
PRO FORMA FINANCIAL INFORMATION
The pro forma information of the Company gives effect to (i) $46.7 million
in net proceeds from the sale of 4,000,000 shares in the prior offering (the
"Prior Offering Transaction"), and (ii) the completion and sale of 3,000,000
shares of common stock offered hereby at an Offering Price of $13.125 per share
and the application of the net proceeds therefrom, the receipt of $52.6 million
of proceeds from the Permanent Debt Financing, the purchase of the Acquisition
Properties for approximately $50.0 million and the repayment of approximately
$39.3 million previously drawn under the Company's $100 million credit facility
(the "Credit Facility") (collectively, the "Offering Transactions").
The pro forma statements of earnings for the year ended December 31, 1994
and the nine months ended September 30, 1995 give effect to the Prior Offering
Transaction and the Offering Transactions as if such transactions had occurred
on January 1, 1994. Such pro forma statements of earnings also treat all
properties acquired during the year ended December 31, 1994 and the nine months
ended September 30, 1995 and the Acquisition Properties as if they had been
acquired and fully leased as of January 1, 1994. The Pro Forma Balance Sheet as
of September 30, 1995, gives effect to the Offering Transactions as if such
transactions had occurred on September 30, 1995.
The pro forma information does not purport to represent what the Company's
financial position or results of operations actually would have been if the
transactions reflected had in fact occurred on the date or at the beginning of
the period indicated, or to project the Company's financial position or results
of operations at any future date or any future period.
COMMERCIAL NET LEASE REALTY, INC.
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 1995
(In thousands, except per share data)
Pro Forma
ASSETS Historical Adjustments Pro Forma
---------- ------------ ---------
Land and buildings on operating
leases, net of accumulated
depreciation (c) $152,174 $ 50,744 (a) $202,918
Net investment in direct financing
leases (c) 52,512 52,512
Cash and cash equivalents 162 115 (a)
(84)(b) 193
Receivables 500 500
Prepaid expenses 291 291
Loan costs, net of accumulated
amortization 587 1,059 (b) 1,646
Accrued rental income 1,823 1,823
Deferred offering costs 165 (165)(b) -
Other assets 1,503 (1,159)(a) 344
-------- -------- --------
$209,717 $ 50,510 $260,227
======== ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Liabilities:
Notes payable $ 72,900 $ 49,700 (a)
(36,409)(b) $ 86,191
Accrued interest payable 138 138
Accounts payable and accrued
expenses 401 609 (b) 1,010
Dividends payable 3,382 3,382
Real estate taxes payable 80 80
Due to related parties 142 142
Rents paid in advance and tenant
deposits 121 121
-------- -------- --------
Total liabilities 77,164 13,900 91,064
-------- -------- --------
Stockholders' equity:
Common stock 117 30 (b) 147
Capital in excess of par value 138,629 36,580 (b) 175,209
Accumulated dividends in excess
of net earnings (6,193) (6,193)
-------- -------- --------
132,553 36,610 169,163
-------- -------- --------
$209,717 $ 50,510 $260,227
======== ======== ========
COMMERCIAL NET LEASE REALTY, INC.
UNAUDITED PRO FORMA STATEMENT OF EARNINGS
NINE MONTHS ENDED SEPTEMBER 30, 1995
(In thousands, except per share data)
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues:
Rental income from operating
leases (2) $10,163 $ 6,767 (1) $16,930
Earned income from direct
financing leases (2) 3,855 334 (1) 4,189
Contingent rental income 579 579
Interest and other income 98 44 (3) 142
------- ------- -------
14,695 7,145 21,840
------- ------- -------
Expenses:
General operating and
administrative 551 45 (4) 596
Advisory fees to related party 740 248 (5) 988
Interest 2,335 2,502 (6) 4,837
Taxes 188 96 (7) 284
Depreciation and amortization 1,463 936 (8)
101 (9) 2,500
------- ------- -------
5,277 3,928 9,205
------- ------- -------
Net Earnings $ 9,418 $ 3,217 $12,635
======= ======= =======
Earnings per share of common stock $ 0.81 $ 0.86
======= =======
Funds from operations (10) $10,659 $14,812
======= =======
Weighted average number of shares
outstanding 11,664 14,664
======= =======
COMMERCIAL NET LEASE REALTY, INC.
UNAUDITED PRO FORMA STATEMENT OF EARNINGS
YEAR ENDED DECEMBER 31, 1994
(In thousands, except per share data)
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
Revenues:
Rental income from operating
leases (2) $ 8,116 $14,457 (1) $22,573
Earned income from direct
financing leases (2) 3,123 2,463 (1) 5,586
Contingent rental income 829 829
Interest and other income 221 (37)(3) 184
------- ------- -------
12,289 16,883 29,172
------- ------- -------
Expenses:
General operating and
administrative 605 153 (4) 758
Advisory fees to related party 728 615 (5) 1,343
Interest 498 5,421 (6) 5,919
Taxes 213 269 (7) 482
Depreciation and amortization 1,330 1,828 (8)
193 (9) 3,351
------- ------- -------
3,374 8,479 11,853
------- ------- -------
Net Earnings $ 8,915 $ 8,404 $17,319
======= ======= =======
Earnings per share of common stock $ 1.04 $ 1.18
======= =======
Funds from operations (10) $ 9,992 $20,222
======= =======
Weighted average number of shares
outstanding 8,606 14,664
======= =======
COMMERCIAL NET LEASE REALTY, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE YEAR ENDED DECEMBER 31, 1994
(Dollars in thousands)
Pro Forma Balance Sheet:
- -----------------------
(a) Represents draw on the Company's Credit Facility used to acquire the
Acquisition Properties for approximately $50,744 (approximately $1,059 of
which had been paid in miscellaneous acquisition costs as of September 30,
1995). Per the Credit Facility agreement, draws must be made in
increments of $100, and as a result, approximately $15 of the draw was
added to working capital. Approximately $100 of the Credit Facility was
used to reimburse working capital for previously paid deposits on
Acquisition Properties.
(b) Represents estimated gross proceeds of $39,375 from the issuance of 3
million shares of stock from the Offering and loan proceeds of $52,600
from the Permanent Debt Financing used to pay down approximately $89,009
of the Credit Facility, to pay stock issuance costs of $2,765 ($165 of
which had been paid in deferred offering costs as of September 30, 1995)
and loan costs of $1,059. In connection with the above, it is assumed the
Company used $84 of its working capital reserve and incurred $609 in loan
costs payable.
(c) In accordance with generally accepted accounting principles, leases in
which the present value of the future minimum lease payments equals or
exceeds 90 percent of the value of the related properties are treated as
direct financing leases rather than as land and buildings. The
categorization of the lease has no effect on the rental revenues received.
Pro Forma Statements of Earnings:
- --------------------------------
(1) Represents rental income as if the properties acquired during the year
ended December 31, 1994 and the nine months ended September 30, 1995 (the
"New Properties") and the Acquisition Properties had been acquired and
fully leased on January 1, 1994.
(2) See Note (c) under "Pro Forma Balance Sheet" above.
(3) Represents adjustments to interest income due to the change in the amount
of cash available for investment in interest bearing accounts from the
receipt of rental income before dividends are paid to shareholders as a
result of the Prior Offering Transaction and the Offering Transactions.
The adjusted pro forma interest income does not include interest income
from the investment of offering proceeds. Pro forma interest income
decreased for the year ended December 31, 1994 due to a decrease in the
amount of cash available for investment in interest bearing accounts as a
result of the acquisition of the New Properties and the Acquisition
Properties. Interest income on interest bearing accounts is assumed to be
earned at a rate of four percent per annum based on the previous
experience of the Company.
(4) Represents additional expenses due to incremental expenses associated with
additional shares of common stock outstanding and due to increased unused
commitment fees under the Credit Facility.
(5) Represents adjustment to advisory fees due to the increase in rental
revenues and funds from operations (as defined in the Company's advisory
agreement with its advisor).
(6) Represents adjustment in interest expense and other loan costs primarily
as a result of the pro forma increase in indebtedness in connection with
the Offering Transactions. Pro forma interest expense for the nine months
ended September 30, 1995 and the year ended December 31, 1994, was based
on the average 30-day LIBOR rates in effect for those periods of 6.01
percent and 4.47 percent, respectively, plus 1.70 percent relating to the
Credit Facility and a weighted average interest rate of approximately 7.26
percent relating to the Permanent Debt Financing.
COMMERCIAL NET LEASE REALTY, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS - CONTINUED
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995
AND THE YEAR ENDED DECEMBER 31, 1994
(Dollars in thousands)
Pro Forma Statements of Earnings - Continued
- --------------------------------------------
(7) Represents additional expenses assumed to have been incurred as a result
of additional state taxes based on additional rental revenue. Due to the
fact that the Company's leases are on a net-lease basis, the Company has
not included any amounts for real estate taxes in the pro forma statements
of earnings.
(8) Represents adjustment to depreciation expense for the New Properties and
the Acquisition Properties as if the properties had been acquired and
fully leased on January 1, 1994. The building portion of the properties
accounted for as operating leases are depreciated using the straight-line
method over their estimated useful lives which is generally 40 years.
(9) Represents adjustment to amortization expense as the result of the
amortization of estimated loan costs incurred in connection with the
Company's Permanent Debt Financing and additional amortization of the loan
costs relating to the Company's Credit Facility as if the Credit Facility
was available as of January 1, 1994.
(10) Funds from operations has been calculated in accordance with the
definition of "funds from operations" recently clarified by the National
Association of Real Estate Investment Trusts (NAREIT) defined as net
income, computed in accordance with generally accepted accounting
principles, excluding gains or losses from debt restructurings and sales
of property, plus depreciation and after adjustments for unconsolidated
partnerships and joint ventures. Under the method previously used by the
Company which included adjustments to net income for amortization of
deferred financing costs and non-cash lease accounting adjustments, funds
from operations would have been $14,273 and $10,351 for the pro forma nine
months ended September 30, 1995 and the historical nine months ended
September 30, 1995, respectively, and would have been $19,521 and $9,731
for the pro forma year ended December 31, 1994 and the historical year
ended December 31, 1994, respectively. Non-cash lease accounting
adjustments for the pro forma nine months ended September 30, 1995 and for
the historical nine months ended September 30, 1995 were $862 and $530,
respectively. Non-cash lease accounting adjustments for the pro forma
year ended December 31, 1994 and the historical year ended December 31,
1994 were $1,149 and $515, respectively. Funds from operations should not
be considered as a substitute for net income as an indication of the
Company's performance or as a substitute for cash flow as a measure of its
liquidity.
EXHIBITS
--------
COMMERCIAL NET LEASE REALTY, INC.
EXHIBIT NO. DESCRIPTION
- ----------- -----------
1.2 Purchase Agreement, which is being filed pursuant to
Regulation S-K, Item 601(b)(1) in lieu of filing the
otherwise required exhibit to the Registration Statement
on Form S-3 (the "Registration Statement"), File No. 33-
61165, under the Securities Act of 1933, as amended (the
"Securities Act"), and which, since this Form 8-K filing
is incorporated by reference in such Registration
Statement, is set forth in full in such Registration
Statement. (Filed herewith.)
5 Opinion of Shaw, Pittman, Potts & Trowbridge, which is
being filed pursuant to Regulation S-K, Item 601(b)(5)
in lieu of the otherwise required exhibit to the
Registration Statement under the Securities Act, and
which, since this Form 8-K filing is incorporated by
reference in such Registration Statement, is set forth
in full in such Registration Statement. (Filed
herewith.)
8 Opinion of Shaw, Pittman, Potts & Trowbridge, which is
being filed pursuant to Regulation S-K, Item 601(b)(8)
in lieu of the otherwise required exhibit to the
Registration Statement under the Securities Act, and
which, since this Form 8-K filing is incorporated by
reference in such Registration Statement, is set forth
in full in such Registration Statement. (Filed
herewith.)
10.14 Second Amended and Restated Line of Credit and Security
Agreement, dated December 7, 1995, among Registrant,
certain lenders listed therein and First Union National
Bank of Florida, as the Agent relating to a $100,000,000
loan. (Filed herewith.)
10.15 Secured Promissory Note, dated December 14, 1995, among
Registrant and Principal Mutual Life Insurance Company
relating to a $13,150,000 loan. (Filed herewith.)
10.16 Mortgage and Security Agreement, dated December 14,
1995, among Registrant and Principal Mutual Life
Insurance Company relating to a $13,150,000 loan.
(Filed herewith.)
10.17 The Annual Report to Shareholders for the year ended
December 31, 1994 (File No. 0-12989) (Incorporated
herein by reference.)
10.18 The Proxy Statement relating to the 1994 Annual Meeting
of Stockholders (File No. 0-12989) (Incorporated herein
by reference.)
23 Consents of Shaw, Pittman, Potts & Trowbridge (contained
in the opinions filed as Exhibits 5 and 8 hereto), which
is being filed pursuant to Regulation S-K, Item
601(b)(23) in lieu of the otherwise required exhibit to
the Registration Statement under the Securities Act, and
which, since this Form 8-K filing is incorporated by
reference in such Registration Statement, is set forth
in full in such Registration Statement. (Filed
herewith.)
24.2 Consent of KPMG Peat Marwick LLP. (Filed herewith.)
ITEM 8. CHANGE IN FISCAL YEAR.
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be filed on its behalf by
the undersigned thereunto duly authorized.
COMMERCIAL NET LEASE REALTY, INC.
Dated: January 18, 1996 By: /s/ Robert A. Bourne
------------------------
ROBERT A. BOURNE, President
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
1.2 Purchase Agreement, which is being filed pursuant
to Regulation S-K, Item 601(b)(1) in lieu of
filing the otherwise required exhibit to the
Registration Statement on Form S-3 (the
"Registration Statement"), File No. 33-61165,
under the Securities Act of 1933, as amended (the
"Securities Act"), and which, since this Form 8-K
filing is incorporated by reference in such
Registration Statement, is set forth in full in
such Registration Statement. (Filed herewith.)
5 Opinion of Shaw, Pittman, Potts & Trowbridge,
which is being filed pursuant to Regulation S-K,
Item 601(b)(5) in lieu of the otherwise required
exhibit to the Registration Statement under the
Securities Act, and which, since this Form 8-K
filing is incorporated by reference in such
Registration Statement, is set forth in full in
such Registration Statement. (Filed herewith.)
8 Opinion of Shaw, Pittman, Potts & Trowbridge,
which is being filed pursuant to Regulation S-K,
Item 601(b)(8) in lieu of the otherwise required
exhibit to the Registration Statement under the
Securities Act, and which, since this Form 8-K
filing is incorporated by reference in such
Registration Statement, is set forth in full in
such Registration Statement. (Filed herewith.)
10.14 Second Amended and Restated Line of Credit and
Security Agreement, dated December 7, 1995, among
Registrant, certain lenders listed therein and
First Union National Bank of Florida, as the Agent
relating to a $100,000,000 loan. (Filed
herewith.)
10.15 Secured Promissory Note, dated December 14, 1995,
among Registrant and Principal Mutual Life
Insurance Company relating to a $13,150,000 loan.
(Filed herewith.)
10.16 Mortgage and Security Agreement, dated December
14, 1995, among Registrant and Principal Mutual
Life Insurance Company relating to a $13,150,000
loan. (Filed herewith.)
10.17 The Annual Report to Shareholders for the year
ended December 31, 1994 (File No. 0-12989)
(Incorporated herein by reference.)
10.18 The Proxy Statement relating to the 1994 Annual
Meeting of Stockholders (File No. 0-12989)
(Incorporated herein by reference.)
23 Consents of Shaw, Pittman, Potts & Trowbridge
(contained in the opinions filed as Exhibits 5 and
8 hereto), which is being filed pursuant to
Regulation S-K, Item 601(b)(23) in lieu of the
otherwise required exhibit to the Registration
Statement under the Securities Act, and which,
since this Form 8-K filing is incorporated by
reference in such Registration Statement, is set
forth in full in such Registration Statement.
(Filed herewith.)
24.2 Consent of KPMG Peat Marwick LLP. (Filed
herewith.)
[FORM OF UNDERWRITING AGREEMENT]
3,000,000 Shares
COMMERCIAL NET LEASE REALTY, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
January __, 1996
SMITH BARNEY INC.
GOLDMAN, SACHS & CO.
LEGG MASON WOOD WALKER INCORPORATED
J.C. BRADFORD & CO.
THE ROBINSON-HUMPHREY COMPANY, INC.
As Representatives of the Several Underwriters
c/o SMITH BARNEY INC.
388 Greenwich Street
New York, New York 10013
Dear Sirs:
Commercial Net Lease Realty, Inc., a Maryland corporation (the
"Company"), proposes to issue and sell an aggregate of 3,000,000 shares (the
"Firm Shares") of its common stock, $0.01 par value per share (the "Common
Stock"), to the several Underwriters named in Schedule I hereto (the
"Underwriters"). The Company also proposes to sell to the Underwriters, upon
the terms and conditions set forth in Section 2 hereof, up to an additional
450,000 shares (the "Additional Shares") of Common Stock. The Firm Shares and
the Additional Shares are hereinafter collectively referred to as the "Shares".
The Company wishes to confirm as follows its agreement with you (the
"Representatives") and the other several Underwriters on whose behalf you are
acting, in connection with the several purchases of the Shares by the
Underwriters.
1. Registration Statement and Prospectus. The Company has
prepared and filed with the Securities and Exchange Commission (the
"Commission") in accordance with the provisions of the Securities Act of 1933,
as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Act"), a registration statement on Form S-3 under the Act
(the "registration statement"), including a prospectus relating to the Offered
Securities (as defined therein), and has filed with, or transmitted for filing
to, or shall promptly hereafter file with or transmit for filing to, the
Commission a supplement to the form of prospectus included in such registration
statement (the "Prospectus Supplement") specifically relating to the Shares and
the plan of distribution thereof pursuant to Rule 424 under the Act. The term
"Registration Statement" as used in this Agreement means the registration
statement (including all financial schedules and exhibits), as amended to the
date of this Agreement. If it is contemplated, at the time this Agreement is
executed, that a post-effective amendment to the registration statement will be
filed and must be declared effective before the offering of the Shares may
commence, the term "Registration Statement" as used in this Agreement means the
registration statement as amended by said post-effective amendment. The term
"Basic Prospectus" as used in this Agreement means the prospectus in the form
included in the Registration Statement. The term "Prospectus" means the Basic
Prospectus, as amended or supplemented by the Prospectus Supplement. The term
"Prepricing Prospectus" as used in this Agreement means a prospectus supplement
subject to completion specifically relating to the Shares which has heretofore
been filed with the Commission, together with the Basic Prospectus. If the
Company has filed an abbreviated registration statement to register additional
Shares pursuant to Rule 462(b) under the Act (including the exhibits thereto,
the "Rule 462 Registration Statement"), then any reference herein to the
Registration Statement shall also be deemed to include such Rule 462
Registration Statement. Any reference in this Agreement to the registration
statement, the Registration Statement, the Basic Prospectus, any Prepricing
Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the Act, and any reference to any amendment or supplement to the
registration statement, the Registration Statement, the Basic Prospectus, any
Prepricing Prospectus or the Prospectus shall be deemed to refer to and include
any documents filed by the Company with the Commission after the date of the
Basic Prospectus under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") which, upon filing, are incorporated by reference therein, as
required by paragraph (b) of Item 12 of Form S-3. As used herein, the term
"Incorporated Documents" means the documents which are incorporated by reference
in the registration statement, the Registration Statement, the Basic Prospectus,
any Prepricing Prospectus, the Prospectus, or any amendment or supplement
thereto.
2. Agreement to Sell and Purchase. The Company hereby agrees,
subject to all the terms and conditions set forth herein, to issue and sell to
each Underwriter and, upon the basis of the representations, warranties and
agreements of the Company herein contained and subject to all the terms and
conditions set forth herein, each Underwriter agrees, severally and not jointly,
to purchase from the Company, at a purchase price of $_____ per Share (the
"purchase price per share"), the number of Firm Shares set forth opposite the
name of such Underwriter in Schedule I hereto (or such number of Firm Shares
increased as set forth in Section 10 hereof).
The Company also agrees, subject to all the terms and conditions set
forth herein, to sell to the Underwriters, and, upon the basis of the
representations, warranties and agreements of the Company herein contained and
subject to all the terms and conditions set forth herein, the Underwriters shall
have the right to purchase from the Company, at the purchase price per share,
pursuant to an option (the "over-allotment option") which may be exercised at
any time and from time to time prior to 9:00 P.M., New York City time, on the
30th day after the date of this Agreement (or, if such 30th day shall be a
Saturday or Sunday or a holiday, on the next business day thereafter when the
New York Stock Exchange is open for trading), up to an aggregate of 450,000
Additional Shares. Additional Shares may be purchased only for the purpose of
covering over-allotments made in connection with the offering of the Firm
Shares. Upon any exercise of the over-allotment option, each Underwriter,
severally and not jointly, agrees to purchase from the Company the number of
Additional Shares (subject to such adjustments as you may determine in order to
avoid fractional shares) which bears the same proportion to the number of
Additional Shares to be purchased by the Underwriters as the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto (or
such number of Firm Shares increased as set forth in Section 10 hereof) bears to
the aggregate number of Firm Shares.
3. Terms of Public Offering. The Company has been advised by you
that the Underwriters propose to make a public offering of their respective
portions of the Shares as soon after this Agreement has become effective as in
your judgment is advisable and initially to offer the Shares upon the terms set
forth in the Prospectus.
4. Delivery of the Shares and Payment Therefor. Delivery to the
Underwriters of and payment for the Firm Shares shall be made at the office of
Smith Barney Inc., 388 Greenwich Street, New York, NY 10013, at 10:00 A.M., New
York City time, on January __, 1996 (the "Closing Date"). [This date shall be
the third full business day following the date of this Agreement or, if the
pricing of the Firm Shares occurs after 4:30 P.M., New York City time, on the
fourth business day thereafter]. The place of closing for the Firm Shares and
the Closing Date may be varied by agreement between you and the Company.
Delivery to the Underwriters of and payment for any Additional
Shares to be purchased by the Underwriters shall be made at the aforementioned
office of Smith Barney Inc. at such time on such date (the "Option Closing
Date"), which may be the same as the Closing Date but shall in no event be
earlier than the Closing Date nor later than ten business days after the giving
of the notice hereinafter referred to, as shall be specified in a written notice
from you on behalf of the Underwriters to the Company of the Underwriters'
determination to purchase a number, specified in such notice, of Additional
Shares. The place of closing for any Additional Shares and the Option Closing
Date for such Shares may be varied by agreement between you and the Company.
Certificates for the Firm Shares and for any Additional Shares to be
purchased hereunder shall be registered in such names and in such denominations
as you shall request prior to 1:00 P.M., New York City time, on the second
business day preceding the Closing Date or any Option Closing Date, as the case
may be. Such certificates shall be made available to you in New York City for
inspection and packaging not later than 9:30 A.M., New York City time, on the
business day next preceding the Closing Date or the Option Closing Date, as the
case may be. The certificates evidencing the Firm Shares and any Additional
Shares to be purchased hereunder shall be delivered to you on the Closing Date
or the Option Closing Date, as the case may be, against payment of the purchase
price therefor by certified or official bank check or checks payable in New York
Clearing House (next day) funds to the order of the Company.
5. Agreements of the Company. The Company agrees with the
several Underwriters as follows:
(a) If, at the time this Agreement is executed and
delivered, it is necessary for a post-effective amendment to the registration
statement to be declared effective before the offering of the Shares may
commence, the Company will endeavor to cause such post-effective amendment to
become effective as soon as possible and will advise you promptly and, if
requested by you, will confirm such advice in writing, when such post-effective
amendment has become effective.
(b) The Company will advise you promptly and, if requested
by you, will confirm such advice in writing: (i) of any request by the
Commission for amendment of or a supplement to the Registration Statement, any
Prepricing Prospectus or the Prospectus or for additional information; (ii) of
the issuance by the Commission of any stop order suspending the effectiveness of
the Registration Statement or of the suspension of qualification of the Shares
for offering or sale in any jurisdiction or the initiation of any proceeding for
such purpose; and (iii) within the period of time referred to in the first
sentence in subsection (f) below, of any change in the Company's condition
(financial or other), business, prospects, properties, net worth or results of
operations, or of the happening of any event, which makes any statement of a
material fact made in the Registration Statement or the Prospectus (as then
amended or supplemented) untrue or which requires the making of any additions to
or changes in the Registration Statement or the Prospectus (as then amended or
supplemented) in order to state a material fact required by the Act or the
regulations thereunder to be stated therein or necessary in order to make the
statements therein not misleading, or of the necessity to amend or supplement
the Prospectus (as then amended or supplemented) to comply with the Act or any
other law. If at any time the Commission shall issue any stop order suspending
the effectiveness of the Registration Statement, the Company will make every
reasonable effort to obtain the withdrawal of such order at the earliest
possible time.
(c) The Company will furnish to you, without charge, (i) six
signed copies of the registration statement and any Rule 462(b) Registration
Statement as originally filed with the Commission and of each amendment thereto,
including financial statements and all exhibits to the registration statement
and Rule 462(b) Registration Statement, (ii) such number of conformed copies of
the registration statement as originally filed and of each amendment thereto,
but without exhibits, as you may request, (iii) such number of copies of the
Incorporated Documents, without exhibits, as you may request, and (iv) six
copies of the exhibits to the Incorporated Documents.
(d) The Company will not file any amendment to the
Registration Statement (including any filing under Rule 462(b)) or make any
amendment or supplement to the Prospectus or, prior to the end of the period of
time referred to in the first sentence in subsection (f) below, file any
document which, upon filing becomes an Incorporated Document, of which you shall
not previously have been advised or to which, after you shall have received a
copy of the document proposed to be filed, you shall reasonably object; and no
such further document, when it is filed, will contain an untrue statement of a
material fact or will omit to state a material fact required to be stated
therein or necessary in order to make the statements therein not misleading.
(e) Prior to the execution and delivery of this Agreement,
the Company has delivered to you, without charge, in such quantities as you have
requested, copies of each form of the Prepricing Prospectus. The Company
consents to the use, in accordance with the provisions of the Act and with the
securities or Blue Sky laws of the jurisdictions in which the Shares are offered
by the several Underwriters and by dealers, prior to the date of the Prospectus,
of each Prepricing Prospectus so furnished by the Company.
(f) As soon after the execution and delivery of this
Agreement as possible and thereafter from time to time for such period as in the
opinion of counsel for the Underwriters a prospectus is required by the Act to
be delivered in connection with sales by any Underwriter or dealer, the Company
will expeditiously deliver to each Underwriter and each dealer, without charge,
as many copies of the Prospectus (and of any amendment or supplement thereto) as
you may request. The Company consents to the use of the Prospectus (and of any
amendment or supplement thereto) in accordance with the provisions of the Act
and with the securities or Blue Sky laws of the jurisdictions in which the
Shares are offered by the several Underwriters and by all dealers to whom Shares
may be sold, both in connection with the offering and sale of the Shares and for
such period of time thereafter as the Prospectus is required by the Act to be
delivered in connection with sales by any Underwriter or dealer. If during such
period of time any event shall occur that in the judgment of the Company or in
the opinion of counsel for the Underwriters is required to be set forth in the
Prospectus (as then amended or supplemented) or should be set forth therein in
order to make the statements therein, in the light of the circumstances when the
Prospectus is delivered to a purchaser, not misleading, or if it is necessary to
supplement or amend the Prospectus (or to file under the Exchange Act any
document which, upon filing, becomes an Incorporated Document) in order to
comply with the Act or any other law, the Company will forthwith prepare and,
subject to the provisions of paragraph (d) above, file with the Commission an
appropriate supplement or amendment thereto (or to such document), and will
expeditiously furnish to the Underwriters and dealers a reasonable number of
copies thereof. In the event that the Company and you, as Representatives of
the several Underwriters, agree that the Prospectus should be amended or
supplemented, the Company, if requested by you, will promptly issue a press
release announcing or disclosing the matters to be covered by the proposed
amendment or supplement.
(g) The Company will cooperate with you and with counsel for
the Underwriters in connection with the registration or qualification of the
Shares for offering and sale by the several Underwriters and by dealers under
the securities or Blue Sky laws of such jurisdictions as you may designate and
will file such consents to service of process or other documents necessary or
appropriate in order to effect such registration or qualification; provided that
in no event shall the Company be obligated to qualify to do business in any
jurisdiction where it is not now so qualified or to take any action which would
subject it to service of process in suits, other than those arising out of the
offering or sale of the Shares, in any jurisdiction where it is not now so
subject.
(h) The Company will make generally available to its
security holders a consolidated earnings statement, which need not be audited,
covering a twelve-month period commencing after the effective date of this
Agreement and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which consolidated earnings statement shall
satisfy the provisions of Section 11(a) of the Act.
(i) During the period of three years hereafter, the Company
will furnish to you (i) as soon as available, a copy of each report of the
Company mailed to stockholders or filed with the Commission, and (ii) from time
to time such other information concerning the Company as you may request.
(j) If this Agreement shall terminate or shall be terminated
after execution pursuant to any provisions hereof (otherwise than pursuant to
the second paragraph of Section 10 hereof or by notice given by you terminating
this Agreement pursuant to Section 10 or Section 11 hereof) or if this Agreement
shall be terminated by the Underwriters because of any failure or refusal on the
part of the Company to comply with the terms or fulfill any of the conditions of
this Agreement, the Company agrees to reimburse the Representatives for all
out-of-pocket expenses (including fees and expenses of counsel for the
Underwriters) incurred by you in connection herewith.
(k) The Company will apply the net proceeds from the sale of
the Shares substantially in accordance with the description set forth in the
Prospectus.
(l) If Rule 430A of the Act is employed, the Company will
timely file the Prospectus pursuant to Rule 424(b) under the Act and will advise
you of the time and manner of such filing.
(m) Except as provided in this Agreement, the Company will
not sell, contract to sell or otherwise dispose of any Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock, or
grant any options or warrants to purchase Common Stock, for a period of 180 days
after the date of the Prospectus, without the prior written consent of Smith
Barney Inc. (except that the Company may at anytime grant options or warrants to
purchase Common Stock in connection with the grant of options to certain
employees, officers and directors under the Company's stock option plans or the
issuance of Common Stock upon exercise of such options).
(n) The Company has furnished to you "lock-up" letters, in
form and substance satisfactory to you, signed by James M. Seneff, Jr. and
Robert A. Bourne.
(o) Except as stated in this Agreement and in the Prepricing
Prospectus and Prospectus, the Company has not taken, nor will it take, directly
or indirectly, any action designed to or that might reasonably be expected to
cause or result in stabilization or manipulation of the price of the Common
Stock to facilitate the sale or resale of the Shares.
(p) The Company will use its best efforts to have the shares
of Common Stock which it agrees to sell under this Agreement listed, subject to
notice of issuance, on the New York Stock Exchange on or before the Closing
Date.
(q) The Company will comply and will cause its tenants to
comply in all material respects with all applicable Environmental Laws (as
hereinafter defined).
(r) The Company will use its best efforts to continue to
qualify as a real estate investment trust under the Internal Revenue Code of
1986, as amended (the "Code"), and to continue to have each of its subsidiaries
comply with all applicable laws and regulations necessary to maintain a status
as a "qualified REIT subsidiary" under the Code.
(s) If the Company elects to rely upon Rule 462(b), the
Company shall both file a Rule 462(b) Registration Statement with the Commission
in compliance with Rule 462(b) and pay the applicable fees in accordance with
Rule 111 of the Act by the earlier of (i) 10:00 P.M. New York City time on the
date of this Agreement, and (ii) the time confirmations are sent or given, as
specified by Rule 462(b)(2).
6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Basic Prospectus and each Prepricing Prospectus
included as part of the registration statement as originally filed or as part of
any amendment or supplement thereto, or filed pursuant to Rule 424 under the
Act, complied when so filed in all material respects with the provisions of the
Act. To the Company's knowledge, the Commission has not issued any order
preventing or suspending the use of the Basic Prospectus or any Prepricing
Prospectus.
(b) The Company and the transactions contemplated by this
Agreement meet the requirements for using Form S-3 under the Act. The
Registration Statement has become effective for the registration under the Act
of the Shares; no stop order suspending the effectiveness of the Registration
Statement is in effect, and no proceedings for such purpose are pending before
or threatened by the Commission. The Registration Statement meets the
requirements set forth in Rule 415(a)(1)(x) under the Act and complies in all
other material respects with such Rule. The registration statement in the form
in which it became effective and also in such form as it may be when any
post-effective amendment thereto shall become effective and the Prospectus and
any supplement or amendment thereto when filed with the Commission under Rule
424(b) under the Act, complied or will comply in all material respects with the
provisions of the Act and did not or will not at any such times contain an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements made therein not
misleading, except that this representation and warranty does not apply to
statements in or omissions from the registration statement or the Prospectus
made in reliance upon and in conformity with information relating to any
Underwriter furnished to the Company in writing by or on behalf of any
Underwriter through you expressly for use therein.
(c) The Incorporated Documents heretofore filed, when they
were filed (or, if any amendment with respect to any such document was filed,
when such amendment was filed), conformed in all material respects with the
requirements of the Exchange Act and the rules and regulations of the Commission
thereunder; no such document when it was filed (or, if an amendment with respect
to any such document was filed, when such amendment was filed), contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements made therein,
in light of the circumstances under which they were made, not misleading.
(d) All the outstanding shares of Common Stock of the
Company have been duly authorized and validly issued, are fully paid and
nonassessable and are free of any preemptive or similar rights; the Shares have
been duly authorized and, when issued and delivered to the Underwriters against
payment therefor in accordance with the terms hereof, will be validly issued,
fully paid and nonassessable and free of any preemptive or similar rights; and
the capital stock of the Company conforms to the description thereof in the
registration statement and the Prospectus.
(e) Each of the Company and each of its subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland with full corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus, and is duly registered and qualified
to conduct its business and is in good standing in each jurisdiction or place
where the nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify does not have a material adverse effect on the condition (financial or
other), business, properties, net worth or results of operations of the Company
and its subsidiaries. Neither the Company nor any of its subsidiaries does any
business in Cuba.
(f) The Company has no subsidiary or subsidiaries other than
Net Lease Realty I, Inc. and Net Lease Realty II, Inc. (each of which is wholly-
owned by the Company), and does not control, directly or indirectly, any
corporation, partnership, joint venture, association or other business
association. The issued shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued, are fully paid and
non-assessable and are owned legally and beneficially by the Company free and
clear of any security interests, liens, encumbrances, equities or claims.
(g) There are no legal or governmental proceedings pending
or, to the knowledge of the Company, threatened, against the Company or either
of its subsidiaries, or to which the Company or any properties of the Company or
either of its subsidiaries is subject, that are required to be described in the
Registration Statement or the Prospectus but are not described as required, and
there are no statutes, regulations, capital expenditures, contingencies or
agreements, contracts, indentures, leases or other instruments that are required
to be described in the Registration Statement or the Prospectus or to be filed
or incorporated by reference as an exhibit to the Registration Statement or any
Incorporated Document that are not described, filed or incorporated as required
by the Act or the Exchange Act.
(h) Neither the Company nor its subsidiaries is (A) in
violation of (i) its respective articles of incorporation or by-laws or (ii) to
the best of the Company's knowledge, any law, ordinance, administrative or
governmental rule or regulation applicable to the Company or its subsidiaries,
which violation would have a material adverse effect on the Company and its
subsidiaries, or (iii) any decree of any court or governmental agency or body
having jurisdiction over the Company or its subsidiaries, or (B) in default in
any material respect in the performance of any obligation, agreement or
condition contained in any bond, debenture, note or any other evidence of
indebtedness or in any material agreement, indenture, lease or other instrument
to which the Company or its subsidiaries is a party or by which the Company or
its subsidiaries or any of their respective properties may be bound.
(i) (A) To the best of the Company's knowledge, neither the
Company nor either of its subsidiaries is in violation of any municipal, state
or federal law, rule or regulation concerning any of the Properties (as defined
in the Prospectus) or the Acquisition Properties set forth in Part A of Schedule
II hereto which would have a material adverse effect on the Company and its
subsidiaries; (B) to the best of the Company's knowledge, each of the Properties
and the Acquisition Properties set forth in Part A of Schedule II hereto
complies with all applicable zoning laws, ordinances and regulations in all
material respects and, if and to the extent there is a failure to comply, such
failure does not materially impair the value of any of such properties and will
not result in a forfeiture or reversion of title thereof; (C) neither the
Company nor either of its subsidiaries has received from any governmental
authority any written notice of any condemnation of or zoning change affecting
any of the Properties or the Acquisition Properties set forth in Part A of
Schedule II hereto, and the Company does not know of any such condemnation or
zoning change which is threatened and which if consummated would have a material
adverse effect on the Company or any of such properties; (D) the leases under
which the Company leases the Properties and the Acquisition Properties set forth
in Part A of Schedule II hereto as lessor (the "Leases") are in full force and
effect and have been entered into in the ordinary course of business of the
Company; (E) the terms of the Advisory Agreement, dated as of April 1, 1993 and
effective as of January 1, 1995, between the Company and CNL Realty Advisors,
Inc. (the "Advisory Agreement") are fair and reasonable to the Company; (F) the
Company and each of its subsidiaries have complied with respective obligations
under the Leases and the Advisory Agreement in all material respects and the
Company does not know of any default by any other party to the Leases and
Advisory Agreement which, alone or together with other such defaults, would have
a material adverse effect on the Company and its subsidiaries or any of the
properties subject to a Lease; and (G) all liens, charges, encumbrances, claims
or restrictions on or affecting the properties and assets (including the
Properties and the Acquisition Properties set forth in Part A of Schedule II
hereto) of the Company and its subsidiaries that are required to be disclosed in
the Prospectus are disclosed therein.
(j) Neither the issuance and sale of the Shares, the
execution, delivery or performance of this Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby (i) requires
any consent, approval, authorization or other order of or registration or filing
with, any court, regulatory body, administrative agency or other governmental
body, agency or official (except such as may be required for the registration of
the Shares under the Act and the Exchange Act and compliance with the securities
or Blue Sky laws of various jurisdictions) or conflicts or will conflict with or
constitutes or will constitute a breach or violation of, or a default under, the
articles of incorporation or by-laws of the Company or either of its
subsidiaries or (ii) conflicts or will conflict with or constitutes or will
constitute a breach of, or a default under, any agreement, indenture, lease or
other instrument to which the Company or either of its subsidiaries is a party
or by which the Company or any properties of the Company or either of its
subsidiaries may be bound (other than the piggyback registration rights granted
pursuant to the CNL Transaction (as defined in the Prospectus), all of which
have been waived in connection with the transactions contemplated by this
Agreement), or violates or will violate any statute, law, regulation or filing
or judgment, injunction, order or decree applicable to the Company or either of
its subsidiaries or any properties of the Company or either of its subsidiaries,
or will result in the creation or imposition of any lien, charge or encumbrance
upon any property or assets of the Company or either of its subsidiaries
pursuant to the terms of any agreement or instrument to which the Company or
either of its subsidiaries is a party or by which the Company or either of its
subsidiaries may be bound or to which any property or assets of the Company or
either of its subsidiaries is subject.
(k) To the Company's knowledge, the accountants, KPMG Peat
Marwick LLP, who have certified or shall certify the financial statements
included or incorporated by reference in the Registration Statement and the
Prospectus (or any amendment or supplement thereto) are independent public
accountants as required by the Act.
The financial statements, together with related schedules and
notes, included or incorporated by reference in the Registration Statement and
the Prospectus (and any amendment or supplement thereto), present fairly the
financial position, results of operations and changes in financial position of
the Company and its subsidiaries on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data included or incorporated by
reference in the Registration Statement and the Prospectus (and any amendment or
supplement thereto) are accurately presented and prepared on a basis consistent
with such financial statements and the books and records of the Company and its
subsidiaries; and the pro forma financial statements and other pro forma
financial information included or incorporated by reference in the Registration
Statement and the Prospectus were prepared on the basis of reasonable
assumptions and comply in all material respects with the applicable requirements
of Rule 11-02 of Regulation S-X and the pro forma adjustments have been properly
applied to the historical amounts in the compilation of that data.
(l) The execution and delivery of, and the performance by
the Company of its obligations under, this Agreement have been duly and validly
authorized by the Company, and this Agreement has been duly executed and
delivered by the Company and constitutes the valid and legally binding agreement
of the Company, enforceable against the Company in accordance with its terms,
except as rights to indemnity and contribution hereunder may be limited by
federal or state securities laws.
(m) Except as disclosed in the Registration Statement and
the Prospectus (or any amendment or supplement thereto), subsequent to the
respective dates as of which such information is given in the Registration
Statement and the Prospectus (or any amendment or supplement thereto), the
Company and its subsidiaries have not incurred any liability or obligation,
direct or contingent, or entered into any transaction, not in the ordinary
course of business, that is material to the Company and its subsidiaries, and
there has not been any change in the capital stock, or material increase in the
short-term debt or long-term debt, of the Company and its subsidiaries, or any
material adverse change, or any development involving or which may reasonably be
expected to involve, a prospective material adverse change, in the condition
(financial or other), business, net worth or results of operations of the
Company and its subsidiaries.
(n) The Company and each of its subsidiaries have good and
marketable title to all property (real and personal) described in the Prospectus
as being owned by each of them (including the Properties and the Acquisition
Properties set forth in Part A of Schedule II hereto), free and clear of all
liens, claims, security interests or other encumbrances except such as are
described in the Registration Statement and the Prospectus or in a document
filed as an exhibit to the Registration Statement and all the property described
in the Prospectus as being held under lease by the Company or either of its
subsidiaries is held by it under valid, subsisting and enforceable leases.
(o) The purchase of the Acquisition Properties has been duly
authorized by the Board of Directors of the Company and each of the agreements
pursuant to which the Company has acquired the Acquisition Properties set forth
in Part A of Schedule II hereto, or will acquire any of the Acquisition
Properties set forth in Part B of Schedule II hereto (each, a "Purchase
Agreement" and together, the "Purchase Agreements") has been duly authorized,
executed and delivered by the Company and gives the Company the unconditional
right, upon payment of the amount provided in the applicable Purchase Agreement,
to acquire the applicable Acquisition Property.
(p) The Company has not distributed and, prior to the later
to occur of (i) the Closing Date and (ii) completion of the distribution of the
Shares, will not distribute any offering material in connection with the
offering and sale of the Shares other than the Registration Statement, the
Prepricing Prospectus, the Prospectus or other materials, if any, permitted by
the Act. The Company has not, directly or indirectly, (i) taken any action
designed to cause or to result in, or that has constituted or which might
reasonably be expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Shares or (ii) since the filing of the Registration Statement (A) sold, bid for,
purchased, or paid anyone any compensation for soliciting purchases of, the
Shares or (B) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.
(q) The Company and its subsidiaries have such permits,
licenses, franchises and authorizations of governmental or regulatory
authorities ("permits") as are necessary to own their respective properties and
to conduct their respective businesses in the manner described in the
Prospectus, subject to such qualifications as may be set forth in the
Prospectus; the Company and its subsidiaries have fulfilled and performed all
their respective material obligations with respect to such permits and no event
has occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or result in any other material impairment of
the rights of the holder of any such permit, subject in each case to such
qualification as may be set forth in the Prospectus; and, except as described in
the Prospectus, none of such permits contains any restriction that is materially
burdensome to the Company and its subsidiaries.
(r) The Company and each of its subsidiaries maintain a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to the financial and corporate books and records and assets is permitted
only in accordance with management's general or specific authorization; and (iv)
the recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
(s) To the Company's knowledge, neither the Company and its
subsidiaries nor any employee or agent of the Company and its subsidiaries has
made any payment of funds of the Company or its subsidiaries or received or
retained any funds in violation of any law, rule or regulation, which payment,
receipt or retention of funds is of a character required to be disclosed in the
Prospectus.
(t) No labor dispute with the employees of the Company and
its subsidiaries exists or is threatened or imminent that could result in a
material adverse change in the condition (financial or other), business, net
worth or results of operations of the Company and its subsidiaries.
(u) The Company has filed all tax returns required to be
filed, which returns are complete and correct, and the Company is not in default
in the payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto.
No holder of any security of the Company has any right to
require registration of shares of Common Stock or any other security of the
Company because of the filing of the registration statement or consummation of
the transactions contemplated by this Agreement which has not been waived in
connection with the transactions contemplated by this Agreement.
(w) The Company and its subsidiaries own or possess all
patents, trademarks, trademark registrations, service marks, service mark
registrations, trade names, copyrights, licenses, inventions, trade secrets and
rights described in the Prospectus as being owned by them or necessary for the
conduct of their respective businesses, and the Company is not aware of any
claim to the contrary or any challenge by any other person to the rights of the
Company and its subsidiaries with respect to the foregoing.
(x) The Company is not now, and after sale of the Shares to
be sold by the Company hereunder and application of the net proceeds from such
sale as described in the Prospectus under the caption "Use of Proceeds" will not
be, an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
(y) (i) The Company, its subsidiaries, the Properties, the
Acquisition Properties and, to the best of the Company's knowledge, the
operations conducted thereon comply and heretofore have complied with all
applicable Environmental Laws, except as disclosed in the Environmental Reports
and not likely to have a material adverse effect on the relevant Property or
Acquisition Property.
(ii) There are no judicial or administrative proceedings of
an environmental nature pending, or to the best of the Company's knowledge,
threatened against the Company or its subsidiaries.
(iii) The Company and its subsidiaries have not at any time
and, to the best of the Company's knowledge, no other party has at any time
handled, buried, stored, retained, refined, transported, processed,
manufactured, generated, produced, spilled, allowed to seep, leak, escape or
leach, or be pumped, poured, emitted, emptied, discharged, injected, dumped,
transferred or otherwise disposed of or dealt with, Hazardous Materials (as
defined below) on, to, under or from the Properties or the Acquisition
Properties, except as disclosed in the environmental site assessment reports
obtained by the Company on or before the date hereof in connection with the
purchase of any of the Properties and the Acquisition Properties and provided to
the Underwriters or their counsel (collectively, the "Environmental Reports")
and not likely to have a material adverse effect on the relevant Property or
Acquisition Property. Neither the Company nor either of its subsidiaries intends
to use the Properties, the Acquisition Properties or any subsequently acquired
properties for the purpose of handling, burying, storing, retaining, refining,
transporting, processing, manufacturing, generating, producing, spilling,
seeping, leaking, escaping, leaching, pumping, pouring, emitting, emptying,
discharging, injecting, dumping, transferring or otherwise disposing of or
dealing with Hazardous Materials.
(iv) To the best of the Company's knowledge, no seepage,
leak, escape, leach, discharge, injection, release, emission, spill, pumping,
pouring, emptying or dumping of Hazardous Materials into waters on or adjacent
to the Properties or the Acquisition Properties has occurred, is occurring or is
reasonably expected to occur, except as disclosed in the Environmental Reports
and not likely to have a material adverse effect on the relevant Property or
Acquisition Property.
(v) Neither the Company nor either of its subsidiaries has
received notice from any Governmental Authority or other person of, and does not
have knowledge of, any occurrence or circumstance which, with notice, passage of
time, or failure to act, would give rise to, any claim under or pursuant to any
Environmental Law or under common law pertaining to Hazardous Materials on or
originating from the Existing Properties or the Acquisition Properties or
arising out of the conduct of any party with respect to the Existing Properties
or the Acquisition Properties, except as disclosed in the Environmental Reports.
(vi) The Properties and the Acquisition Properties are not
included nor, to the best of the Company's knowledge, proposed for inclusion on
any federal, state, or local lists of sites which require or might require
environmental cleanup, including, but not limited to, the National Priorities
List or CERCLIS List issued pursuant to CERCLA (as defined below) by the United
States Environmental Protection Agency.
(vii) There are no matters of an environmental nature that are
required to be disclosed in the Registration Statement or the Prospectus or
related documents by the Act or the Exchange Act that are not disclosed in such
documents.
As used herein, "Hazardous Material" shall include, without
limitation, any flammable explosives, radioactive materials, hazardous
materials, hazardous wastes, hazardous or toxic substances, or related
materials, asbestos, polychlorinated biphenyls ("PCBs"), petroleum products and
by-products and substances defined or listed as "hazardous substances," "toxic
substances," "hazardous waste," or "hazardous materials" in any Federal, state
or local Environmental Law.
As used herein, "Environmental Law" shall mean all laws,
regulations or ordinances of any Federal, state or local governmental authority
having or claiming jurisdiction over any of the Properties or the Acquisition
Properties (a "Governmental Authority") that are designed to protect public
health and the environment or regulate the handling of Hazardous Materials,
including, without limitation, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601 et
seq.) ("CERCLA"), the Hazardous Material Transportation Act, as amended
(49 U.S.C. Section 1801 et seq.), the Resource Conservation and Recovery Act,
as amended (42 U.S.C. Section 6901 et seq.), the Federal Water Pollution Control
Act, as amended (33 U.S.C. Section 1251 et seq.), and the Clear Air Act, as
amended (42 U.S.C. Section 7401 et seq.), and any and all analogous future
federal or present or future state or local laws.
As used in this paragraph 6(y), "to the best of the Company's
knowledge" shall, with respect to the Acquisition Properties set forth in Part B
of Schedule II hereto, be based solely on the information contained in the
Environmental Reports.]
(z) The Company is organized in conformity with the
requirements for qualification as a real estate investment trust under Sections
856 through 860 of the Code and the rules and regulations thereunder; as of the
close of any taxable year, the Company has had no earnings and profits
accumulated in a non-REIT year within the meaning of Section 857(a)(3)(B) of the
Code; and the Company's past and proposed method of operation have enabled it,
and will enable it, to meet the requirements for taxation as a real estate
investment trust under the Code for all years of its taxable operations ending
on or before December 31, 1996.
(aa) Each of the Company's subsidiaries is in compliance with
all requirements applicable to a "qualified REIT subsidiary" within the meaning
of Section 856(i) of the Code and all applicable regulations under the Code, and
the Company is not aware of any fact that would negatively impact such
qualifications.
(bb) The Company and each of its subsidiaries are insured by
insurers of recognized financial responsibility against such losses and risks
and in such amounts as are prudent and customary in the businesses in which they
are engaged and the value of their properties; neither the Company nor any of
its subsidiaries has been refused any insurance coverage sought or applied for,
and the Company does not have any reason to believe that the Company and each of
its subsidiaries will not be able to renew its respective existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its respective businesses at a
cost that would not materially and adversely affect the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company and its subsidiaries.
(cc) The Company and its subsidiaries have title insurance on
each of the Properties and the Acquisition Properties set forth in Part A of
Schedule II hereto in an amount at least equal to the greater of (a) the cost of
acquisition of such property and (b) the replacement cost of the improvements
located on such property.
(dd) No subsidiary of the Company is currently prohibited
directly or indirectly, from paying any dividends to the Company, from making
any other distribution on such subsidiary's capital stock, from repaying to the
Company any loans or advances to such subsidiary from the Company or from
transferring and of such subsidiary's assets or property to the Company or any
other subsidiary of the Company, except as described in or contemplated by the
Prospectus.
7. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each of you and each other Underwriter and each
person, if any, who controls any Underwriter within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act from and against any and all losses,
claims, damages, liabilities and expenses (including reasonable costs of
investigation) arising out of or based upon any untrue statement or alleged
untrue statement of a material fact contained in any Prepricing Prospectus or in
the Basic Prospectus or in the Registration Statement or the Prospectus or in
any amendment or supplement thereto, or arising out of or based upon any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
except insofar as such losses, claims, damages, liabilities or expenses arise
out of or are based upon any untrue statement or omission or alleged untrue
statement or omission which has been made therein or omitted therefrom in
reliance upon and in conformity with the information relating to such
Underwriter furnished in writing to the Company by or on behalf of any
Underwriter through you expressly for use in connection therewith; provided,
however, that the indemnification contained in this paragraph (a) with respect
to any Prepricing Prospectus shall not inure to the benefit of any Underwriter
(or to the benefit of any person controlling such Underwriter) to the extent
that any such loss, claim, damage, liability or expense results from the fact
that such Underwriter sold Shares to any person as to whom it shall be
established that a copy of the Prospectus as then amended or supplemented
(excluding documents incorporated by reference) was not delivered or sent to
such person within the time required by the Act and the regulations thereunder
and such loss, claim, damage, liability or expense of such Underwriter results
from an untrue statement or alleged untrue statement or omission or alleged
omission of a material fact contained in such Prepricing Prospectus which was
identified to such Underwriter and was corrected in the Prospectus (excluding
documents incorporated by reference), provided that the Company has delivered
the Prospectus to the several Underwriters in requisite quantity on a timely
basis to permit such delivery or sending. The foregoing indemnity agreement
shall be in addition to any liability which the Company may otherwise have.
(b) If any action, suit or proceeding shall be brought
against any Underwriter or any person controlling any Underwriter in respect of
which indemnity may be sought against the Company, such Underwriter or such
controlling person shall promptly notify the Company and the Company shall
assume the defense thereof, including the employment of counsel and payment of
all fees and expenses. Such Underwriter or any such controlling person shall
have the right to employ separate counsel in any such action, suit or proceeding
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Underwriter or such controlling person
unless (i) the Company has agreed in writing to pay such fees and expenses, (ii)
the Company has failed to assume the defense and employ counsel, or (iii) the
named parties to any such action, suit or proceeding (including any impleaded
parties) include both such Underwriter or such controlling person and the
Company and such Underwriter or such controlling person shall have been advised
by its counsel that representation of such indemnified party and the Company by
the same counsel would be inappropriate under applicable standards of
professional conduct (whether or not such representation by the same counsel has
been proposed) due to actual or potential differing interests between them (in
which case the Company shall not have the right to assume the defense of such
action, suit or proceeding on behalf of such Underwriter or such controlling
person). It is understood, however, that the Company shall, in connection with
any one such action, suit or proceeding or separate but substantially similar or
related actions, suits or proceedings in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the reasonable fees
and expenses of only one separate firm of attorneys (in addition to any local
counsel) at any time for all such Underwriters and controlling persons not
having actual or potential differing interests with you or among themselves,
which firm shall be designated in writing by Smith Barney Inc., and that all
such fees and expenses shall be reimbursed as they are incurred. The Company
shall not be liable for any settlement of any such action, suit or proceeding
effected without its written consent, but if settled with such written consent,
or if there be a final judgment for the plaintiff in any such action, suit or
proceeding, the Company agrees to indemnify and hold harmless any Underwriter,
to the extent provided in the preceding paragraph, and any such controlling
person from and against any loss, claim, damage, liability or expense by reason
of such settlement or judgment.
(c) Each Underwriter agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors, its officers who sign
the Registration Statement, and any person who controls the Company within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act, to the same
extent as the foregoing indemnity from the Company to each Underwriter, but only
with respect to information relating to such Underwriter furnished in writing by
or on behalf of such Underwriter through you expressly for use in the
Registration Statement, the Prospectus or any Prepricing Prospectus, or any
amendment or supplement thereto. If any action, suit or proceeding shall be
brought against the Company, any of its directors, any such officer, or any such
controlling person based on the Registration Statement, the Prospectus or any
Prepricing Prospectus, or any amendment or supplement thereto, and in respect of
which indemnity may be sought against any Underwriter pursuant to this paragraph
(c), such Underwriter shall have the rights and duties given to the Company by
paragraph (b) above (except that if the Company shall have assumed the defense
thereof such Underwriter shall not be required to do so, but may employ separate
counsel therein and participate in the defense thereof, but the fees and
expenses of such counsel shall be at such Underwriter's expense), and the
Company, its directors, any such officer, and any such controlling person shall
have the rights and duties given to the Underwriters by paragraph (b) above.
The foregoing indemnity agreement shall be in addition to any liability which
the Underwriters may otherwise have.
(d) If the indemnification provided for in this Section 7 is
unavailable to an indemnified party under paragraphs (a) or (c) hereof in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then an indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Shares, or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company on the one hand and the Underwriters on the other in
connection with the statements or omissions that resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Underwriters on the other shall be deemed to be in the same
proportion as the total net proceeds from the offering (before deducting
expenses) received by the Company bear to the total underwriting discounts and
commissions received by the Underwriters, in each case as set forth in the table
on the cover page of the Prospectus. The relative fault of the Company on the
one hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand or by the
Underwriters on the other hand and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
(e) The Company and the Underwriters agree that it would not
be just and equitable if contribution pursuant to this Section 7 were determined
by a pro rata allocation (even if the Underwriters were treated as one entity
for such purpose) or by any other method of allocation that does not take
account of the equitable considerations referred to in paragraph (d) above. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities and expenses referred to in paragraph (d) above
shall be deemed to include, subject to the limitations set forth above, any
reasonable legal or other expenses incurred by such indemnified party in
connection with investigating any claim or defending any such action, suit or
proceeding. Notwithstanding the provisions of this Section 7, no Underwriter
shall be required to contribute any amount in excess of the amount by which the
total price of the Shares underwritten by it and distributed to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 7 are several
in proportion to the respective numbers of Firm Shares set forth opposite their
names in Schedule I hereto (or such numbers of Firm Shares increased as set
forth in Section 10 hereof) and not joint.
(f) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability on claims that are the subject
matter of such action, suit or proceeding.
(g) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 7 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 7 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter, the Company, its directors or officers, or any person
controlling the Company, (ii) acceptance of any Shares and payment therefor
hereunder, and (iii) any termination of this Agreement. A successor to any
Underwriter or any person controlling any Underwriter, or to the Company, its
directors or officers, or any person controlling the Company, shall be entitled
to the benefits of the indemnity, contribution and reimbursement agreements
contained in this Section 7.
8. Conditions of Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares hereunder are
subject to the following conditions:
(a) (i) If, at the time this Agreement is executed and
delivered, it is necessary for a post-effective amendment to the registration
statement to be declared effective before the offering of the Shares may
commence, such post-effective amendment shall have become effective not later
than 5:30 P.M., New York City time, on the date hereof, or at such later date
and time as shall be consented to in writing by you; if the Company has elected
to rely on Rule 462(b), the Rule 462(b) Registration Statement shall have become
effective not later than the earlier of (x) 10:00 P.M., New York City time, on
the date hereof, or (y) at such later date and time as shall be consented to in
writing by you; and all filings, if any, required by Rules 424 and 430A under
the Act shall have been timely made; (ii) no stop order suspending the
effectiveness of the registration statement shall have been issued and no
proceeding for that purpose shall have been instituted or, to the knowledge of
the Company or any Underwriter, threatened by the Commission; and (iii) any
request of the Commission for additional information (to be included in the
registration statement or the Prospectus or otherwise) shall have been complied
with to your satisfaction.
(b) Subsequent to the effective date of this Agreement,
there shall not have occurred (i) any change, or any development involving a
prospective change, in or affecting the condition (financial or other),
business, properties, net worth, or results of operations of the Company and its
subsidiaries not contemplated by the Prospectus (exclusive of any amendments or
supplements thereto subsequent to the date of this Agreement), which in your
opinion, as Representatives of the several Underwriters, would materially
adversely affect the market for the Shares, or (ii) any event or development
relating to or involving the Company and its subsidiaries or any officer or
director of the Company and its subsidiaries which makes any statement made in
the Prospectus untrue or which, in the opinion of the Company and its counsel or
the Underwriters and their counsel, requires the making of any addition to or
change in the Prospectus in order to state a material fact required by the Act
or any other law to be stated therein or necessary in order to make the
statements therein not misleading, if amending or supplementing the Prospectus
to reflect such event or development would, in your opinion, as Representatives
of the several Underwriters, adversely affect the market for the Shares.
(c) You shall have received on the Closing Date, an opinion
of Shaw, Pittman, Potts & Trowbridge, counsel for the Company, dated the Closing
Date and addressed to you, as Representatives of the several Underwriters, to
the effect that:
(i) Each of the Company and each of its subsidiaries is a
corporation duly incorporated and validly existing in good standing under the
laws of the State of Maryland with full corporate power and authority to own,
lease and operate its properties and to conduct its business as described in the
Registration Statement and the Prospectus (and any amendment or supplement
thereto), and, based solely on certificates of public officials and officers of
the Company and its subsidiaries, is duly registered and qualified to conduct
its business and is in good standing in each jurisdiction or place where the
nature of its properties or the conduct of its business requires such
registration or qualification, except where the failure so to register or
qualify does not have a material adverse effect on the condition (financial or
other), business, properties, net worth or results of operations of the Company
and its subsidiaries;
(ii) To the knowledge of such counsel, the Company has no
subsidiaries other than Net Lease Realty I, Inc. and Net Lease Realty II, Inc.
and does not control, directly or indirectly, any corporation, partnership,
joint venture, association or other business association. The issued shares of
capital stock of each of the Company's subsidiaries have been duly authorized
and validly issued, are fully paid and non-assessable and are owned legally and
beneficially by the Company free and clear of any security interests, liens,
encumbrances, equities or claims;
(iii) The authorized and outstanding capital stock of the
Company is as set forth under the caption "Capitalization" in the Prospectus;
and the authorized capital stock of the Company conforms in all material
respects as to legal matters to the description thereof contained in the
Prospectus under the caption "Description of Common Stock";
(iv) All the shares of capital stock of the Company
outstanding prior to the issuance of the Shares have been duly authorized and
validly issued, and are fully paid and nonassessable;
(v) The Shares have been duly authorized and, when issued
and delivered to the Underwriters against payment therefor in accordance with
the terms hereof, will be validly issued, fully paid and nonassessable and free
of any preemptive rights under Maryland General Corporation Law;
(vi) To the knowledge of such counsel, based upon such
inquiry as such counsel deems appropriate, (a) the Shares, when issued and
delivered in accordance with the terms hereof, will be free of any contractual
preemptive right or other similar rights that entitle or will entitle any person
to acquire any Shares upon the issuance thereof by the Company and (b) no holder
of securities of the Company is entitled to have such securities registered
under the Registration Statement which right has not been waived in connection
with the transactions contemplated by this Agreement;
(vii) The form of certificates for the Shares conforms to the
requirements of the Maryland General Corporation Law;
(viii) The Registration Statement and all post-effective
amendments, if any, and the Rule 462(b) Registration Statement, if any, have
become effective under the Act and, to the knowledge of such counsel, no stop
order suspending the effectiveness of the Registration Statement has been issued
and no proceedings for that purpose are pending before or contemplated by the
Commission; and any required filing of the Prospectus pursuant to Rule 424(b)
has been made in accordance with Rule 424(b);
(ix) The Company has the corporate power and authority to
enter into this Agreement and the Purchase Agreements and to issue, sell and
deliver the Shares to the Underwriters as provided herein, and this Agreement
and the Purchase Agreements have been duly authorized, executed and delivered by
the Company and are valid, legal and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms,
except as enforcement of rights to indemnity and contribution hereunder may be
limited by Federal or state securities laws or principles of public policy and
subject to the qualification that the enforceability of the Company's
obligations hereunder and thereunder may be limited by bankruptcy, fraudulent
conveyance, insolvency, reorganization, moratorium, and other laws relating to
or affecting creditors' rights generally, and by general equitable principles
when applied by a court of law or equity;
(x) To the knowledge of such counsel, neither the Company
nor either of its subsidiaries is (a) in violation of its respective articles of
incorporation or by-laws or (b) in default in the performance of any material
obligation, agreement or condition contained in any bond, debenture, note or
other evidence of indebtedness set forth on Schedule A attached to such opinion,
except as may be disclosed in the Prospectus;
(xi) Neither the offer, sale or delivery of the Shares, the
execution, delivery or performance by the Company of this Agreement, compliance
by the Company with the provisions hereof nor consummation by the Company of the
transactions contemplated hereby (a) conflicts or will conflict with or
constitutes or will constitute a breach of, or a default under, (1) the articles
of incorporation or by-laws of the Company or either of its subsidiaries or (2)
any agreement, indenture, lease or other instrument to which the Company or
either of its subsidiaries is a party or by which the Company or any properties
of the Company or either of its subsidiaries is bound (A) that is an exhibit to
the Registration Statement or (B) which is known to such counsel (other than the
piggyback registration rights granted pursuant to the CNL Transaction (as
defined in the Prospectus), all of which have been waived in connection with the
transactions contemplated by this Agreement); or (b) results or will result in
the creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or its subsidiaries, pursuant to any agreement,
indenture, lease or other instrument to which the Company or either of its
subsidiaries is a party or by which the Company or any properties of the Company
or either of its subsidiaries is bound (1) that is incorporated by reference or
an exhibit to the Registration Statement or (2) which is known to such counsel;
or (c) violates or will violate (1) any existing federal or Maryland law,
regulation or ruling (assuming compliance with all applicable state securities
and Blue Sky laws, regulations, rulings and orders) or (2) to the knowledge of
such counsel, any judgment, injunction, order or decree applicable to the
Company or its subsidiaries or any properties of the Company or either of its
subsidiaries;
(xii) No consent, approval, authorization or other order of,
or registration or filing with, any court, regulatory body, administrative
agency or other governmental body, agency, or official is required on the part
of the Company (except as have been obtained under the Act and the Exchange Act
or such as may be required under state securities or Blue Sky laws governing the
purchase and distribution of the Shares) for the valid issuance and sale of the
Shares to the Underwriters as contemplated by this Agreement;
(xiii) (a) The Registration Statement and the Prospectus and
any supplements or amendments thereto (except for the financial statements and
the notes thereto and the schedules and other financial data included therein,
as to which such counsel need not express any opinion) comply as to form in all
material respects with the requirements of the Act; and (b) each of the
Incorporated Documents (except for the financial statements and the notes
thereto and the schedules and other financial and statistical data included
therein, as to which counsel need not express any opinion) complies as to form
in all material respects with the Exchange Act and the rules and regulations of
the Commission thereunder;
(xiv) To the knowledge of such counsel, based upon such
inquiry as such counsel deems appropriate, (A) other than as described or
contemplated in the Prospectus (or any supplement thereto), there are no legal
or governmental proceedings pending or threatened against the Company or either
of its subsidiaries, or to which the Company or either of its subsidiaries or
any properties of the Company and either of its subsidiaries is subject, which
are required to be described in the Registration Statement or Prospectus (or any
amendment or supplement thereto) and (B) there are no statutes, regulations,
capital expenditures, contingencies or agreements, contracts, indentures, leases
or other instruments, that are required to be described in the Registration
Statement or the Prospectus (or any amendment or supplement thereto) or to be
filed or incorporated by reference as an exhibit to the Registration Statement
or any Incorporated Document that are not described, filed or incorporated as
required, as the case may be;
(xv) To the knowledge of such counsel, neither the Company
nor either of its subsidiaries is in violation of any law, ordinance,
administrative or governmental rule or regulation applicable to the Company or
its subsidiaries or of any decree of any court or governmental agency or body
having jurisdiction over the Company or its subsidiaries;
(xvi) Such counsel is not aware of any certificates,
authorizations, licenses or permits required by any federal regulatory authority
which are necessary for the Company and its subsidiaries to conduct their
respective businesses; to the knowledge of such counsel, neither the Company nor
either of its subsidiaries has received any notice of proceedings relating to
the revocation or modification of any certificate, authorization, license or
permit issued by any federal, state, municipal or foreign regulatory authority
which, singly or in the aggregate, if the subject of an unfavorable decision,
ruling or finding, would result in a material adverse change in the condition
(financial or otherwise), business prospects, net worth or results of operations
of the Company or its subsidiaries;
(xvii) The Company is not subject to registration as an
investment company under the Investment Company Act of 1940, as amended, and the
transactions contemplated by this Agreement will not cause the Company to become
an investment company subject to registration under the Investment Company Act
of 1940, as amended;
(xviii) Commencing with the Company's initial taxable year,
the Company has qualified as a real estate investment trust under the Code for
all taxable years ending on or before December 31, 1994, and its past and
proposed method of operation will enable it to qualify as a real estate
investment trust under the Code for its taxable year ending on December 31,
1996; and each of the Company's subsidiaries is a "qualified REIT subsidiary"
within the meaning of Section 856(i) of the Code;
(xix) To the knowledge of such counsel, (a) neither the
Company nor either of its subsidiaries is in violation of any federal law or
regulation relating to occupational safety and health or to the environment,
including, without limitation, the storage, handling, transportation or disposal
of hazardous or toxic materials, (b) the Company and its subsidiaries have
received all permits, registrations, licenses and other approvals required of
them under applicable federal occupational safety and health and environmental
laws and regulations to conduct their respective businesses, (c) the Company and
its subsidiaries are in compliance with all terms and conditions of any such
permit, registration, license or approval, except any such violation of law or
regulation, failure to receive required permits, registrations, licenses or
other approvals or failure to comply with the terms and conditions of such
permits, registrations, licenses or approvals which would not, singly or in the
aggregate, result in a material adverse change in the condition (financial or
otherwise), business prospects, net worth or results of operations of the
Company or its subsidiaries, (d) there are no occurrences or circumstances of an
environmental nature which, with notice, passage of time, or failure to act,
would result in material liability under applicable federal environmental laws
or regulations or result in a material adverse change in the condition
(financial or otherwise), business prospects, net worth or results of operations
of the Company or its subsidiaries and (e) there are no matters of an
environmental nature required by the Act or the Exchange Act to be disclosed in
the Registration Statement or the Prospectus or related documents that are not
disclosed in such documents;
(xx) The Shares have been approved for listing on the New
York Stock Exchange, subject to official notice of issuance;
(xxi) The statements in the Prospectus, insofar as they are
descriptions of contracts or agreements or constitute statements of law or legal
conclusions, are accurate and present fairly the information required to be
shown in all material respects; and
(xxii) Although counsel has not undertaken, except as
otherwise indicated in their opinion, to determine independently, and does not
assume any responsibility for, the accuracy or completeness of the statements in
the Registration Statement, such counsel has participated in the preparation of
the Registration Statement and the Prospectus, including review and discussion
of the contents thereof (including review and discussion of the contents of all
Incorporated Documents), and nothing has come to the attention of such counsel
that has caused them to believe that the Registration Statement (including the
Incorporated Documents) at the time the Registration Statement became effective,
or the Prospectus, as of its date and as of the Closing Date or the Option
Closing Date, as the case may be, contained an untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary to make the statements therein not misleading or that any amendment or
supplement to the Prospectus, as of its respective date, and as of the Closing
Date or the Option Closing Date, as the case may be, contained any untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in the light of the circumstances under
which they were made, not misleading (it being understood that such counsel need
express no opinion with respect to the financial statements and the notes
thereto and the schedules and other financial data included in the Registration
Statement or the Prospectus or any Incorporated Document).
(d) You shall have received on the Closing Date an opinion
of Willkie Farr & Gallagher, counsel for the Underwriters, dated the Closing
Date and addressed to you, as Representatives of the several Underwriters, with
respect to the matters referred to in clauses (viii) and (xiii)(a) of the
foregoing paragraph (c) and such other related matters as you may request.
(e) You shall have received letters addressed to you, as
Representatives of the several Underwriters, and dated the date hereof and the
Closing Date from KPMG Peat Marwick LLP, independent certified public
accountants, substantially in the forms heretofore approved by you.
(f) (i) No stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there shall
not have been any change in the capital stock of the Company nor any material
increase in the short-term or long-term debt of the Company and its subsidiaries
(other than in the ordinary course of business) from that set forth or
contemplated in the Registration Statement or the Prospectus (or any amendment
or supplement thereto); (iii) there shall not have been, since the respective
dates as of which information is given in the Registration Statement and the
Prospectus (or any amendment or supplement thereto), except as may otherwise be
stated in the Registration Statement and Prospectus (or any amendment or
supplement thereto), any material adverse change in the condition (financial or
other), business, prospects, properties, net worth or results of operations of
the Company and its subsidiaries; (iv) the Company and its subsidiaries shall
not have any liabilities or obligations, direct or contingent (whether or not in
the ordinary course of business), that are material to the Company and its
subsidiaries, other than those reflected in the Registration Statement or the
Prospectus (or any amendment or supplement thereto); and (v) all the
representations and warranties of the Company contained in this Agreement shall
be true and correct on and as of the date hereof and on and as of the Closing
Date as if made on and as of the Closing Date, and you shall have received a
certificate, dated the Closing Date and signed by the chief executive officer
and the chief financial officer of the Company (or such other officers as are
acceptable to you), to the effect set forth in this Section 8(f) and in Section
8(g) hereof.
(g) The Company shall not have failed at or prior to the
Closing Date to have performed or complied with any of its agreements herein
contained and required to be performed or complied with by it hereunder at or
prior to the Closing Date.
(h) Prior to the Closing Date the Shares shall have been
listed, subject to notice of issuance, on the New York Stock Exchange.
(i) The Company shall have furnished or caused to be
furnished to you such further certificates and documents as you shall have
requested.
All such opinions, certificates, letters and other documents
will be in compliance with the provisions hereof only if they are satisfactory
in form and substance to you and your counsel.
Any certificate or document signed by any officer of the
Company and delivered to you, as Representatives of the Underwriters, or to
counsel for the Underwriters, shall be deemed a representation and warranty by
the Company to each Underwriter as to the statements made therein.
The several obligations of the Underwriters to purchase
Additional Shares hereunder are subject to the satisfaction on and as of any
Option Closing Date of the conditions set forth in this Section 8, except that,
if any Option Closing Date is other than the Closing Date, the certificates,
opinions and letters referred to in paragraphs (c) through (g) shall be dated
the Option Closing Date in question and the opinions called for by paragraphs
(c) and (d) shall be revised to reflect the sale of Additional Shares.
9. Expenses. The Company agrees to pay the following costs and
expenses and all other costs and expenses incident to the performance by the
Company of its obligations hereunder: (i) the preparation, printing or
reproduction, and filing with the Commission of the registration statement
(including financial statements and exhibits thereto), each Prepricing
Prospectus, the Prospectus, and each amendment or supplement to any of them;
(ii) the printing (or reproduction) and delivery (including postage, air freight
charges and charges for counting and packaging) of such copies of the
registration statement, each Prepricing Prospectus, the Prospectus, the
Incorporated Documents, and all amendments or supplements to any of them, as may
be reasonably requested for use in connection with the offering and sale of the
Shares; (iii) the preparation, printing, authentication, issuance and delivery
of certificates for the Shares, including any stamp taxes in connection with the
original issuance and sale of the Shares; (iv) the printing (or reproduction)
and delivery of this Agreement, the preliminary and supplemental Blue Sky
Memoranda and all other agreements or documents printed (or reproduced) and
delivered in connection with the offering of the Shares; (v) the listing of the
Shares on the New York Stock Exchange; (vi) the registration or qualification of
the Shares for offer and sale under the securities or Blue Sky laws of the
several states as provided in Section 5(g) hereof (including the reasonable
fees, expenses and disbursements of counsel for the Underwriters relating to the
preparation, printing or reproduction, and delivery of the preliminary and
supplemental Blue Sky Memoranda and such registration and qualification); (vii)
the filing fees and the fees and expenses of counsel for the Underwriters in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc.; (viii) the transportation and other expenses incurred
by or on behalf of Company representatives in connection with presentations to
prospective purchasers of the Shares; and (ix) the fees and expenses of the
Company's accountants and the fees and expenses of counsel (including local and
special counsel) for the Company.
10. Effective Date of Agreement. This Agreement shall become
effective: (i) upon the execution and delivery hereof by the parties hereto; or
(ii) if, at the time this Agreement is executed and delivered, it is necessary
for a post-effective amendment to the registration statement to be declared
effective before the offering of the Shares may commence, when notification of
the effectiveness of such post-effective amendment has been released by the
Commission. Until such time as this Agreement shall have become effective, it
may be terminated by the Company, by notifying you, or by you, as
Representatives of the several Underwriters, by notifying the Company.
If any one or more of the Underwriters shall fail or refuse to
purchase Shares which it or they are obligated to purchase hereunder on the
Closing Date, and the aggregate number of Shares which such defaulting
Underwriter or Underwriters are obligated but fail or refuse to purchase is not
more than one-tenth of the aggregate number of Shares which the Underwriters are
obligated to purchase on the Closing Date, each non-defaulting Underwriter shall
be obligated, severally, in the proportion which the number of Firm Shares set
forth opposite its name in Schedule I hereto bears to the aggregate number of
Firm Shares set forth opposite the names of all non-defaulting Underwriters or
in such other proportion as you may specify in accordance with Section 20 of the
Master Agreement Among Underwriters of Smith Barney Inc., to purchase the Shares
which such defaulting Underwriter or Underwriters are obligated, but fail or
refuse, to purchase. If any one or more of the Underwriters shall fail or
refuse to purchase Shares which it or they are obligated to purchase on the
Closing Date and the aggregate number of Shares with respect to which such
default occurs is more than one-tenth of the aggregate number of Shares which
the Underwriters are obligated to purchase on the Closing Date and arrangements
satisfactory to you and the Company for the purchase of such Shares by one or
more non-defaulting Underwriters or other party or parties approved by you and
the Company are not made within 36 hours after such default, this Agreement will
terminate without liability on the part of any non-defaulting Underwriter or the
Company. In any such case which does not result in termination of this
Agreement, either you or the Company shall have the right to postpone the
Closing Date, but in no event for longer than seven days, in order that the
required changes, if any, in the Registration Statement and the Prospectus or
any other documents or arrangements may be effected. Any action taken under
this paragraph shall not relieve any defaulting Underwriter from liability in
respect of any such default of any such Underwriter under this Agreement. The
term "Underwriter" as used in this Agreement includes, for all purposes of this
Agreement, any party not listed in Schedule I hereto who, with your approval and
the approval of the Company, purchases Shares which a defaulting Underwriter is
obligated, but fails or refuses, to purchase.
Any notice under this Section 10 may be given by telegram, telecopy
or telephone but shall be subsequently confirmed by letter.
11. Termination of Agreement. This Agreement shall be subject to
termination in your absolute discretion, without liability on the part of any
Underwriter to the Company by notice to the Company, if prior to the Closing
Date or any Option Closing Date (if different from the Closing Date and then
only as to the Additional Shares), as the case may be, (i) trading in securities
generally on the New York Stock Exchange, the American Stock Exchange or the
Nasdaq National Market shall have been suspended or materially limited, (ii) a
general moratorium on commercial banking activities in New York or Florida shall
have been declared by either federal or state authorities, or (iii) there shall
have occurred any outbreak or escalation of hostilities or other international
or domestic calamity, crisis or change in political, financial or economic
conditions, the effect of which on the financial markets of the United States is
such as to make it, in your judgment, impracticable or inadvisable to commence
or continue the offering of the Shares at the offering price to the public set
forth on the cover page of the Prospectus or to enforce contracts for the resale
of the Shares by the Underwriters. Notice of such termination may be given to
the Company by telegram, telecopy or telephone and shall be subsequently
confirmed by letter.
12. Information Furnished by the Underwriters. The statements set
forth in the last paragraph on the cover page, the stabilization legend on the
inside front cover, and the statements in the first and third paragraphs under
the caption "Underwriting" in any Prepricing Prospectus and in the Prospectus,
constitute the only information furnished by or on behalf of the Underwriters
through you as such information is referred to in Sections 6(b) and 7 hereof.
13. Miscellaneous. Except as otherwise provided in Sections 5, 10
and 11 hereof, notice given pursuant to any provision of this Agreement shall be
in writing and shall be delivered (i) if to the Company, at the office of the
Company at 400 East South Street, Suite 500, Orlando, Florida 32801, Attention:
James M. Seneff, Jr., Chairman and Chief Executive Officer; or (ii) if to you,
as Representatives of the several Underwriters, care of Smith Barney Inc., 388
Greenwich Street, New York, New York 10013, Attention: Manager, Investment
Banking Division.
This Agreement has been and is made solely for the benefit of the
several Underwriters, the Company, its directors and officers, and the other
controlling persons referred to in Section 7 hereof and their respective
successors and assigns, to the extent provided herein, and no other person shall
acquire or have any right under or by virtue of this Agreement. Neither the
term "successor" nor the term "successors and assigns" as used in this Agreement
shall include a purchaser from any Underwriter of any of the Shares in his
status as such purchaser.
14. Applicable Law; Counterparts. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York
applicable to contracts made and to be performed within the State of New York.
This Agreement may be signed in various counterparts which together
constitute one and the same instrument. If signed in counterparts, this
Agreement shall not become effective unless at least one counterpart hereof
shall have been executed and delivered on behalf of each party hereto.
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
COMMERCIAL NET LEASE REALTY, INC.
By
---------------------------
Chairman of the Board
Confirmed as of the date first
above mentioned on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
SMITH BARNEY INC.
GOLDMAN, SACHS & CO.
LEGG MASON WOOD WALKER INCORPORATED
J.C. BRADFORD & CO.
THE ROBINSON-HUMPHREY COMPANY, INC.
As Representatives of the Several Underwriters
By SMITH BARNEY INC.
By
-------------------------
Managing Director
SCHEDULE I
COMMERCIAL NET LEASE REALTY, INC.
Number of
Underwriter Firm Shares
- ----------- -----------
Smith Barney Inc.
Goldman, Sachs & Co.
Legg Mason Wood Walker Incorporated
J.C. Bradford & Co.
The Robinson-Humphrey Company, Inc.
---------
Total 3,000,000
=========
SCHEDULE II
ACQUISITION PROPERTIES
Location
Retailer (street address) City State
- -------- ---------------- ---- -----
A. [Acquired 9/30 - Closing]
B. [To be Acquired]
[LETTERHEAD OF SHAW, PITTMAN, POTTS & TROWBRIDGE]
January 19, 1996
Commercial Net Lease Realty, Inc.
400 East South Street
Suite 500
Orlando, Florida 32801
Ladies and Gentlemen:
We have acted as counsel to Commercial Net Lease Realty, Inc., a Maryland
corporation (the "Company"), in connection with the Registration Statement on
Form S-3, Registration No. 33-61165 (the "Registration Statement"), filed with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended, and declared effective by the Commission on October 18,
1995. Pursuant to the Registration Statement, the Company proposes to issue and
sell 3,450,000 shares of common stock, par value $0.01 per share (the "Common
Stock") (including the underwriters' over-allotment option, if exercised), to
the public through certain underwriters pursuant to the terms set forth in the
prospectus supplement filed on January 5, 1996 (the "Prospectus Supplement") to
the prospectus filed as part of the Registration Statement.
Based upon our examination of the originals or copies of such documents,
corporate records, certificates of officers of the Company and other instruments
as we have deemed necessary and upon the laws as presently in effect, we are of
the opinion that the Common Stock has been duly authorized for issuance by the
Company, and that upon issuance and delivery in accordance with the purchase
agreement referred to in the Prospectus Supplement, the Common Stock will be
validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as an exhibit to the
Prospectus Supplement. We also consent to the reference to Shaw, Pittman, Potts
& Trowbridge under the caption "Legal Matters" in the Prospectus Supplement.
Very truly yours,
/s/ SHAW, PITTMAN, POTTS & TROWBRIDGE
SHAW, PITTMAN, POTTS & TROWBRIDGE
[LETTERHEAD OF SHAW, PITTMAN, POTTS & TROWBRIDGE]
January 19, 1996
Commercial Net Lease Realty, Inc.
400 E. South Street
Suite 500
Orlando, Florida 32801
Smith Barney Inc.
388 Greenwich Street
New York, New York 10013
Gentlemen:
On July 20, 1995, Commercial Net Realty, Inc. ("CNL Realty") filed a
registration statement on Form S-3, file number 33-61165 (the "Registration
Statement"), with the Securities and Exchange Commission, which was declared
effective on October 18, 1995. In connection with the filing of a prospectus
supplement on January 5, 1996 (the "Prospectus Supplement") to the prospectus
contained in the Registration Statement (the "Prospectus"), you have asked us to
render an opinion with respect to the qualification of CNL Realty* as a real
estate investment trust ("REIT") under sections 856 through 860 of the Internal
Revenue Code and with respect to the matters discussed under the heading
"Federal Income Tax Considerations" in the Prospectus. (Our references herein
to "the Code" are to the Internal Revenue Code of 1986, as amended, with respect
to taxable years ending on or after January 1, 1987, and to the Internal Revenue
Code of 1954, as amended, with respect to taxable years ending on or before
December 31, 1986.)
We have served as special counsel for CNL Realty in connection with the
filing of the Prospectus and the Prospectus Supplement and from time to time in
the past have represented CNL Realty on specific matters as requested by CNL
Realty. Specifically for the purpose of this opinion, we have examined and
relied upon the following: copies of CNL Realty's Articles of Incorporation and
any amendments thereto; its Federal Forms 1120 for its taxable years 1984
through 1994 (in which tax returns we observe that CNL Realty has elected to be
treated as a real estate investment trust); the Registration Statement; the
Prospectus; the Prospectus Supplement; copies of executed leases covering real
property owned by CNL Realty; and its Form S-11 Registration Statement as filed
with the Securities and Exchange Commission on August 15, 1984.
We have not served as general counsel to CNL Realty and have not been
involved in decisions regarding the day-to-day operation of CNL Realty and its
properties. We have, however, discussed the mode of operation of CNL Realty
with its officers with a view to learning information relevant to the opinions
expressed herein and have received and relied upon a certificate from CNL Realty
with respect to certain matters. A copy of the certificate is attached.
We have discussed with management of CNL Realty arrangements relating to
the management of its properties, the relationships of CNL Realty with tenants
of such properties, and certain terms of leases of such properties to tenants,
with a view to assuring that at the close of each quarter of the taxable years
covered by this opinion it met the asset composition requirements set forth in
section 856(c)(5), and with a view to assuring that, with respect to years
covered by this opinion (and as projected by CNL Realty management for all of
1996), it satisfied (or will satisfy for 1996) the 95%, 75%, and 30% gross
income tests set forth in sections 856(c)(2), (3), and (4), respectively. We
have further reviewed with management of CNL Realty the requirements that the
beneficial ownership of a REIT be held by 100 or more persons for at least
335/365ths of each taxable year and that a REIT must satisfy the diversity of
ownership requirements of section 856(h) as such requirements existed in the
years covered by this opinion, and we have been advised by management that at
all times during the years covered by this opinion (and specifically on each
record date for the payment of dividends during 1984 through the date hereof)
CNL Realty has had more than 1,000 shareholders of record, that CNL Realty
maintains the records required by section 1.857-8 of the Treasury Regulations,
that no later than January 30 of each year it sent the demand required by
section 1.857-8(d) of the Treasury Regulations to each shareholder of record
owning one percent or more of the outstanding shares of CNL Realty on the
appropriate date required by said regulation, and that the actual ownership of
CNL Realty shares was such that, to the best knowledge of its management (based
upon responses to the aforesaid demands, any filing of a Schedule 13D under the
Securities Exchange Act of 1934, as amended, or any other sources of
information), CNL Realty satisfied the applicable requirements of section
856(h). Further, we have examined various property leases and lease supplements
relating to the properties that CNL Realty owns, and although leases relating to
certain properties which CNL Realty owns have not been made available to us, CNL
Realty has represented with respect to such leases that they will conform in all
material respects to a form of lease agreement provided to us. On the basis of
discussions with management of CNL Realty, we are not aware that CNL Realty's
election to be a REIT has been terminated or challenged by the Internal Revenue
Service or any other party or that CNL Realty has revoked its election to be a
REIT for any such prior year so as to make CNL Realty ineligible to qualify as a
REIT for the years covered by this opinion.
In rendering the opinions set forth herein, we are assuming that copies of
documents examined by us are true copies of originals thereof and that the
information concerning CNL Realty set forth in CNL Realty's Federal income tax
returns, and in the Prospectus Supplement, as well as the information provided
us by CNL Realty's management are true and correct. We have no reason to
believe that such assumptions are not warranted.
Based upon the foregoing, we are of the opinion that: (a) CNL Realty was a
"real estate investment trust" as defined by section 856(a) for its taxable
years ended December 31, 1984 through December 31, 1995, and its proposed method
of operation will enable it to meet the requirements for qualification and
taxation as a REIT for its taxable year ending December 31, 1996 and for all
future taxable years, and (b) CNL Realty's wholly owned subsidiaries, Net Lease
Realty I, Inc. and Net Lease Realty II, Inc., were each "qualified REIT
subsidiaries" as defined by section 856(i) for CNL Realty's taxable year ending
December 31, 1995, and their proposed ownership will enable them to meet the
requirements for treatment as qualified REIT subsidiaries for CNL Realty's
taxable year ending December 31, 1996 and for all future taxable years.
However, with respect to the 1996 year and all future years, we note that CNL
Realty's status as a real estate investment trust at any time is dependent among
other things upon its meeting the requirements of section 856 throughout the
year and for the year as a whole.
In addition, we have participated in the preparation of the material under
the heading "Federal Income Tax Considerations" in the Prospectus, and we are of
the opinion that the matters described therein are accurate and we consent to
your filing of this opinion as an exhibit to the Prospectus Supplement and the
Registration Statement.
This opinion is based upon the existing provisions of the Code (or
predecessor provisions, as applicable), rules and regulations (including
proposed regulations) promulgated thereunder, and reported administrative and
judicial interpretations thereof, all of which are subject to change, possibly
with retroactive effect. This opinion is limited to the specific matters
covered hereby and should not be interpreted to imply that the undersigned has
offered its opinion on any other matter.
Very truly yours,
SHAW, PITTMAN, POTTS & TROWBRIDGE
By:
---------------------------
Charles B. Temkin, P.C.
* Unless otherwise noted, all references to CNL Realty herein refer to CNL
Realty and its wholly owned subsidiaries, Net Lease Realty I, Inc. and Net Lease
Realty II, Inc.
** All section references herein are to the Code or to the regulations issued
thereunder.
SECOND AMENDED AND RESTATED
REVOLVING LINE OF CREDIT AND SECURITY AGREEMENT
AMONG
COMMERCIAL NET LEASE REALTY, INC.,
NET LEASE REALTY I, INC.,
NET LEASE REALTY II, INC.,
THE LENDERS LISTED ON THE SIGNATURE PAGES HEREOF,
and
FIRST UNION NATIONAL BANK OF FLORIDA,
as the Agent
TABLE OF CONTENTS
SECTION 1. DEFINITIONS 2
1.1 Defined Terms. 2
1.2 Other Definitional Provisions 10
SECTION 2. THE CREDIT 10
2.1 The Revolving Credit Facility 10
2.2 Advance Requests and Funding Mechanics 11
2.3 Letters of Credit 14
2.4 Use of Proceeds 16
2.5 Note 16
2.6 Interest 16
2.7 Repayment 17
2.8 Fees 18
2.9 Extension of Revolving Credit Maturity Date 18
2.10 Single Loan 18
2.11 Payments and Computations 19
2.12 Prepayments 20
2.13 LIBOR Rate Compensation 21
2.14 Sharing of Payments, Etc. 22
2.15 Conversion and Continuation of Advances; Failure to Select
Interest Period 23
2.16 Increased Costs, Illegality, Etc. 24
2.17 Letters of Credit Obligations 25
SECTION 3. SECURITY DOCUMENTS 27
3.1 Security Agreement 27
3.2 Ownership and Encumbrance of Property 28
3.3 Additional Security Documents 28
3.4 Release of Property 29
SECTION 4. REPRESENTATIONS AND WARRANTIES 30
4.1 Corporate Existence of Borrower; Compliance with Law 31
4.2 Authorization 31
4.3 Enforceable Obligations 31
4.4 Financial Condition of the Borrowers 31
4.5 No Litigation 32
4.6 Disclosure and No Untrue Statements 32
4.7 Title to Assets; Leases in Good Standing 32
4.8 Payment of Taxes 32
4.9 Agreement or Contract Restrictions 33
4.10 Patents, Trademarks, Etc. 33
4.11 Racketeer Influenced and Corrupt Organization(s) Act 33
4.12 Investment Company Act; Regulation 33
4.13 Labor Matters 34
4.14 ERISA Requirement 34
4.15 Compliance With Environmental Requirements 34
4.16 Compliance with REIT Requirements 35
4.17 Principal Office/Corporate Name 35
4.18 Use of Credit 35
SECTION 5. CONDITIONS OF LENDING 36
5.1 Request for Borrowing; Security Documents and Information 36
5.2 Continuing Accuracy of Representations and Warranties 36
5.3 No Default 36
5.4 Loan Documents 36
5.5 Supporting Documents 36
5.6 Opinion of the Borrowers' Counsel 37
SECTION 6. AFFIRMATIVE COVENANTS 38
6.1 Financial Reports and Other Data 38
6.2 Financial Covenants of the Borrowers 40
6.3 Payment and Performance of the Borrowers Obligations 40
6.4 Depository Account 40
6.5 Conduct of Business; Maintenance of Existence 40
6.6 Right of Inspection; Discussions 40
6.7 Notices 41
6.8 Payment of Taxes; Liens 42
6.9 Maintenance of Property, Leases 42
6.10 ERISA Benefit Plans 42
6.11 Insurance of Property 43
6.12 True Books 43
6.13 Observance of Laws 43
6.14 Further Assurances 43
6.15 Change of Name, Principal Place of Business, Office, or the
Agent 44
6.16 Status 44
6.17 Syndication of Credit 44
6.18 Use of Proceeds from Mortgage Loans 44
SECTION 7. NEGATIVE COVENANTS 44
7.1 Other Indebtedness 44
7.2 Limitations on Mortgages, Liens, Etc. 45
7.3 No Guaranties 45
7.4 Merger, Sale of Assets, Dissolution, Etc. 45
7.5 Limitations on Loans, Advances, and Investments 46
7.6 Regulation U 46
7.7 Insider Transactions 46
7.8 Changes in Governing Documents, Accounting Methods, Fiscal Year 47
7.9 Management 47
SECTION 8. EVENTS OF DEFAULT 47
8.1 Payment of Obligations to the Banks 47
8.2 Representation or Warranty 47
8.3 Covenants 47
8.4 Any Borrower's Liquidation; Dissolution; Bankruptcy; Etc. 47
8.5 Order of Dissolution 48
8.6 Reports and Certificates 48
8.7 Judgments 48
8.8 Liens Imposed by Law 48
8.9 Corporate Existence 48
8.10 Invalidity of Security Interest and Liens 48
SECTION 9. THE AGENT 49
9.1 Appointment, Authorization, and Action 49
9.2 Delegation of Duties 50
9.3 Exculpatory Provisions 50
9.4 Reliance by the Agent 51
9.5 Agent and Affiliates 51
9.6 Notice of Default 51
9.7 Non-Reliance on the Agent and Other Lenders 52
9.8 Enforcement by the Agent 52
9.9 Indemnification 52
9.10 Failure to Act 53
9.11 Successor Agent 53
SECTION 10. INDEMNIFICATION BY BORROWERS 53
SECTION 11. MISCELLANEOUS 54
11.1 Course of Dealing; Amendments 54
11.2 Payment of Expenses, Including Attorneys' Fees and Taxes 54
11.3 Successors and Assigns 55
11.4 Assignments and Participations 55
11.5 Confidential Information 57
11.6 Liens; Set-Off 58
11.7 Notices 59
11.8 Waiver of Default 59
11.9 No Waiver; Cumulative Remedies 59
11.10 Venue and Jurisdiction 59
11.11 Governing Law 60
11.12 Title and Headings; Table of Contents 60
11.13 Complete Agreement 60
11.14 Legal or Governmental Limitations 60
11.15 Counterparts 60
11.16 Additional Banks 60
11.17 WAIVER OF JURY TRIAL BY BORROWERS 62
SECOND AMENDED AND RESTATED
REVOLVING LINE OF CREDIT AND SECURITY AGREEMENT
-----------------------------------------------
THIS SECOND AMENDED AND RESTATED REVOLVING LINE OF CREDIT AND SECURITY
AGREEMENT is made and entered into as of this _____ day of December, 1995, by
and among COMMERCIAL NET LEASE REALTY, INC., a Maryland corporation ("CNLR"),
NET LEASE REALTY I, INC., a Maryland corporation ("Net I") and NET LEASE REALTY
II, INC., a Maryland corporation ("Net II") (CNL, Net I and Net II are
hereinafter sometimes individually referred to as a "Borrower" and collectively
referred to as the "Borrowers"), FIRST UNION NATIONAL BANK OF FLORIDA, a
national banking association, as the Agent (the "Agent") and the financial
institutions which are, or may from time to time become, listed on the signature
pages hereof (together with their successors and assigns, individually a "Bank"
and collectively the "Banks").
BACKGROUND
----------
CNLR and First Union National Bank of Florida entered into a Revolving
Line of Credit and Security Agreement dated as of June 21, 1994 (the "Prior
Credit Agreement"), which provided for a revolving line of credit in the amount
of $30,000,000.00 in favor of CNLR (the "Prior Credit"), evidenced by a
promissory note in the principal amount of $30,000,000.00 (the "Prior Note"),
Collateral Assignments of Leases, Rents, and Profits and Security Agreements,
Agreements Not to Encumber or Transfer Property, and other related instruments
(the "Prior Security Documents").
Subsequently, CNLR, the Agent and certain Banks entered into a Revolving
Line of Credit and Security Agreement dated as of July 25, 1994 (the "1994
Credit Agreement"), which provided for a revolving line of credit in the amount
of $100,000,000.00 in favor of CNLR (the "Existing Credit") pursuant to which
First Union National Bank of Florida assigned the Prior Credit (including but
not limited to the Prior Note and the Prior Security Documents) to the Banks and
evidenced by a Promissory Note in the principal amount of $100,000,000.00 (the
"Existing Note"), Collateral Assignments of Leases, Rents and Profits and
Security Agreements, Agreements Not to Encumber or Transfer Property, and other
related instruments (the "Existing Security Documents"). The 1994 Credit
Agreement superseded and replaced the Prior Credit Agreement and provided for an
increased line of credit.
CNLR, the Agent and the Banks subsequently agreed to amend and restate the
1994 Credit Agreement to reflect certain changes in the terms of the Credit
pursuant to the terms of an Amended and Restated Revolving Line of Credit and
Security Agreement dated as of April 13, 1995 (the "Existing Agreement") which
superseded the 1994 Credit Agreement.
CNLR has now requested certain additional amendments to the Existing
Agreement to permit (i) CNLR to incur mortgage loans from Principal Mutual Life
Insurance Company, or an affiliate thereof, in the total amount of not more than
$52,600,000.00 with respect to certain properties currently identified in the
Existing Security Documents and (ii) to allow it to place certain properties to
be acquired in its wholly-owned subsidiaries, Net I and Net II.
The Agent and the Banks have agreed to CNLR's request so long as: (i) all
proceeds from Principal Mutual Life Insurance Company's, or an affiliate
thereof, mortgage loans to CNLR are used to prepay outstanding Advances under
the Credit, as hereinafter defined and (ii) Net I and Net II agree to become co-
borrowers under the Credit, and pursuant to the terms and conditions of this
Agreement which supersedes the Existing Agreement and is evidenced by a Renewal
and Modification Promissory Note in the principal amount of $100,000,000.00 and
the Existing Security Documents.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, covenants, and conditions herein, the Existing Agreement is hereby
amended and restated and the Borrowers, the Agent, and the Banks agree as
follows:
SECTION I. DEFINITIONS
1.1 DEFINED TERMS. Except as otherwise expressly provided in this
Agreement, the following capitalized terms shall have the respective meanings
ascribed to them for all purposes of this Agreement:
"Advance" means a Revolving Credit Advance.
"Agent" means First Union National Bank of Florida, acting as agent for
the Banks hereunder, together with any successor agent appointed pursuant to the
provisions hereof.
"Agreement" means this Second Amended and Restated Revolving Line of
Credit and Security Agreement (which supersedes the Existing Agreement), as the
same may be amended, supplemented, restated, replaced, or otherwise modified
from time to time.
"Banks" means First Union National Bank of Florida, SouthTrust Bank of
Alabama National Association, Creditanstalt Corporate Finance, Inc., Comerica
Bank, AmSouth Bank of Florida, and the other lending institutions which are, or
from time to time may become, signatories hereto, and any other lending
institution which becomes an assignee or successor of any rights of a Bank
pursuant to Subsection 11.4 hereof.
"Borrower" means Commercial Net Lease Realty, Inc., a Maryland
corporation, and its successors, Net Lease Realty I, Inc., a Maryland
corporation, and its successors, or Net Lease Realty II, Inc., a Maryland
corporation, and its successors.
"Borrowers" means Commercial Net Lease Realty, Inc., a Maryland
corporation, and its successors, Net Lease Realty I, Inc., a Maryland
corporation, and its successors, and Net Lease Realty II, Inc., a Maryland
corporation, and its successors.
"Business Day" means a day that is not a Saturday, a Sunday, or a day on
which either the Agent or First Union National Bank of North Carolina is closed
pursuant to authorization or requirement of law.
"Capital" means Funded Debt plus Tangible Net Worth.
"Cash Flow Coverage Ratio" means Funds from Operations plus Interest
divided by Interest.
"Closing Date" means the date this Agreement is executed by the Borrowers,
the Agent and the Banks.
"CNLR" means Commercial Net Lease Realty, Inc., a Maryland corporation,
and its successors.
"Collateral" means all leases, rents, income, profits, and accounts
receivable arising from any and every lease, rental, or occupancy agreement
entered into with respect to property now owned or hereafter acquired by
Borrowers, except as otherwise provided in this Agreement.
"Consistent Basis" means, in reference to the application of Generally
Accepted Accounting Principles, that the accounting principles observed in the
current period are comparable in all material respects to those applied in the
preceding period.
"Continue," "Continuation," and "Continued" refer to a continuation of
Advances of the same Type from one Interest Period to the next Interest Period.
"Convert," "Conversion," and "Converted" refer to a conversion of Advances
of one Type into Advances of the other Type pursuant to Subsection 2.15 or 2.16
hereof.
"Credit" means the Revolving Credit Facility described in Section 2 below.
"Debt Service" shall mean amortization of existing term debt of the
Borrowers plus assumed fifteen year amortization of debt under the Credit, plus
existing property capital expenditures.
"Debt Service Coverage Ratio" means Funds from Operations plus existing
property capital expenditures, divided by Debt Service.
"Default Rate" has the meaning specified in Subsection 2.6(c)(iii) hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974, as the
same may be supplemented or amended from time to time.
"Event of Default" means any of the events specified in Section 8 hereof.
"Existing Credit" has the meaning specified in the Background section
hereof.
"Existing Credit Agreement" has the meaning specified in the Background
section hereof.
"Existing Note" has the meaning specified in the Background section
hereof.
"Existing Security Documents" has the meaning specified in the Background
section hereof.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to the weighted average of the
rates per annum, rounded upward to the nearest one-hundredth of one percent
(1/100%), on overnight federal funds transactions with members of the Federal
Reserve System, arranged by federal funds brokers, as published for such day (or
if such day is not a Business Day, for the next preceding Business Day) by the
Board of Governors of the Federal Reserve System in Publication H.15 (519), or,
if such rate is not published for any day which is a Business Day, the average
of the quotations for such day for such transactions received by the Agent from
three (3) federal funds brokers of recognized standing selected by the Agent.
"Funded Debt" shall mean all interest bearing debt of Borrowers plus the
maximum amounts of any outstanding letters of credit issued for the benefit of
any Borrower.
"Funds from Operations" shall mean net income plus depreciation and
amortization plus capital lease payments less accrued rental income less earned
income from direct financing leases in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis.
"Generally Accepted Accounting Principles" means those principles of
accounting set forth in Opinions of the Financial Accounting Standards Board of
the American Institute of Certified Public Accountants or which have other
substantial authoritative support and are applicable in the circumstances as of
the date of any report required herein or as of the date of an application of
such principles as required herein.
"Governmental Acts" shall have the meaning specified in Section 2.17(b)
hereof.
"Governmental Authority" shall mean, as to any Person, any government (or
any political subdivision or jurisdiction thereof), court, bureau, agency or
other governmental authority having jurisdiction over such Person or any of its
business, operations or properties.
"Interest" means with respect to any period the net interest expense of
the Borrowers for such period, as determined in accordance with Generally
Accepted Accounting Principles applied on a Consistent Basis.
"Interest Period" means, for each LIBOR Rate Advance comprising part of
the same borrowing, the period commencing on the date such Advance is made,
Converted from an Advance of another Type, or Continued as an Advance of the
same Type, and ending on the numerically corresponding day one, two, three, or
six months thereafter as the Borrowers may select, as provided in Subsections
2.2 or 2.15 hereof; provided however that:
(a) Interest Periods commencing on the same date for LIBOR Rate
Advances shall be of the same duration;
(b) If an Interest Period would otherwise expire on a day that is
not a Business Day, such Interest Period shall expire on the next succeeding
Business Day; provided that if any Interest Period would otherwise expire on a
day that is not a Business Day but is a day of the month after which no further
Business Day occurs in such month, such Interest Period shall expire on the next
preceding Business Day;
(c) Any Interest Period that begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall end on the last
Business Day of a calendar month; and
(d) No Interest Period shall extend beyond the Revolving Credit
Maturity Date.
"Issuing Bank" means First Union National Bank of Florida, in its capacity
as a Bank hereunder, for so long as it remains the Agent hereunder. Upon the
appointment of a successor Agent, the "Issuing Bank" shall be the successor
Agent, in its capacity as a Bank hereunder, for the purposes of all new Letters
of Credit issued hereunder.
"Late Fee" has the meaning specified in Subsection 2.7(c) hereof.
"Letters of Credit" has the meaning specified in Subsection 2.3 hereof.
"Letter of Credit Contingent Obligation" and "Letters of Credit Contingent
Obligations" mean the amount available for drawings and remaining undrawn under
the Letter of Credit or Letters of Credit, respectively.
"LIBOR Rate Advance" means an Advance that bears interest at a rate
determined by reference to the Reserve Adjusted LIBOR Rate, as provided in
Subsection 2.6(a)(ii) hereof.
"LIBOR Reserve Requirement" means, for any day, the rate at which reserves
(including, without limitation, any marginal, supplemental, or emergency
reserves) are required to be maintained by member banks of the Federal Reserve
System on such day against Eurocurrency liabilities, expressed as a decimal.
"Loan Documents" means the following documents:
(a) This Second Amended and Restated Revolving Line of
Credit and Security Agreement;
(b) The Renewal and Modification Promissory Note made by the
Borrowers in favor of the Agent for the benefit of the Banks in the
amount of $100,000,000.00;
(c) Assignments of Leases, Rents and Profits made by any
Borrower to the Agent for the benefit of the Banks with respect to
property now owned or hereafter acquired by any Borrower or any
leasehold interest in property hereafter acquired by any Borrower,
except as otherwise provided for in this Agreement;
(d) Agreements Not To Encumber or Transfer Property made by
any Borrower to the Agent for the benefit of the Banks with respect
to property now owned or hereafter acquired by any Borrower or any
leasehold interest in property hereafter acquired by any Borrower,
except as otherwise provided for in this Agreement;
(e) Agreements between the Agent on behalf of the Banks, a
Borrower and the landlord with respect to any leasehold interest
hereinafter acquired by any Borrower, except as otherwise provided
for in this Agreement;
(f) Anti-Coercion Statements with respect to property now
owned or hereafter acquired by any Borrower;
(g) UCC-1 Financing Statements covering all leases, rents,
income, profits, and accounts receivable arising from any and every
lease, rental, or occupancy agreement entered into with respect to
property now owned by or hereafter acquired by any Borrower, except
as otherwise provided for in this Agreement, and such other
documents as will ensure the Agent, as Agent for the benefit of the
Banks, a first perfected security interest in and to such personal
property; and
(h) all other documents executed and delivered by any
Borrower in connection with the Credit closing, and thereafter from
time to time as contemplated by this Agreement, including any
modifications, amendments, or restatements of the foregoing.
"Net I" means Net Lease Realty I, Inc., a Maryland corporation, and its
successors.
"Net II" means Net Lease Realty II, Inc., a Maryland corporation, and its
successors.
"1994 Credit Agreement" has the meaning specified in the Background
section hereof.
"Note" means the Renewal and Modification Promissory Note (which
supersedes the Existing Note), as may be amended, renewed, increased, restated,
or replaced from time to time.
"Notice of Borrowing" means a Notice of Borrowing in the form attached
hereto as Exhibit "B".
"Person" means any natural person, corporation, unincorporated
organization, trust, joint venture, association, company, partnership, or
government, or any agency or political subdivision of any government.
"Prime Rate" means, for the purposes hereof, the rate of interest
announced by the Agent from time to time as its Prime Rate. The Agents' Prime
Rate is a reference rate used by the Agent in determining interest rates on
certain loans. The Agent loans at rates both above and below the Agent's Prime
Rate, and the Borrowers acknowledge that the Agent's Prime Rate is not
represented or intended to be the lowest or most favorable rate of interest
offered by the Agent.
"Prime Rate Advance" means an Advance that bears interest at a rate
determined with reference to the Prime Rate, as provided in Subsection 2.6(a)(i)
hereof.
"Prior Credit" has the meaning specified in the Background section hereof.
"Prior Credit Agreement" has the meaning specified in the Background
section hereof.
"Prior Note" has the meaning specified in the Background section hereof.
"Prior Security Documents" has the meaning specified in the Background
section hereof.
"Pro Rata Portion" means, with respect to any Bank, the quotient obtained
by dividing the Revolving Credit Commitment of the Bank by the aggregate
Revolving Credit Commitments of all the Banks.
"Qualified REIT Subsidiary Status" means Net I's and Net II's status as a
qualified REIT subsidiary as defined in Section 856(i) of the Internal Revenue
Code, as amended.
"REIT Status" means each Borrower's status as a real estate investment
trust as defined in Section 856(a) of the Internal Revenue Code, as amended.
"Related Entities" means any "affiliated person" as defined under the
provisions of the United States Internal Revenue Code.
"Required Banks" means at any time the Banks owning or holding in the
aggregate at least 66 2/3% of the aggregate unpaid principal amount of the
Advances or, in the event that no Advances are outstanding, the Banks having at
least 66 2/3% of the aggregate Revolving Credit Commitments.
"Reserve Adjusted LIBOR Rate" means, for any Interest Period, an interest
rate per annum obtained by dividing (i) the rate quoted on the Telerate page
3750 as of 11:00 a.m. London time, on the day that is two London banking days
prior to the first day of the Interest Period, in an amount substantially equal
to the LIBOR Rate Advance and with a term substantially equal to such Interest
Period, by (ii) an amount equal to 1 minus the LIBOR Reserve Requirement for
such Interest Period. In the event the rate quoted by Telerate is discontinued
or the rate otherwise cannot be identified, the Agent shall determine the LIBOR
Rate on the basis of quotes by major banks in the London interbank Eurodollar
market for dollar deposits in an amount substantially equal to the LIBOR Rate
Advance for a term substantially equal to the Interest Period selected.
"Revolving Credit Advance" has the meaning specified in Subsection 2.1(a)
hereof.
"Revolving Credit Commitment" means $35,000,000 in the case of First Union
National Bank of Florida, $20,000,000 in the case of SouthTrust Bank of Alabama
National Association, $20,000,000 in the case of Creditanstalt Corporate
Finance, Inc., $20,000,000 in the case of Comerica Bank, $5,000,000 in the case
of AmSouth Bank of Florida, and in the case of any other Bank, that amount set
forth next to the name of the Bank on the signature pages hereto or, if there
has been a full or partial assignment of a Revolving Credit Commitment pursuant
to the provisions of Subsection 11.4 hereof, as may be reflected on the records
of the Agent with respect to such assignment.
"Revolving Credit Facility" means the commitments of the Banks to make
Revolving Credit Advances to and issue Letters of Credit in favor of the
Borrowers pursuant to Subsection 2.1 hereof.
"Revolving Credit Maturity Date" shall mean June 30, 1997 (as such date
may be extended pursuant to the provisions hereof) or if such date is not a
Business Day, the next succeeding Business Day, or such earlier date on which
the Credit shall be due and payable pursuant to the terms hereof.
"Revolving Credit Note" has the meaning specified in Subsection 2.5
hereof.
"Security Documents" has the meaning specified in Subsection 3.3 hereof.
"Tangible Net Worth" means an amount equal to the total assets of the
Borrowers minus the Total Intangible Assets of the Borrowers, minus the total
liabilities of the Borrowers, calculated in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis.
"Term Credit" shall have the meaning specified in Subsection 7.1 hereof.
"Total Intangible Assets" of the Borrowers shall be determined in
accordance with Generally Accepted Accounting Principles applied on a Consistent
Basis, but in any event shall be deemed to include the excess of costs over the
assets of acquired businesses, formulae, trademarks, patents, patent rights, and
deferred expenses (including, but not limited to, unamortized debt discount and
expense, organization expense, experimental and developmental expenses, but
excluding prepaid expenses).
"Total Liabilities" means the total liabilities of the Borrower
(including, without limitation, all obligations or indebtedness of any other
Person which the Borrower has assumed, guaranteed, or endorsed or in connection
with which the Borrower has otherwise become directly or contingently liable and
the amount of any outstanding Letters of Credit) computed in accordance with
Generally Accepted Accounting Principles applied on a Consistent Basis.
"Type" refers to the distinction among Advances bearing interest based on
the Prime Rate and the Reserve Adjusted LIBOR Rate.
1.2 OTHER DEFINITIONAL PROVISIONS.
(a) The terms "material" and "materially" shall have the meanings
ascribed to such terms under Generally Accepted Accounting Principles as
such would be applied to the business of the Borrowers, except as the
context shall clearly otherwise require;
(b) all of the terms defined in this Agreement shall have such
defined meanings when used in other documents issued under, or delivered
pursuant to, this Agreement unless the context shall otherwise require;
(c) all terms defined in this Agreement in the singular shall have
comparable meanings when used in the plural, and vice versa;
(d) accounting terms to the extent not otherwise defined shall
have the respective meanings given them under, and shall be construed in
accordance with, Generally Accepted Accounting Principles;
(e) terms defined in, or by reference to, Article 9 of the Uniform
Commercial Code as adopted in Florida to the extent not otherwise defined
herein shall have the respective meanings given to them in Article 9 with
the exception of the word "document" unless the context clearly requires
such meaning;
(f) the words "hereby," "hereto," "hereof," "herein," "hereunder,"
and words of similar import when used in this Agreement shall refer to
this Agreement as a whole and not to any particular provision of this
Agreement;
(g) the masculine and neuter genders are used herein and whenever
used shall include the masculine, feminine, and neuter as well; and
(h) wherever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and
assigns of such parties unless the context shall expressly provide
otherwise.
SECTION 2. THE CREDIT
2.1 THE REVOLVING CREDIT FACILITY.
(a) Each Bank severally agrees, on the terms and conditions set forth
herein, that prior to the Revolving Credit Maturity Date and so long as there
exists no Event of Default or circumstance which with the giving of notice or
passage of time would become an Event of Default, it will make advances to the
Borrowers (all such advances and the Bank's Pro Rata Portion of any unreimbursed
amounts paid under Letters of Credit referred to herein as "Revolving Credit
Advances" and "Advances") in an aggregate amount which, when aggregated with
Advances comprised of the Bank's Pro Rata Portion of unreimbursed amounts paid
under Letters of Credit and with the Bank's Pro Rata Portion of Letter of Credit
Contingent Obligations, does not exceed at any time such Bank's Revolving Credit
Commitment, subject to the terms and conditions of this Agreement. During the
aforesaid period, the Borrowers may borrow, repay, and reborrow, and request the
issuance of Letters of Credit in accordance with the terms hereof. The
Borrowers acknowledge that the amount outstanding at any time pursuant to the
Credit is as reflected in the books and records of the Agent and shall be
conclusive and binding absent manifest error. Agent will, upon request, furnish
the Borrowers with a statement of the amount outstanding pursuant to the Credit
as reflected in the books and records of the Agent at the time of any such
request.
(b) If at any time the principal amounts outstanding under any
Bank's Revolving Credit Advances (including Advances in respect of unreimbursed
amounts paid under Letters of Credit), together with the aggregate amount of the
Bank's Pro Rata Portion of the Letter of Credit Contingent Obligations, exceed
such Bank's Revolving Credit Commitment, the Borrowers shall prepay the Bank's
Revolving Credit Advances so as to cause the aggregate outstanding amounts
thereunder to be equal to or less than such Bank's Revolving Credit Commitment.
(c) Subject to the further terms and limitations of this
Agreement, the Borrowers may designate Advances requested under the Revolving
Credit Facility and Advances made pursuant to draws under Letters of Credit
issued under the Revolving Credit Facility to be LIBOR Rate Advances or Prime
Rate Advances, and the Borrowers may Convert Advances of one Type into Advances
of another Type (as provided in Subsection 2.15 hereof), or Continue Advances of
one Type as Advances of the same Type (as provided in Subsection 2.15 hereof).
All Advances shall be made, Converted, or Continued by the Banks simultaneously
and proportionately to their Pro Rata Portion of the aggregate Commitments.
(d) On the Closing Date, the aggregate outstanding principal
amount under the Existing Agreement shall be automatically converted to an
equivalent principal amount of Revolving Credit Advances hereunder (which shall
be Prime Rate Advances unless otherwise specified by the Borrowers in accordance
with the procedures contained in Subsection 2.15 hereof), allocated to the then
existing Banks pro rata in accordance with their Pro Rata Portions, and shall be
deemed to be Revolving Credit Advances and Advances and included in the Banks'
Revolving Credit Commitments for all purposes hereof.
2.2 ADVANCE REQUESTS AND FUNDING MECHANICS.
(a) The Revolving Credit Advances (other than Advances made by
honoring a draft drawn under a Letter of Credit) shall be made upon irrevocable
notice from the Borrowers to the Agent (effective upon receipt) no later than
10:00 a.m. (Eastern Time) three (3) Business Days prior to the date of any
proposed LIBOR Rate Advances and no later than 10:00 a.m. (Eastern Time) one (1)
Business Day prior to the date of any proposed Prime Rate Advances. Each such
notice shall be in writing, or shall be by telephone or telecopier, confirmed
immediately in writing, specifying the proposed (i) date of borrowing, (ii)
aggregate amount of borrowing, (iii) Type of Advances, (iv) in the case of LIBOR
Rate Advances, the initial Interest Period for such Advances, and (v) manner of
receipt of the funds, and shall be evidenced by an executed Notice of Borrowing.
Each request for such Advances shall be in the aggregate minimum amount of
$100,000.00 or an integral multiple thereof, except that with respect to LIBOR
Rate Advances, each request shall be in the aggregate minimum amount of
$1,000,000.00 and in integral multiples of $100,000.00.
(b) Notwithstanding the foregoing, the Borrowers may not select
any LIBOR Rate Advances if (i) the obligation of any of the Banks to make LIBOR
Rate Advances is suspended pursuant to Subsections 2.15(b)(iii) or 2.16(c) or
(d) hereof, or (ii) after giving effect to the Advances, the aggregate number of
different Interest Periods for outstanding LIBOR Rate Advances from the Banks is
greater than ten (10) (for purposes of this clause, Interest Periods of the same
duration, but commencing on different dates, shall be treated as different
Interest Periods).
(c) Neither the Agent nor any Bank shall incur any liability to
the Borrowers in acting upon any telephonic notice referred to herein that the
Agent believes in good faith to have been given by a duly authorized officer or
other person authorized to borrow on behalf of the Borrowers or for otherwise
acting in good faith under this Subsection, and, upon funding of Advances by the
Bank in accordance with this Agreement pursuant to any telephonic notice, the
Borrowers shall be deemed to have received Advances hereunder.
(d) Each notice of a proposed borrowing shall be irrevocable and
binding on the Borrowers. In the case of LIBOR Rate Advances, the Borrowers
shall indemnify each Bank against any loss, costs, or expense incurred by such
Bank as a result of any failure of the Borrowers to fulfill on or before the
date specified for such Advance all conditions for such borrowing set forth in
Section 5 hereof, or as a result of any purported revocation of such Advance
request or any other reason for nonfunding of such Advance, including, without
limitation, any loss (including loss of anticipated profits), cost, or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by the Bank to fund the Advance, when such Advance is not made on such
date, as more fully described in Subsection 2.13 hereof.
(e) The Agent shall give each Bank notice of each request for
Advances in writing or by telephone or telecopier not later than 12:00 p.m.
(Eastern Time) on the date of receipt of such request, provided that if the
request was not received prior to 10:00 a.m. (Eastern Time), the Agent shall
give such notice no later than 9:00 a.m. (Eastern Time) on the following
Business Day. Not later than 2:00 p.m. (Eastern Time) on the date specified in
such notice, each Bank shall make available to the Agent, at its Lending Office
specified on the signature pages hereof, in immediately available funds, the
Bank's Pro Rata Portion of such borrowing. After the Agent's receipt of such
funds, the Agent will make such funds available to the Borrowers at the Agent's
office referred to above no later than 2:00 p.m. (Eastern Time) on the date
specified in the notice.
(f) Unless the Agent shall have received notice from a Bank prior
to the date of any proposed borrowing that such Bank will not make available to
the Agent such Bank's Pro Rata Portion of the borrowing, the Agent may assume
that the Bank has made such portion available to the Agent on the date of such
borrowing in accordance with the provisions hereof. The Agent may, in reliance
upon such assumption (but shall not be required to), make available to the
Borrowers a corresponding amount. If and to the extent that the Bank shall not
have so made such Pro Rata Portion available to the Agent, the Bank and the
Borrowers severally agree to repay to the Agent forthwith upon demand, to the
extent not collected from the other, such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrowers until the date such amount is repaid to the Agent at (i) in the
case of the Borrowers, the interest rate applicable at the time to the Advances
comprising the borrowing, and (ii) in the case of the Bank, the Federal Funds
Rate; provided, however, that the Borrowers shall not be required to so repay
such amount if and to the extent that the Agent, in its capacity as a Bank, has
availability therefor under its Revolving Credit Commitment. In such
circumstances, the Agent, in its capacity as a Bank, may, but shall not be
required to, make an Advance under its Revolving Credit Commitment in respect of
such amount. If the delinquent Bank shall repay to the Agent (in its capacity
as Agent or Bank, as appropriate) such amount (with interest), the amount so
repaid shall constitute the Bank's Advance as part of such borrowing for
purposes of this Agreement. If the Borrowers shall repay to the Agent such
corresponding amount, or if the Agent, in its capacity as a Bank, makes an
Advance therefor, such payment or Advance shall not relieve the delinquent Bank
of its obligations hereunder.
(g) The failure of any Bank to make an Advance to be made by it as
part of any borrowing, when required to do so by the provisions hereof, shall
not relieve any other Bank of its obligation hereunder to make its Advance on
the date of such borrowing, but no Bank shall be responsible for the failure of
any other Bank to make the Advance to be made by such other Bank. Nothing
herein shall prejudice any rights or remedies that the Borrowers may have
against any Bank as a result of any failure by such Bank to make an Advance
hereunder if such failure is in breach of its obligations hereunder.
2.3 LETTERS OF CREDIT.
(a) Subject to the terms and conditions hereof, including but not
limited to the limitations set forth in Subsection 2.1(a) and 2.4 hereof, the
Revolving Credit Commitments may be utilized, upon the request of the Borrowers,
for the issuance of standby letters of credit by the Issuing Bank ("Letters of
Credit"). Each Letter of Credit issued hereunder shall be in such form, contain
such terms, and support such transactions as shall be satisfactory to the
Issuing Bank in its sole discretion. No Letter of Credit shall have a term
extending beyond the earlier of (i) one year after the date of issuance or (ii)
the Revolving Credit Maturity Date.
(b) Each Letter of Credit shall be requested by the Borrowers by
irrevocable notice (effective upon receipt) from the Borrowers to the Issuing
Bank and the Agent (which shall promptly give notice thereof to the Banks) no
later than 10:00 a.m. (Eastern Time) three (3) Business Days prior to the date
of the proposed issuance of the Letter of Credit. Each such notice from the
Borrowers shall be in writing, or shall be by telephone or telecopier, confirmed
immediately in writing, specifying the proposed (i) date of issuance of the
Letter of Credit, (ii) maximum amount of such Letter of Credit, (iii) expiration
date of the Letter of Credit, (iv) name and address of the beneficiary of such
Letter of Credit, (v) form of such Letter of Credit, and (vi) description of
transaction supported by the Letter of Credit, and shall be evidenced by an
executed Notice of Borrowing. The request shall be accompanied by such other
applications, agreements, information, and documents as the Agent or the Issuing
Bank shall require, and the payment of the fees and commissions described in
Subsection 2.8 hereof.
(c) If the form of the Letter of Credit and transaction supported
by the Letter of Credit is satisfactory to the Issuing Bank in its sole
discretion, and subject to the other terms and conditions of this Agreement, the
Issuing Bank will make such Letter of Credit available to the Borrower
designated in the Notice of Borrowing at the Issuing Bank's Lending Office
described in the signature pages hereof or as otherwise agreed with the
Borrowers in connection with such issuance.
(d) Upon the issuance of any Letter of Credit by the Issuing Bank,
the Issuing Bank shall be deemed, irrevocably and without further action by any
party hereto, to have sold to each Bank, and each Bank shall be deemed,
irrevocably and without further action by any party hereto, to have purchased
from the Issuing Bank, an undivided interest and participation in, to the extent
of such Bank's Pro Rata Portion, the Letter of Credit and the related Letter of
Credit Contingent Obligation. The Issuing Bank shall notify the Agent of the
issuance of any Letter of Credit, and the Agent shall promptly notify each Bank
of such Bank's Pro Rata Portion of the amount of the Letter of Credit and the
related Letter of Credit Contingent Obligation. Each Bank's Pro Rata Portion of
the Letter of Credit Contingent Obligation shall be deemed to utilize the Bank's
Revolving Credit Commitment and reduce the availability thereunder, until such
time as the Letter of Credit Contingent Obligation terminates by virtue of
expiration of or payment under the Letter of Credit.
(e) The payment by the Issuing Bank of a draft drawn under a
Letter of Credit shall constitute for all purposes hereunder the making by the
Issuing Bank of a Revolving Credit Advance (which shall be a Prime Rate Advance
unless otherwise specified by the Borrowers in accordance with the procedures
contained in Subsection 2.15 hereof), in the amount of such payment (but without
any requirement for compliance with the requirements for the making of a
Revolving Credit Advance contained in Subsections 2.1 and 2.2 and Section 5
hereof).
(f) The Issuing Bank shall give the Agent prompt notice of any
presentation of a draw under a Letter of Credit in writing or by telephone or
telecopier, and the Agent shall give prompt notice thereof to the Banks. Each
Bank shall, on the date of receipt of such notice, either (i) make a Revolving
Credit Advance (which shall be a Prime Rate Advance unless otherwise specified
by the Borrowers in accordance with the procedures contained in Subsection 2.15
hereof) in an amount equal to its Pro Rata Portion of the payment under the
Letter of Credit, subject to the requirements for the making of a Revolving
Credit Advance contained in Subsection 2.1 and 2.2 and Section 5 hereof), and
shall simultaneously make available to the Issuing Bank at its Lending Office
specified in the signature pages hereof, in immediately available funds, the
proceeds of such Revolving Credit Advance, or (ii) if for any reason Borrowers
is not entitled on such day to receive a Revolving Credit Advance each Bank
shall pay to the Issuing Bank such Bank's Pro Rata Portion of such draw,
whereupon such Bank shall acquire a participation, to the extent of such Pro
Rata Portion, in the claim of the Issuing Bank against Borrowers in respect of
such draw.
(g) If and to the extent that any Bank shall not have so made the
proceeds of such a Revolving Credit Advance available to the Issuing Bank, the
Bank and the Borrowers severally agree to repay to the Issuing Bank forthwith
upon demand, to the extent not collected from the other, such corresponding
amount together with interest thereon, for each day from the date of receipt of
notice of the draw until the date the Bank's Pro Rata Portion thereof is paid to
the Issuing Bank at (i) in the case of the Borrowers, the interest rate
applicable at the time to the Advances, and (ii) in the case of the Bank, the
Federal Funds Rate, provided, however, that the Borrowers shall not be required
to so repay such amount if and to the extent that the Agent, in its capacity as
a Bank, has availability therefor under its Revolving Credit Commitment. In
such circumstances, the Agent, in its capacity as a Bank, may, but shall not be
required to, make an Advance under its Revolving Credit Commitment in respect of
such amount. If the Borrowers shall repay to the Agent such corresponding
amount, or if the Agent, in its capacity as a Bank, makes an Advance therefor,
such payment or Advance shall not relieve the delinquent Bank of its obligations
hereunder.
2.4 USE OF PROCEEDS. The Revolving Credit Facility and the proceeds
thereof shall be used by the Borrowers solely for the purpose of acquiring
income producing commercial restaurant and retail properties, either existing or
to be built, which construction must be completed within twelve (12) months
after acquisition of the fee simple estate, and which in any event, are subject
to long term lease agreements and, in an aggregate amount not to exceed Ten
Million Dollars ($10,000,000.00) at any time, for working capital purposes and
the issuance and funding of standby Letters of Credit; provided, however, that
Borrowers may also acquire income producing unsubordinated ground leases which
are intended to support income producing commercial restaurant and retail
properties upon completion and said completion occurs within a reasonable period
of time after acquisition of such ground lease so long as the total number of
such ground leases does not exceed five percent (5%) of the total number of
properties in the Borrowers' portfolio at any time. From time to time and upon
the Agent's request, the Borrowers shall furnish to the Agent evidence
satisfactory to the Agent that such proceeds are being used according to the
terms of this Subsection.
2.5 NOTE. The aggregate indebtedness of the Borrowers to each of the
Banks resulting from the Revolving Credit Advances shall be evidenced by a
single promissory note of the Borrowers payable to the Agent for the benefit of
the Banks, in a principal amount equal to One Hundred Million Dollars
($100,000,000.00) in substantially the form of Exhibit "A" hereto (as may be
amended, renewed, increased, restated, replaced, or otherwise modified from time
to time, the "Revolving Credit Note"). The Revolving Credit Note constitutes a
renewal and modification of the Existing Note which is replaced and superseded
in its entirety by the Revolving Credit Note.
2.5 INTEREST.
(a) The Borrowers shall pay interest on the unpaid principal
amount of each Advance from the date of such Advance until such principal amount
shall be paid in full, at the following rates per annum:
(i) during such periods as an Advance is a Prime Rate
Advance, a rate equivalent to the Prime Rate in effect from time to
time, which rate shall be adjusted daily to reflect changes in the
Prime Rate, with each adjustment to be effective on the day the
change occurs;
(ii) during such periods as an Advance is a LIBOR Rate
Advance, a rate equivalent to the Reserve Adjusted LIBOR Rate for
the Interest Period for such Advance plus one and 70/100 percent
(1.70%) per annum; and
(iii) after the maturity or due date of the Advance (whether
by acceleration or otherwise), a rate equivalent to five percent
(5%) per annum above the rate per annum required to be paid on such
Advance pursuant to paragraphs (i) or (ii) above (the "Default
Rate").
(b) The Borrowers shall pay interest, on demand, on all other
amounts in respect of any other obligations of the Borrowers under the Loan
Documents not paid when due at a rate per annum equal to five (5%) per annum
above the Prime Rate in effect from time to time, which rate shall be adjusted
daily to reflect changes in the Prime Rate, with each adjustment to be effective
on the day the change occurs.
2.7 REPAYMENT.
(a) Interest on the Revolving Credit Advances shall be paid to the
Agent for the account of the Banks as follows:
(i) Interest on each Prime Rate Advance shall be paid
quarterly in arrears on the last day of March, June, September, and
December of each year, and on the Revolving Credit Maturity Date.
(ii) In respect of any LIBOR Loan, interest shall be payable
at the relevant Elected Rate, in arrears, on the last day of the
applicable Interest Period, provided that interest on LIBOR Loans
shall additionally be payable on the 90th day of any Interest Period
that exceeds 90 days in duration.
(iii) In addition to the interest due and payable under (i)
and (ii) above, and as provided elsewhere in the Agreement, all
accrued interest shall be due and payable on each date when all of
the unpaid principal balance of the Credit shall be due (whether by
maturity, acceleration or otherwise).
(b) Principal under the Revolving Credit Advances, if not sooner
paid, shall be paid to the Agent on the Revolving Credit Maturity Date for the
account of the Banks.
(c) If any payment of principal or interest or both is more than
ten (10) days late, the Borrowers will pay to the Agent, for the account of the
Banks, a late charge equal to five percent (5%) of the payment (the "Late Fee").
The provisions herein for a Late Fee shall not be deemed to extend the time for
any payment or to constitute a "grace period" giving the Borrowers a right to
cure such default.
2.8 FEES.
(a) As consideration for making the Revolving Credit Facility
available, the Borrowers shall pay to the Agent, for the pro rata account of the
Banks based on the amounts of the then existing Revolving Credit Commitments, a
fee from the date hereof to the Revolving Credit Maturity Date (as may be
extended hereunder) equal to twenty (20) basis points per annum of the unused
portion of the aggregate Revolving Credit Commitments. Such fee shall be
computed on the basis of the average daily unused portion of the Banks' then
existing Revolving Credit Commitments and shall be payable quarterly in arrears
on each quarterly interest payment date described in Subsection 2.7 hereof.
Notwithstanding the foregoing, no additional fees shall be payable pursuant to
this Subsection in the event (i) the Banks cease to offer LIBOR Rate Advances
pursuant to Subsection 2.16 hereof and (ii) all borrowings hereunder have been
repaid in full by the Borrowers.
(b) The Borrowers shall pay the Issuing Bank a fee of 1% per annum
of the face amount of each Letter of Credit for any Letters of Credit issued
hereunder, payable quarterly in advance. One-eighth (1/8) of such fee shall be
retained by the Issuing Bank as issuing bank and the remaining seven-eighths
(7/8) of such fee shall be shared by the Banks (including the Issuing Bank)
based on the Pro Rata Portion of each. In addition, the Borrowers shall pay the
Issuing Bank such additional fees and charges as are customarily changed by the
Issuing Bank in respect of Letters of Credit.
(c) The Borrowers shall also pay to the Agent such agency and
other fees as the Agent and the Borrowers shall separately agree.
2.9 EXTENSION OF REVOLVING CREDIT MATURITY DATE. Upon the written
request of the Borrowers, which request shall be received by the Agent at least
sixty (60) days prior to the then existing Revolving Credit Maturity Date, the
Revolving Credit Maturity Date shall be extended a single time for a period of
twelve (12) months beyond the then existing Revolving Credit Maturity Date,
provided that the Borrowers have fully complied with all of the financial
covenants pursuant to Subsection 6.2 of this Agreement and materially complied
with all other covenants, terms, conditions and provisions of this Agreement for
the six (6) quarters preceding the then existing Revolving Credit Maturity Date.
In such event, the Borrowers may be required by the Agent, in its discretion, to
execute and deliver to the Banks, not later than the earlier Revolving Credit
Maturity Date, new Revolving Credit Notes, with appropriate inserts therein as
to date, date of payments, and any appropriate recitals.
2.10 SINGLE LOAN. The Advances and all other obligations arising under
this Agreement and the other Loan Documents shall constitute one general
obligation of the Borrowers and shall be secured by the Collateral. Recourse by
the Agent and the Banks to the Collateral will not be required at any time.
2.11 PAYMENTS AND COMPUTATIONS.
(a) The Borrowers shall make each payment due under the Note or
otherwise due hereunder not later than 12:00 p.m. (Eastern Time) on the day when
due to the Agent in immediately available funds. Any such payment received
later than 12:00 p.m. (Eastern Time) shall be deemed received by the Agent on
the following Business Day. In the event any such payment is received by the
Agent not later than 12:00 p.m. (Eastern Time), the Agent will thereafter on the
date such payment is received cause to be distributed like funds ratably to the
Banks, in each case to be applied in accordance with the terms of this
Agreement. If any such payment is received by the Agent after 12:00 p.m.
(Eastern Time), the Agent will thereafter on the following Business Day cause to
be distributed like funds ratably to the Banks, in each case to be applied in
accordance with the terms of this Agreement. In the event the Agent does not so
distribute such funds to the Banks, it shall pay interest thereon, for each day
from the Business Day following the date such amount is payable to the Banks to
the date the Agent repays such amount to the Banks, at the Federal Funds Rate.
(b) If the Agent receives funds for application to the Advances
under circumstances for which the Loan Documents or the Borrowers (to the extent
permitted by the Loan Documents) do not specify the Advances to which, or the
manner in which, such funds are to be applied, the Agent shall distribute such
funds for application to the Advances to each Bank ratably in accordance with
such Bank's Pro Rata Portion of all outstanding Advances, in repayment or
prepayment of such of the outstanding Advances of such Bank, and for application
to such principal installments or interest.
(c) Unless the Agent shall have received notice from the Borrowers
prior to the date on which any payment is due to any Banks hereunder that the
Borrowers will not make such payment in full, the Agent may assume that the
Borrowers have made such payment in full to the Agent on such date. The Agent
may, in reliance upon such assumption, cause to be distributed to each Bank on
the Business Day following the date when due an amount equal to the amount then
due to such Bank. If and to the extent the Borrowers shall not have made such
payment in full to the Agent, each such Bank shall repay to the Agent forthwith
on demand such amount distributed to such Bank together with interest thereon,
for each day from the date such amount is distributed to such Bank until the
date such Bank repays such amount to the Agent, at the Federal Funds Rate.
(d) Each payment and prepayment by the Borrowers of principal or
interest shall be made in such coin or currency of the United States of America
as at the time of payment is legal tender for the payment of public and private
debt. If any installment of principal or interest becomes due and payable on a
day other than a Business Day, the due date thereof shall be extended to the
next succeeding Business Day (except as otherwise provided with respect to LIBOR
Advances in the definition of "Interest Period"), and, in the case of principal,
interest shall be payable during the extension at the annual rate specified in
the note for the payment of interest before maturity.
(e) Unless otherwise specified herein, or unless otherwise
determined by the Required Banks in their sole discretion, all payments (other
than prepayments) of a particular Advance shall be applied pro rata among the
Banks first to interest and lawful charges then accrued and then to principal.
The Borrowers shall, at the time of making payments of Advances, specify to the
Agent (which shall so notify the Banks) of the Advances to be paid.
(f) Each Borrower hereby authorizes the Agent and each Bank, if
and to the extent that any payments owed hereunder are not made when due, to
charge such payments from time to time against any or all of such Borrower's
accounts with the Agent or the Bank, in which event the Agent or the Bank will
give prompt notice to such Borrower of such charge; provided, however, that the
failure to give such notice shall not affect the validity of such charge. Any
such Bank will give notice to the Agent thereof.
(g) Interest and any fees hereunder shall be computed on the basis
of a year of 360 days, but charged for the actual number of days elapsed. Each
determination by the Agent of an interest rate hereunder shall be conclusive and
binding for all purposes, absent manifest error.
(h) Notwithstanding anything contained herein to the contrary, in
no event shall any interest rate provided for herein exceed the maximum rate of
interest allowed by applicable law, as amended from time to time. Neither the
Banks nor the Agent intend to charge any amount of interest or other fees or
charges in the nature of interest that exceeds the maximum amount allowed by
applicable law. If any payment of interest or in the nature of interest would
cause the foregoing interest rate limitation to be exceeded, then such excess
payment shall be credited as a payment of principal, unless the Borrowers notify
the Agent in writing that the excess payment must be returned to the Borrowers,
together with interest at the rate specified in Section 687.04(2), Florida
Statutes, or any successor statute.
2.12 PREPAYMENTS UNDER REVOLVING CREDIT FACILITY.
(a) The Borrowers shall be entitled to prepay Prime Rate Advances
in whole or in part, at any time, without premium or penalty, upon notice to the
Agent no later than 10:00 a.m. (Eastern Time) on the proposed date of the
prepayment, each notice stating the proposed date, Advances to be prepaid, and
aggregate principal amount of the prepayment.
(b) Notwithstanding the provisions of Subsection 2.13 hereof, the
Borrowers shall be entitled to pay LIBOR Rate Advances only on the last days of
the applicable Interest Periods, without premium or penalty, upon notice to the
Agent no later than 10:00 a.m. (Eastern Time) at least three (3) Business Days
prior to the proposed date of the prepayment, each notice stating the proposed
date, Advances to be paid, and aggregate principal amount of the payment.
(c) Any prepayment of Prime Rate Advances shall be in the
aggregate principal amount of $100,000.00 or an integral multiple thereof, and
any payment of LIBOR Rate Advances shall be in the full amount of the LIBOR Rate
Advances so paid.
(d) On or prior to the Revolving Credit Maturity Date, any
prepayment of Revolving Credit Advances (whether optional or required, but not
including any payment after default or acceleration) shall be applied first to
principal and then to interest and lawful charges, unless otherwise specified by
the Borrowers. In the event of a prepayment after default or acceleration, any
prepayment of Revolving Credit Advances shall be applied first to interest
accrued on the principal amount prepaid (to be allocated among the Advances
according to amount of interest accrued) and other lawful charges, and then to
principal. The Borrowers shall, at the time of making prepayments of Advances,
specify to the Agent (which shall so notify the Banks) of the Advances to be
prepaid.
2.13 LIBOR RATE COMPENSATION. Notwithstanding the provisions of
Subsection 2.12(b) hereof, which prohibit prepayment of LIBOR Rate Advances
prior to the end of the applicable Interest Period, in the event that all or any
portion of any LIBOR Rate Advances are repaid, prepaid, or Converted prior to
the end of the applicable Interest Period, regardless of whether such payment or
Conversion is optional or obligatory, or in the event that any LIBOR Rate
Advances are not borrowed or Converted as specified in a notice given pursuant
to Subsection 2.2 or 2.15 hereof for any reason, including the failure of any
conditions precedent, the Borrowers shall be required to pay to the Agent, for
the account of the Banks, compensation as follows. The Borrowers shall be
required to pay an amount equal to the excess, if any, of (i) the amount of
interest which otherwise would have accrued on the portion of the LIBOR Rate
Advances repaid, prepaid, Converted, or not borrowed or Converted from and after
the date of such payment, prepayment, Conversion, failure to borrow, or failure
to Convert, to the last day of the applicable Interest Period (or, in the case
of a failure to borrow or Convert, to the last day of the Interest Period which
would have commenced) at the applicable rate of interest for such Advances
specified herein, minus (ii) the amount of interest which would have accrued on
such LIBOR Rate Advances or portion thereof from and after the date of such
payment, prepayment, Conversion, failure to borrow, or failure to Convert, to
the last day of the applicable Interest Period at the applicable rate of
interest for such Advances specified herein, but calculated with respect to a
LIBOR Rate based on an amount substantially equal to the amount paid, prepaid,
Converted, or not borrowed or Converted, and an Interest Period substantially
equal to the number of days remaining in the applicable Interest Period.
Whether or not the foregoing calculation results in a charge to be paid by the
Borrowers, the Borrowers shall also pay all actual out-of-pocket expenses other
than those taken into account in the foregoing calculation incurred by the Banks
and the Agent (excluding any internal expenses) and reasonably attributable to
such payment, prepayment, Conversion, or failure to borrow or Convert. The
Borrowers acknowledge that the Banks are relying in the LIBOR Rate Advances
remaining outstanding or being borrowed or Converted for the entire Interest
Periods selected, and that the foregoing compensation represents reasonable
liquidated damages and is not a penalty. The foregoing compensation shall apply
with respect to all payments, prepayments, and Conversions of LIBOR Rate Advance
and all failures to borrow and failures to Convert into LIBOR Rate Advances,
whether optional or obligatory (including any required principal installments
and any required Conversions pursuant to the provisions of Subsections 2.15 and
2.16 hereof), and shall include any prepayment, repayment, or Conversion after
default or acceleration of the Note.
2.14 SHARING OF PAYMENTS, ETC.
(a) If any Bank shall obtain from any Borrower payment of any
principal of or interest on any Advance owing to it or payment of any other
amount under this Agreement or any other Loan Document through the exercise of
any right of set-off, banker's lien, counterclaim, similar right, or otherwise
(other than from the Agent as provided herein), and, as a result of such
payment, such Bank shall have received a greater percentage of the principal of
or interest on the Advances or other amounts then due hereunder by Borrowers to
such Bank than the percentage received by any other Banks, it shall promptly
purchase from such other Banks participations in (or, if, and to the extent
specified by such Bank, direct interests in) the Advances or such other amounts,
respectively, owing to such other Banks (or in interest due thereon, as the case
may be) in such amounts, and make such other adjustments from time to time as
shall be equitable, to the end that all the Banks shall share the benefit of
such excess payment (net of any expenses which may be incurred by such Bank in
obtaining or preserving such excess payment) pro rata in accordance with the
unpaid principal of and interest on the Advances or such other amounts,
respectively, owing to each of the Banks. To such end all the Banks shall make
appropriate adjustments among themselves (by the resale of participations sole
or otherwise) if such payment is rescinded or must otherwise be restored.
(b) Nothing contained herein shall require any Bank to exercise
any such right or shall affect the right of any Bank to exercise, and retain the
benefits of exercising, any such right with respect to any other indebtedness or
obligation of any Borrower. If, under any applicable bankruptcy, insolvency, or
other similar law, any Bank receives a secured claim in lieu of a set-off to
which this Subsection applies, such Bank shall, to the extent practicable,
exercise its rights in respect of such secured claim in a matter consistent with
the rights of the Banks entitled under this Subsection to share in the benefits
of any recovery on such secured claim.
2.15 CONVERSION AND CONTINUATION OF ADVANCES; FAILURE TO SELECT INTEREST
PERIOD.
(a) The Borrowers may, upon notice given to the Agent (effective
upon receipt) no later than 10:00 a.m. (Eastern Time) at least three (3)
Business Days prior to the date of a proposed Conversion into or Continuation of
LIBOR Rate Advances and not later than 10:00 a.m. (Eastern Time) at least one
(1) Business Day prior to the date of a proposed Conversion into Prime Rate
Advances, and subject to the provisions hereof, Convert Advances of one Type
into Advances of the other Type or Continue Advances of one Type as Advances of
the same Type at any time and from time to time on any Business Day; provided,
however, that (i) any Conversion or Continuation of LIBOR Rate Advances shall be
made on, and only on, the last day of the Interest Period for the LIBOR Rate
Advances being Converted or Continued, (ii) any Conversion or Continuation of
any Advances into LIBOR Rate Advances shall be in amounts not less than the
minimum aggregate amounts specified in Section 2.2(a), and (iii) no Conversion
or Continuation of Advances shall result in a greater number of different
Interest Periods for LIBOR Rate Advances than is permitted under Section 2.2(b).
Each such notice of Conversion or Continuation shall be in writing or shall be
by telephone or telecopier, confirmed immediately in writing, specifying, within
the restrictions specified above, the date of such Conversion or Continuation,
the Advances to be Converted or Continued, the portion thereof to be Converted
or Continued, and the Type of Advances into which they will be Converted or
Continued, and if such Conversion or Continuation is into LIBOR Rate Advances,
the duration of the Interest Periods for such Advances. Each notice of
Conversion or Continuation shall be irrevocable and binding on the Borrowers.
(b) (i) Whenever the unpaid principal amount of LIBOR Rate
Advances comprising a borrowing shall be reduced, by payment or prepayment or
otherwise, to less than $1,000,000.00, such Advances shall automatically Convert
into Prime Rate Advances on the last day of the then current Interest Period
with respect to such Advances.
(ii) If the Borrowers shall fail to give a notice of
Conversion or Continuation in respect of LIBOR Rate Advances prior to the end of
the Interest Period applicable thereto as provided in paragraph (a) hereof, or
to select the duration of any Interest Period for any LIBOR Rate, such LIBOR
Rate Advances will automatically, on the last day of the then existing Interest
Period therefor, convert into Prime Rate Advances.
(iii) Upon the occurrence and during the continuance of any
Event of Default, (i) all LIBOR Rate Advances will automatically, on the last
days of the then existing Interest Periods therefor, Convert into Prime Rate
Advances and (ii) the obligation of the Banks to make, Continue, or Convert
Advances into LIBOR Rate Advances shall be suspended.
(iv) LIBOR Rate Advances may be subject to automatic
Conversion into Advances of other Types, as provided in Section 2.16(c) and (d).
2.16 INCREASED COSTS, ILLEGALITY, ETC.
(a) If either (i) the introduction of or any change in any law or
regulation or in the interpretation or administration of any law or regulation
by any court or administrative or governmental authority charged with the
interpretation of administration thereof from the date hereof or (ii) the
compliance with any guideline or request from any such governmental authority,
including, without limitation, any central bank (whether or not having the force
of law), (x) subjects any Bank or any corporation controlling any Bank to any
tax of any kind whatsoever with respect to this Agreement or any Advance, or
changes the basis of taxation of payments to such Bank or corporation of
principal, commissions, fees, interest, or any other amount payable hereunder
(except for (A) taxes on or measured by the overall net income of such Bank or
branch, office, or agency through which such Bank is acting for purposes of this
Agreement or (B) changes in the rate of such taxes); (y) imposes, modifies, or
holds applicable any reserve, special deposit, compulsory loan, or similar
requirement against assets held by, or deposits or other liabilities in or for
the account of, advances or loans by, or other credit or commitment therefor
extended by, or any other acquisition of funds by, any office of such Bank which
are not otherwise included in any determination of the Reserve Adjusted LIBOR
Rate or other interest payable hereunder; or (z) imposes on any Bank or the
corporation controlling the Bank any other condition, and as a result there
shall be any increase in the cost to the Bank or the corporation of agreeing to
make or making, funding, or maintaining Advances by an amount deemed by the Bank
to be material, then the Borrowers shall from time to time, upon demand by the
Bank, pay directly to the Bank additional amounts sufficient to compensate the
Bank for such increased cost. A certificate as to the amount of such increased
cost, submitted to the Borrowers by the Bank, shall be conclusive and binding
for all purposes, absent manifest error.
(b) If any Bank determines that compliance with any law or
regulation or with any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) concerning
capital adequacy or otherwise has or would have the effect of reducing the rate
of return on the capital of the Bank or the corporation controlling the Bank, as
a consequence of, or with reference to, the facilities hereunder, or its making
or funding or maintaining Advances below the rate which the Bank or such other
corporation could have achieved but for such compliance (taking into account the
policies of the Bank of such corporation with regard to capital) by an amount
deemed by the Bank to be material, the Borrowers shall from time to time, upon
demand by the Bank, pay to the Bank additional amounts sufficient to compensate
the Bank or such other corporation for such reduction. A certificate as to such
amounts, submitted to the Borrowers by the Bank, shall be conclusive and binding
for all purposes, absent manifest error.
(c) If, with respect to any LIBOR Rate Advances, the Required
Banks notify the Agent that the Reserve Adjusted LIBOR Rate for any Interest
Period for such Advances will not adequately reflect the cost to the Banks of
making, funding, or maintaining the LIBOR Rate Advances for such Interest
Period, the Agent shall forthwith so notify the Borrowers whereupon (i) each
such LIBOR Rate Advance, will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Prime Rate Advance, and (ii)
the obligation of the Banks to make, Continue, or Convert Advances into LIBOR
Rate Advances shall be suspended until the Agent notifies Borrowers that the
Required Banks have determined that the circumstances causing such suspension no
longer exist.
(d) Notwithstanding any other provision of this Agreement, if the
introduction of or any change in or in the interpretation of any law or
regulation shall make it unlawful or any central bank or other governmental
authority shall assert that it is unlawful for any Bank to perform its
obligations hereunder to make LIBOR Rate Advances or to continue to fund or
maintain LIBOR Rate Advances hereunder, then, on notice thereof and demand
therefor by the Bank through the Agent, (i) each LIBOR Rate Advance of the Banks
will automatically, upon such demand, Convert into a Prime Rate Advance and (ii)
the obligation of the Banks to make, Continue, or Convert Advances into LIBOR
Rate Advances shall be suspended until the Agent shall notify the Borrowers that
the Bank has determined that the circumstances causing such suspension no longer
exist.
2.17 LETTERS OF CREDIT OBLIGATIONS.
(a) The payment obligations of the Borrowers under this Agreement
with respect to the Letters of Credit shall be unconditional and irrevocable,
and shall be paid strictly in accordance with the terms of this Agreement under
all circumstances, including, without limitation, the following circumstances:
(i) any lack of validity or enforceability of the Letters of
Credit;
(ii) any amendment or waiver of or any consent to departure
from all or any of the Letters of Credit;
(iii) the existence of any claim, set-off, defense or other
right which the Borrowers may have at any time against any beneficiary, or any
transferee, of the Letters of Credit (or any Person for whom any such
beneficiary or transferee may be acting), the Agent, the Issuing Bank, any of
the other Banks, or any other person or entity, whether in connection with this
Agreement, the transactions contemplated herein or in the Letters of Credit, or
any unrelated transaction;
(iv) any statement or any other document presented under the
Letters of Credit proving to be forged, fraudulent, invalid or insufficient in
any respect or any statement therein being untrue or inaccurate in any respect;
(v) payment by the Issuing Bank under the Letters of Credit
against presentation of a draft or certificate which does not comply (other than
on its face) with the terms of the Letters of Credit; or
(vi) any other circumstance or happening whatsoever, whether
or not similar to any of the foregoing.
(b) In addition to (but without duplication of) the amounts
payable as elsewhere provided in this Agreement, or any obligation arising out
of Letters of Credit, the Borrowers hereby agree to protect, indemnify, pay, and
save the Agent, the Issuing Bank, and each other Bank harmless from and against
any and all claims, demands, liabilities, damages, losses, costs, charges, and
expenses (including reasonable attorneys' fees) which such party may incur or be
subject to as a consequence, direct or indirect, of (i) the issuance of the
Letters of Credit, or (ii) the failure by the Issuing Bank to honor, or to make
payment on, a drawing under the Letters of Credit as a result of any act or
omission, whether rightful or wrongful, of any present or future de jure or de
facto Governmental Authority (all such acts or omissions herein called
"Governmental Acts").
(c) As among the Borrowers, the Issuing Bank, the other Banks, and
the Agent, the Borrowers assume all risks of the acts and omissions of, or
misuse of the Letters of Credit. In furtherance, and not in limitation of the
foregoing, none of the Agent or the Banks shall be responsible: (A) for the
form, validity, sufficiency, accuracy, genuineness, or legal effect of any
document submitted by any party as beneficiary or transferee or otherwise in
connection with a drawing under the Letters of Credit, even if it should in fact
prove to be in any or all respects invalid, insufficient, inaccurate,
fraudulent, or forged; (B) for the validity or sufficiency of any instrument
transferring or assigning or purporting to transfer or assign the Letters of
Credit or the rights or benefits thereunder or proceeds thereof, in whole or in
part, which may prove to be invalid or ineffective for any reason; (C) for
failure of the beneficiary or transferee to comply fully with conditions
required in order to draw upon the Letters of Credit, other than conditions
expressly stated in the Letters of Credit; (D) for errors, omissions,
interruptions, or delays in transmission or delivery of any messages, by mail,
cable, telegraph, telex, or otherwise, whether or not they be in cipher; (E) for
errors in interpretation of technical terms; (F) for any loss or delay in the
transmission or otherwise of any document required in order to make a drawing
under the Letters of Credit or of the proceeds thereof; (G) for the
misapplication by the beneficiary of the Letters of Credit; and (H) for any
consequences arising from causes beyond the control of the Agent, the Issuing
Bank, or the other Banks including, without limitation, any Governmental Acts.
None of the above shall affect, impair, or prevent the vesting of any of the
Agent's, Issuing Bank's, or any other Bank's rights or powers hereunder.
(d) In furtherance and extension, and not in limitation of the
specific provisions hereinabove set forth, any action taken or omitted by the
Agent, the Issuing Bank, or any other Bank under or in connection with the
Letters of Credit or the related certificates, if taken or omitted in good
faith, shall not result in any liability of the Agent, the Issuing Bank, or any
other Bank to the Borrowers. The Issuing Bank may accept documents that appear
on their face to be in order, without responsibility for further investigation,
regardless of any notice or any information to the contrary.
(e) Notwithstanding anything to the contrary contained in this
Subsection, the Borrowers shall have no obligation to indemnify the Issuing
Bank, any other Bank, or the Agent in respect of any liability incurred by the
Borrowers arising solely out of the bad faith, gross negligence or willful
misconduct of the Agent, the Issuing Bank, or any other Bank, as determined by a
court of competent jurisdiction.
(f) Without prejudice to the survival of any other obligation of
the Borrowers under this Agreement, the indemnities and obligations of the
Borrowers under this Subsection shall survive the payment in full of all other
amounts payable under this Agreement and the termination of the Letters of
Credit.
SECTION 3. SECURITY DOCUMENTS.
Payment of the Credit shall be secured as provided in this Section 3.
3.1 SECURITY AGREEMENT. To secure payment of the Credit, including but
not limited to contingent obligations under Letters of Credit, and all other
obligations of the Borrowers under the Loan Documents, the Borrowers hereby
grant the Agent and the Banks and this Agreement shall be deemed to create,
grant, give, and convey to the Agent and the Banks a first priority lien and
encumbrance upon, and a first priority security interest in, the Collateral.
This Agreement shall also serve as a "Security Agreement" within the meaning of
that term as used in the Uniform Commercial Code as adopted and in force from
time to time in the State of Florida, and shall be operative and effective as a
Security Agreement in addition to, and not in substitution for, any other
Security Agreement executed by the Borrowers in connection with the extension of
credit or loan transaction secured hereby. The Borrowers agree to and shall,
upon the request of the Agent, execute and deliver to the Agent, in form
satisfactory to the Agent, such "Financing Statements," descriptions of property
and such further assurances as the Agent, in its sole discretion, may from time
to time consider necessary to create, perfect, continue, and preserve the lien
and encumbrances hereof and the security interest granted herein upon and in
such Collateral. The Agent, at the expense of the Borrowers, may or shall cause
such statements, descriptions, and assurances to be recorded and re-recorded,
filed and re-filed, at such times and in such places as may be required or
permitted by law to so create, perfect, and preserve the lien and encumbrances
hereof upon all of said Collateral. In addition to any other rights and
remedies contained in the Loan Documents, the Agent and the Banks shall have all
the rights and remedies of a secured party under the Uniform Commercial Code as
adopted and in force from time to time in the State of Florida or other
applicable law, all of which rights shall be cumulative and non-exclusive, to
the extent permitted by law.
3.2 OWNERSHIP AND ENCUMBRANCE OF PROPERTY. Subject to any mortgages
permitted pursuant to Section 7.2 hereof, each Borrower hereby agrees and
represents to the Agent and the Banks that the properties now owned by such
Borrower are not subject to any mortgage, lien, charge, encumbrance, or security
interest. Subject to Sections 7.1 and 7.2 hereof, no Borrower shall, without
the prior written consent of Required Banks, permit or suffer to exist any
mortgage, lien, charge, encumbrance, or security interest in or upon any
properties now owned or hereafter acquired by such Borrower.
3.3 ADDITIONAL SECURITY DOCUMENTS. The Borrowers further agree to
prepare, execute, and deliver to the Agent the following documents (together,
the "Security Documents") each of which shall be properly completed with all
pertinent information and otherwise satisfactory to the Agent:
(a) a Notice of Borrowing, in the form attached as Exhibit "B" to
this Agreement at the time of each request for an Advance under the
Credit;
(b) an Agreement Not To Encumber for each property now owned by
any Borrower, except as otherwise provided for in this Agreement, which
includes a correct legal description of such property in the form attached
hereto as Exhibit "C" at closing and subsequently at the time any real
property is hereafter acquired by any Borrower or an Agreement Not to
Encumber which includes a correct legal description of such property in
the form attached hereto as Exhibit "G" for each property pursuant to
which any Borrower hereafter acquires a leasehold interest permitted
pursuant to Section 2.4 hereof;
(c) a Collateral Assignment of Leases, Rents, and Profits of, from
or pertaining to each property owned by any Borrower, in the form attached
hereto as Exhibit "D" at closing and subsequently at the time any real
property is hereafter acquired by any Borrower executed by such Borrower
or a Collateral Assignment of Leases, Rents, and Profits, of, from or
pertaining to each property in which Borrowers hereafter acquires a
leasehold interest permitted pursuant to Section 2.4 hereof in the form
attached hereto as Exhibit "H" and such Borrower shall use its best
efforts to obtain an acknowledgement of lessee thereon or on a form
satisfactory to Agent in its sole discretion;
(d) an Agreement between the Agent on behalf of the Banks, any
Borrower and the landlord with respect to any leasehold interest hereafter
acquired by any Borrower in substantially the form attached hereto as
Exhibit "I", which form must be acceptable to Agent in its sole
discretion;
(e) UCC Financing Statements, for filing with the Secretary of
State and the local recording office of the State and County where the
property of any Borrower is located, in the form required by such State
and County, reflecting the Banks' security interest in the Collateral at
closing and subsequently at the time any real property is hereafter
acquired by any Borrower; provided, however, that the Agent, in its sole
discretion, may prepare any such Financing Statements upon receipt of the
other documents provided for in this Section 3.3 and forward such
completed Financing Statements to any Borrower for execution;
(f) an Anti-Coercion Statement for each property owned by any
Borrower in the form attached hereto as Exhibit "E" at closing and
subsequently at the time any real property is hereafter acquired by any
Borrower;
(g) evidence of Owner's Title Insurance Policy or commitment
binder therefor for each property owned by any Borrower at closing and
subsequently at the time any real property is hereafter acquired by any
Borrower;
(h) evidence that each property owned by any Borrower at closing
and any property hereafter acquired by any Borrower is insured with fire
and extended coverage to the full insurable value of the requirements on
any such property, and each Borrower hereby agrees that any proceeds from
such insurance coverage will be applied by such Borrower to (i) repair or
rebuild the property for which such proceeds are being received, (ii)
replace such property with a substantially equivalent property with a
substantially equivalent stream of rent payments of similar credit
quality, or (iii) repay any borrowings hereunder;
(i) copies of lease agreements applicable to each property owned
by any Borrower at closing and subsequently at the time any real property
is hereafter acquired by any Borrower; and
(j) an M.A.I. or state certified appraisal or an appraisal in
compliance with the Appraisal Standards for Federally Regulated
Transactions, as required by the Federal Financial Institution Reform
Recovery and Enforcement Act of 1989, as amended from time to time, and
related or subsequent regulations for any real property hereafter acquired
by any Borrower, prepared by an appraiser approved by the Agent and
otherwise in form and substance satisfactory to the Agent.
3.4 RELEASE OF PROPERTY.
(a) Upon the request of the Borrowers, the Agent on behalf of the
Banks will, so long as there exists no Event of Default or circumstance
which with the giving of notice or passage of time would become an Event
of Default, execute releases of property from the lien and encumbrance of
the Security Documents, provided that (a) each property to be released is
being sold in the ordinary course of business to bona fide unrelated third
parties, (b) either (i) each such property is being replaced with
substantially equivalent property with a substantially equivalent stream
of rent payments of similar credit quality, or (ii) the sale of such
property is for cash and the proceeds of the sale, net only of reasonable
seller's closing costs, are applied by the Borrowers as a prepayment of
the Revolving Credit Facility, (c) the property to be released consists of
the entire parcel or parcels of property acquired and is not a mere
portion thereof, and (d) the Borrowers shall submit to the Agent properly
prepared release documents in a form satisfactory to Agent, and with
respect to any new parcel described in clause (b)(i) hereof, properly
prepared Security Documents for such parcel, the warranty deed and closing
statement for such property or properties, and such other information as
the Agent shall reasonably request. The Banks hereby authorize the Agent
to execute such releases and accept the substitution of such Security
Documents under the foregoing conditions without the necessity of notice
to or consent or agreement of the Banks or the Required Banks. If
required by any title company, any Bank will furnish then current
confirmation of the Agent's continued authority to execute and deliver
release documents in connection with any property as provided for in this
Subsection.
(b) Notwithstanding anything to the contrary in this Agreement,
Agent agrees, on behalf of Banks, to execute releases of those properties
of CNLR listed on Schedule I attached hereto from the lien and encumbrance
of the Existing Security Documents in the form of the Release of
Collateral Assignment of Leases, Rents, and Profits and Security Agreement
and UCC-1 Financing Statement attached hereto as Exhibit "J" or in a form
otherwise required by a title insurance company in connection with
Principal Mutual Life Insurance Company's, or an affiliate thereof,
mortgages on such properties. Upon such execution, such properties shall
no longer be included as part of the Collateral hereunder. These releases
of liens and encumbrances are being given to facilitate CNLR's securing of
mortgage loans from Principal Mutual Life Insurance Company, or an
affiliate thereof, totaling not more than $52,600,000.00 on the properties
listed on Schedule I attached hereto. Pursuant to Section 6.18 hereof,
all net proceeds from any such loans shall be applied by CNLR to prepay
outstanding Advances hereunder.
SECTION 4. REPRESENTATIONS AND WARRANTIES.
To induce the Agent and the Banks to enter into this Agreement and to
establish the Credit provided for herein, each Borrower represents and warrants
to the Agent and Banks (which representations and warranties shall survive the
delivery of the documents mentioned herein and the establishment of the Credit
contemplated hereby) as follows:
4.1 CORPORATE EXISTENCE OF BORROWER; COMPLIANCE WITH LAW. The Borrower
is a corporation duly incorporated and organized, validly existing, and in good
standing under the laws of the State of Maryland. The Borrower has the
corporate power to own its properties and assets, and to carry on its business
as now being conducted. The Borrower is in compliance with all other
requirements of law applicable to it and to its business.
4.2 AUTHORIZATION. The Borrower has the corporate power and authority,
and the legal right to execute, deliver, and perform the Loan Documents, and to
borrow thereunder, and has taken all action necessary to authorize the
execution, delivery, and performance of the Loan Documents, and to authorize the
borrowings contemplated thereby. The execution, delivery, and performance of
the Loan Documents by the Borrower is made by individuals of legal capacity;
will not conflict with, result in the breach of, or constitute a violation of or
default under, any applicable law, rule, regulation, writ, or decree or the
charter or bylaws of the Borrower, or any agreement or instrument to which the
Borrower is a party; or result in the creation of any lien, charge, or
encumbrance upon any property or assets of the Borrower pursuant to any
indenture or other agreement or instrument to which the Borrower is a party, or
by which the Borrower or its Collateral may be bound or affected. No consent,
license, or authorization of, or filing with, any Person or entity (including,
without limitation, any Governmental Authority), is required in connection with
the execution, delivery, performance, validity, or enforceability of the Loan
Documents and the borrowings as contemplated thereunder, except for consents,
licenses, approvals, and filings referred to or disclosed in the Loan Documents.
4.3 ENFORCEABLE OBLIGATIONS. The Loan Documents when executed and
delivered to the Agent will constitute legal, valid, and binding agreements
enforceable against the respective parties thereto and any property described
therein in accordance with their respective terms, except (i) as enforceability
may be limited by applicable bankruptcy, insolvency, reorganization, moratorium,
or similar laws affecting the enforceability of creditor's rights; and (ii) as
enforceability may be limited or qualified by general principles of equity,
whether raised in a proceeding at law or in equity.
4.4 FINANCIAL CONDITION OF THE BORROWERS.
(a) The consolidated financial statements of the Borrowers as of
__________________, 1995, a copy of which has been furnished to the Agent, are
materially correct, complete, and fairly present the financial condition of the
Borrowers as at the date of the financial statements and fairly present the
results of the operations of the Borrowers for the period covered thereby.
(b) The Borrowers have no material direct or contingent
liabilities, liabilities for taxes, long-term leases, or unusual forward or
long-term commitments as of the date of the Agreement which are not disclosed
by, provided for, or reserved against in the financial statements or referred to
in notes thereto, and at such date there are no material unrealized or
anticipated losses from any unfavorable commitments of the Borrowers. The
financial statements furnished to the Agent have been prepared in accordance
with Generally Accepted Accounting Principles applied on a Consistent Basis
maintained throughout the period involved. There has been no material adverse
change in the business, properties or condition, financial or otherwise, of the
Borrowers since the date of such financial statements.
4.5 NO LITIGATION. Except as disclosed in a Form 10-K or Form 10-Q
filed by the Borrower with the Securities and Exchange Commission, there is no
suit or proceeding at law or in equity (including proceedings, by or before any
court, arbitrator, governmental or administrative commission, board or bureau,
or other administrative agency) pending, or to the knowledge of the Borrower
threatened, by or against or involving the Borrower or against any of its
properties, existence, or revenues which, if adversely determined, would have a
material adverse effect on the property, assets, or business or on the
condition, financial or otherwise, of the Borrowers or which would be required
to be disclosed in notes to any balance sheet as of the date hereof of the
Borrowers prepared in reasonable detail in accordance with Generally Accepted
Accounting Principles applied on a Consistent Basis.
4.6 DISCLOSURE AND NO UNTRUE STATEMENTS. No representation or warranty
made by the Borrower in the Loan Documents or which will be made by the Borrower
from time to time in connection with the Loan Documents (a) contains or will
contain any misrepresentation or untrue statement of fact; or (b) omits or will
omit to state any material fact necessary to make the statements therein not
misleading, unless otherwise disclosed in writing to the Agent. There is no
fact known to the Borrower or any of its executive financial officers which
adversely affects, or which might in the future adversely affect, the business,
assets, properties, or condition, financial or otherwise, of the Borrower.
4.7 TITLE TO ASSETS; LEASES IN GOOD STANDING. The Borrower has good and
marketable title to its properties and assets, including the properties and
assets reflected in the financial statements and notes thereto described in
Section 4.4 hereof, except for such assets as have been disposed of in the
ordinary course of business, and all such properties and assets are free and
clear of all liens, mortgages, pledges, security interests, charges, title
retention agreements, or other encumbrances of any kind, except as otherwise
permitted pursuant to this Agreement. The Borrower enjoys peaceful and
undisturbed possession under all leases under which it is now operating, none of
which contain any unusual provisions which may adversely affect its operations,
and all said leases are valid, subsisting, and in full force and effect, and the
Borrower is not in violation of any material term of any such lease.
4.8 PAYMENT OF TAXES. The Borrower has filed or caused to be filed all
federal, state, and local tax returns which are required to be filed by it and
has paid or caused to be paid all taxes as shown on said returns or on any
assessment received by it, to the extent that such taxes have become due, except
as otherwise permitted by the provisions hereof, and no controversy in respect
of additional income taxes of the Borrower is pending, or, to the knowledge of
the Borrower, threatened. The Borrower has set up reserves which are believed
by its officers to be adequate for the payment of all taxes for which a notice
of assessment has been received and for the payment of such taxes for the years
that have not been audited by the respective tax authorities.
4.9 AGREEMENT OR CONTRACT RESTRICTIONS. The Borrower is not a party to,
nor is it bound by, any agreement, contract, or instrument or subject to any
charter or other corporate or partnership restriction which materially adversely
affects the business, properties, assets, operations, or condition, financial or
otherwise, of the Borrower except as disclosed in the financial statements and
notes thereto described in Subsection 4.4 hereof. The Borrower is not in
default in the performance, observance, or fulfillment of any obligations,
covenants, or conditions contained in any agreement or instrument to which it is
a party, which would have a material adverse affect on Borrower performing
hereunder.
4.10 PATENTS, TRADEMARKS, ETC. The Borrower owns, possesses, or has the
right to use all necessary patents, patent rights, licenses, trademarks,
trademark rights, trade names, trade name rights, and copyrights to conduct its
business as now conducted, without known conflict with any patent, patent right,
license, trademark, trademark right, trade name, trade name right, or copyright
of any other Person or entity.
4.11 RACKETEER INFLUENCED AND CORRUPT ORGANIZATION(S) ACT. The Borrower
has never been nor is it now engaged, nor will the Borrower engage, directly or
indirectly, in any pattern of "racketeering activity" or in any "collection of
any unlawful debt," as each of the quoted terms or phrases is defined or used by
the Racketeer Influenced and Corrupt Organization(s) Act of either the United
States or the State of Florida, Title 18, United States Code, Section 1961 et
seq.; Chapter 895, Florida Statues, respectively, as each act now exists or is
hereafter amended (the "RICO Lien Acts"). No real property of the Borrower, no
interest or interests of any kind, including beneficial interest or interests,
mortgages, and leases, in or on real property of the Borrower, and no personal
property, including money, of the Borrower, has ever been, is now, or is in any
way reasonably anticipated by the Borrower to become, subject to any lien,
notice, civil investigative demand, action, suit, or any proceeding pursuant to
the RICO Lien Acts.
4.12 INVESTMENT COMPANY ACT; REGULATION. (a) The Borrower is not an
"investment company," an "affiliated person" of any investment company," or a
company "controlled" by an "investment company," and the Borrower is not an
"investment advisor" or an "affiliated person" of an "investment advisor" (as
each of the quoted terms is defined or used in the Investment Company Act of
1940, as amended).
(b) The Borrower is not subject to regulation under any state or
local public utilities code or federal, state, or local statute or regulation
limiting the ability of the Borrower to incur indebtedness for money borrowed or
to pledge assets of the type contemplated hereunder.
4.13 LABOR MATTERS. There are no strikes or other labor disputes against
the Borrower pending or, to the Borrower's knowledge, threatened. Hours worked
by and payment made to employees of the Borrower has not been in violation of
the Fair Labor Standards Act or any other applicable law dealing with such
matters. All payments due from the Borrower on account of employee health and
welfare insurance have been paid or accrued as a liability on its books.
4.14 ERISA REQUIREMENT. Except as previously disclosed to Agent in
writing, the Borrower does not have in force any written or oral bonus plan,
stock option plan, employee welfare, pension or profit sharing plan, or any
other employee benefit arrangement or understanding. In addition, the Borrower
and any predecessor of the Borrower is not now or was not formerly during the
five year period immediately preceding the effective date of this Agreement a
participating employer in any multi-employer or "multiple employer" plans within
the meaning of Sections 4001(1)(a)(3), 4063, and 4064 of ERISA. Each employee
benefit plan subject to the requirements of ERISA complies with all of the
requirements of ERISA and those plans which are subject to being "qualified"
under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as
amended from time to time, have since their adoption been "qualified" and have
received favorable determination letters from the Internal Revenue Service so
holding. There is no matter which would adversely affect the qualified tax
exempt status of any such trust or plan, and except as previously disclosed to
the Agent, there are no deficiencies or liabilities for any such plan or trust.
No employee benefit plan sponsored by the Borrower has engaged in a non-exempt
"prohibited transaction" as defined in ERISA.
4.15 COMPLIANCE WITH ENVIRONMENTAL REQUIREMENTS. The Borrower warrants
and represents to the Agent and the Banks that to the best of Borrower's
knowledge, the Property described herein is now and at all times hereafter will
continue to be in full compliance with all federal, state and local
environmental laws and regulations as they now exist or are hereafter enacted
and/or amended, including, but not limited to, the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended by the Superfund
Amendments and Reauthorization Act of 1986, the Resource Conservation and
Recovery Act of 1976, as amended by the Used Oil Recycling Act of 1980, and the
Hazardous and Solid Waste Amendments of 1984, as amended. The Borrowers shall
indemnify and hold the Agent and the Banks harmless from and against any and all
damages, penalties, fines, claims, liens, suits, liabilities, costs (including
cleanup costs), judgments and expenses (including attorneys', consultants' or
experts' fees and expenses) of every kind and nature suffered by or asserted
against the Agent or the Banks as a direct or indirect result of any warranty or
representation made by the Borrower in this paragraph being false or untrue in
any material respect or any requirement under any law, regulation or ordinance,
whether local, state or federal, which requires the elimination or removal of
any hazardous materials, substances, wastes or other environmentally regulated
substances. The Borrower's obligations hereunder shall not be limited to any
extent by the term of the Indebtedness secured hereby, and, as to any act or
occurrence prior to payment in full and satisfaction of the Indebtedness which
gives rise to liability hereunder, shall continue, survive and remain in full
force and effect notwithstanding payment in full and satisfaction of the
Indebtedness.
4.16 COMPLIANCE WITH REIT REQUIREMENTS. CNLR is in compliance with all
requirements applicable to a Real Estate Investment Trust imposed by the
Internal Revenue Code of 1986, as amended, and all applicable regulations
thereunder, Net I and Net II are in compliance with all requirements applicable
to a Qualified REIT Subsidiary imposed by the Internal Revenue Code of 1986, as
amended, and all applicable regulations thereunder and the Borrower is not aware
of any fact that would negatively impact such qualifications.
4.17 PRINCIPAL OFFICE/CORPORATE NAME. The principal office, chief
executive office, and principal place of business of the Borrower is at 400 East
South Street, Suite 500, Orlando, Florida 32801. The Borrower maintains its
principal records and books at such address.
4.18 USE OF CREDIT. The Revolving Credit Advances shall be used
exclusively for the purposes specified in Section 2.4 hereof. The Borrower is
not engaged in the business of extending credit for the purpose of purchasing or
carrying "margin stock" (within the meaning of Regulation U, Regulation X or
Regulation G of the Board of Governors of the Federal Reserve System), and no
part of the proceeds of any Advance hereunder will be used to purchase or carry
any "margin stock," to extend credit to others 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 Regulation U,
Regulation X, or Regulation G. Neither the Borrower nor any Person acting on
behalf of the Borrower has taken or will take any action which might cause the
Note or any other Loan Documents, including this Agreement, to violate
Regulation U, Regulation X, or Regulation G or any other regulation of the Board
of Governors of the Federal Reserve system or violate Section 8 of the
Securities Exchange Act of 1934 or any rule or regulation thereunder, in each
case as now in effect as the same may hereinafter be in effect. The Borrower
owns no "margin stock" except for that described in the financial statements
referred to in Section 4.4 hereof and, as of the date hereof, the aggregate
value of all "margin stock" owned by the Borrower does not exceed twenty-five
percent (25%) of the value of all of the Borrower's assets. In connection with
the Credit, the Borrower will upon request of the Agent deliver to the Agent a
statement in conformity with the requirements of Federal Reserve Form U-1
referred to in said Regulation.
SECTION 5. CONDITIONS OF LENDING.
The obligation of the Agent and the Banks to establish the Credit or to
permit any borrowing or issue Letters of Credit hereunder is conditioned upon
the performance of all agreements by the Borrowers contained herein, as well as
satisfaction of the following conditions precedent:
5.1 REQUEST FOR BORROWING; SECURITY DOCUMENTS AND INFORMATION. Each
request for a borrowing or the issuance of a Letter of Credit hereunder shall be
evidenced by a Notice of Borrowing in substantially the form of Exhibit "B"
hereto and, if a borrowing is for the purpose of acquiring restaurant or retail
properties pursuant to the Agreement, the Security Documents described in
Section 3.3 above. At least five (5) business days prior to requesting such
Advance, the Borrower must deliver to the Agent all of the information as may be
reasonably requested by the Agent in response to the Borrowers' request for a
borrowing or the issuance of a Letter of Credit. Any Advance of funds by the
Banks without obtaining all such Security Documents and information shall not
constitute a waiver by the Agent or any Bank of its right to receive such
Security Documents and information and a failure of the Borrowers to deliver the
same to the Agent upon demand shall constitute a default hereunder.
5.2 CONTINUING ACCURACY OF REPRESENTATIONS AND WARRANTIES. At the time
of each borrowing or issuance of a Letter of Credit hereunder, the
representations and warranties set forth in this Agreement shall be true,
correct, and complete on and as of the date of such borrowing or Letter of
Credit issuance hereunder with the same effect as though the representations
and warranties had been made on and as of the date of the borrowing or Letter of
Credit issuance.
5.3 NO DEFAULT. At the time of each borrowing or issuance of a Letter
of Credit hereunder, the Borrowers shall be in compliance with all terms and
conditions set forth herein, and no Event of Default, nor any event which upon
notice or lapse of time or both would constitute an Event of Default, shall have
occurred and be continuing at the time of such borrowing or Letter of Credit
issuance.
5.4 LOAN DOCUMENTS. On or prior to the Closing Date, the Agent shall
have received, duly executed this Agreement and the other Loan Documents, all in
form and substance satisfactory to the Agent and counsel for the Agent.
5.5 SUPPORTING DOCUMENTS. On or prior to the Closing Date, the Agent
shall have received the following documents satisfactory in form and substance
to the Agent and counsel for the Agent and, as requested by the Agent, certified
by appropriate corporate or governmental authorities:
(a) a certificate of good standing of each Borrower certified by
the Secretary of State, or other appropriate governmental authority, of
the State of Maryland;
(b) a certificate of qualification of each Borrower to transact
business in the State of Florida certified by the Secretary of State of
the State of Florida;
(c) a copy of the articles of incorporation of each Borrower
certified by the Secretary of State, or other appropriate governmental
authority, of the State of Maryland, accompanied by a certificate from an
appropriate officer of such Borrower that the copy is complete and that
the articles of incorporation have not been amended, annulled, rescinded,
or revoked since the date of the certificate of the Secretary of State or
other appropriate governmental authority;
(d) a copy of the bylaws of each Borrower in effect on the date of
this Agreement, accompanied by a certificate from an appropriate officer
of such Borrower that the copy is true and complete, and that the bylaws
have not been amended, annulled, rescinded, or revoked since the date of
the bylaws or the last amendment reflected in the copy, if any;
(e) a copy of resolutions of the Board of Directors of each
Borrower authorizing the execution, delivery, and performance of the Loan
Documents and the borrowing thereunder, and specifying the officer or
officers of such Borrower authorized to execute the Loan Documents,
accompanied by a certificate from an appropriate officer that the
resolutions are true and complete, were duly adopted at a duly called
meeting in which a quorum was present and acting throughout, or were duly
adopted by written action, and have not been amended, annulled, rescinded,
or revoked in any respect and remain in full force and effect on the date
of the certificate;
(f) an incumbency certificate containing the names, titles, and
genuine signatures of all duly elected officers and directors of each
Borrower as of the date of this Agreement, accompanied by a certificate
from an appropriate officer of such Borrower that the information is true
and complete;
(g) such additional supporting documents as the Agent may request.
5.6 OPINION OF THE BORROWERS' COUNSEL. On or prior to the Closing Date,
and to the extent required by the Agent at the time of any borrowing or Letter
of Credit issuance hereunder, the Agent shall have received the favorable
opinion of counsel for Borrowers, in form and substance satisfactory to the
Agent.
SECTION 6. AFFIRMATIVE COVENANTS.
The Borrowers covenant and agree that, from the date of this Agreement
until payment in full and termination of the Credit and expiration of all
Letters of Credit issued thereunder, unless the Agent shall otherwise consent in
writing, the Borrowers will fully comply with the following provisions:
6.1 FINANCIAL REPORTS AND OTHER DATA.
(a) Quarterly Reports. The Borrowers shall deliver to the Agent
and the Banks within sixty (60) days after the end of each of the
Borrower's fiscal quarters:
(i) The Borrowers' Profit and Loss Statement and Cash Flow
Statement for such quarter and the Borrower's Balance Sheet as at
the last day of such quarter, all in reasonable detail and
satisfactory in scope to the Agent and certified by each Borrower's
chief financial officer as to the fairness and accuracy of such
financial statements and that the same have been prepared in
accordance with Generally Accepted Accounting Principles applied on
a Consistent Basis; and
(ii) a Quarterly Advance Compliance Certificate including a
listing of each Borrower's properties and information on leases,
stating that each Borrower is in compliance with all covenants made
pursuant to the Loan Documents and including a schedule of
computations in reasonable detail demonstrating compliance with the
financial covenants contained in Subsection 6.2 of this Agreement.
Such certificate shall be executed by the chief financial officer of
each Borrower stating that to the best of the officer's knowledge,
such Borrower has kept, observed, performed, and fulfilled each and
every agreement binding on it contained in the Loan Documents, and
is not at the time in default of the keeping, observance,
performance, or fulfillment of any of the terms, provisions, and
conditions thereof, and that none of the Events of Default or events
which upon notice or the lapse of time or both would constitute
Events of Default has occurred (or specifying all such defaults and
events of which officer may have knowledge and what actions such
Borrower is taking or proposes to take with respect thereto).
(b) Annual Reports. The Borrowers shall annually furnish to the
Agent and the Banks within ninety (90) days after the end of each fiscal
year financial statements of the Borrowers which must be acceptable to the
Agent in the Agent's sole discretion. Such statements shall include, but
not be limited to, a statement of profit and loss, and reconciliation of
surplus statement for such year, and a balance sheet as of the end of such
year, all in reasonable detail and satisfactory in scope to the Agent.
All financial statements shall be prepared in accordance with Generally
Accepted Accounting Principles, applied on a Consistent Basis, accompanied
by an unqualified opinion of independent certified public accountants of
recognized national standing selected by the Borrowers and satisfactory to
the Agent. Together with each delivery of financial statements as
required by this subsection 6.1(b), the Borrowers shall deliver to the
Agent a certificate of the independent certified accountants stating that
in making the examination necessary to said certification of the financial
statements, they obtained no knowledge of any condition or event
pertaining to financial or accounting matters, of the Borrowers that
constitutes an Event of Default or event which after notice by the Agent
or lapse of time, or both, would constitute an Event of Default; or if the
accountants have obtained knowledge of any Event of Default or other such
event, a statement specifying the nature and period of existence thereof.
In addition, such accountants' certificate shall state that with respect
to the fulfillment of any of the terms, covenants, provisions, or
conditions of the Loan Documents, other than those relating to financial
or accounting matters, they have obtained no knowledge of any default or
Event of Default, or if the accountants have obtained knowledge of any
such default or Event of Default they shall make disclosure thereof, but
the accountants shall not be liable to the Agent or the Banks for any
failure to obtain knowledge of any default or Event of Default referred to
in this sentence.
(c) Additional Data. With reasonable promptness, the Borrowers
will deliver such additional information respecting the business,
operations, and financial condition of any Borrower as the Agent or any
Bank may from time to time reasonably request, including, without
limitation, (i) any and all correspondence with any auditors and/or
regulatory agencies which request changes in or require alterations in the
procedures used in administering or reporting in any Borrower's
operations, (ii) any and all financial statements, reports, notices, and
proxy statements sent or made available by any Borrower to its security
holders, all regular and periodic reports, and all registration statements
and prospectuses filed by any Borrower with the Securities and Exchange
Commission or any governmental authority succeeding to any of its
functions, and (iii) all press releases and other statements made
available generally by any Borrower to the public concerning material
developments in the business of such Borrower.
(d) Sharing of Financial Information. The Agent and the Banks are
hereby authorized to deliver a copy of any financial statements or any
other information relating to the business operations or financial
condition of any Borrower which may be furnished to them or come to their
attention pursuant to the Loan Documents or otherwise, to any regulatory
body or agency having jurisdiction over Agent or any Bank or to any Person
which shall, or shall have the right or obligation to, succeed to all or
any part of the Agent's or any Bank's interest in the Loan Documents.
6.2 FINANCIAL COVENANTS OF THE BORROWERS. During the term of the
Credit, the Borrowers will maintain the following financial covenants and such
computations shall be made on a consolidated basis in accordance with Generally
Accepted Accounting Principles applied on a Consistent Basis:
(a) the ratio of Total Liabilities to Tangible Net Worth of the
Borrower shall not be more than .85 to 1 at any time.
(b) the ratio of Funded Debt to the Banks to Capital, but
excluding the book value and mortgage debt for those properties to be
mortgaged by CNLR to Principal Mutual Life Insurance Company, or an
affiliate thereof, as provided in this Agreement, at the end of any fiscal
quarter shall not be more than .40 to 1.
(c) the ratio of Funded Debt to Capital at the end of any fiscal
quarter shall not be more than .46 to 1.
(d) the Cash Flow Coverage Ratio defined as Funds from Operations
plus Interest divided by Interest, shall not be less than 2.5 to 1 at any
time.
(e) the Debt Service Coverage Ratio shall not be less than 1.8 to
1. This ratio shall be calculated at the end of each quarter on a rolling
twelve month basis beginning September 30, 1994.
6.3 PAYMENT AND PERFORMANCE OF THE BORROWERS OBLIGATIONS. The Borrowers
will make full and timely payment of the principal of and interest on the
indebtedness owed hereunder. The Borrowers will duly comply with all the terms
and covenants contained in the Loan Documents.
6.4 DEPOSITORY ACCOUNT. Until the Note and the other Loan Documents are
paid in full, each Borrower shall maintain a depository account with the Agent.
6.5 CONDUCT OF BUSINESS; MAINTENANCE OF EXISTENCE. Each Borrower will
do or cause to be done all things necessary to preserve and to keep in full
force and effect its corporate existence and rights and its franchises, trade
names, patents, trademarks, and permits which are necessary for the continuance
of its business; maintain management satisfactory to Required Banks; and
continue to engage principally in the business currently operated by such
Borrower.
6.6 RIGHT OF INSPECTION; DISCUSSIONS. Each Borrower will permit any
person designated by the Agent or any Bank, at such Borrower's expense, to visit
and inspect any of the property, books, records, papers, and financial reports
of such Borrower, including the making of any copies thereof and abstracts
therefrom, and to discuss its affairs, finances, and accounts with its principal
officers, all at such reasonable times and as often as the Agent or any Bank may
reasonably request. Each Borrower will also permit the Agent or any Bank, or
its designated representative, to audit or appraise any of its assets or
financial and business records. Without limiting the foregoing in any way, each
Borrower also agrees to allow the Agent and any Bank or certified public
accountants satisfactory to the Agent or such Bank to review such Borrower's
financial statements, books, and records regarding depreciation and reserves
accounting. Each Borrower further agrees to permit the Agent and the Banks to
review each registration statement and any other offering documents (including
any amendments thereto) (collectively the "Offering Documents") prepared by such
Borrower or at the direction of such Borrower for the purpose of effecting an
offering of an equity interest in such Borrower. The Agent and each Bank shall
have the right to approve any reference to the Agent or such Bank and to the
Credit in such Offering Documents.
6.7 NOTICES. Each Borrower will promptly give notice to the Agent and
the Banks of:
(a) the occurrence of any default or Event of Default (or event
which would constitute a default or Event of Default but for the
requirement that notice be given or time elapse or both) hereunder or
under any other obligation of any Borrower, in which case such notice
shall specify the nature thereof, the period of existence thereof, and the
action that the Borrowers propose to take with respect thereto;
(b) the occurrence of any material casualty to any property of any
Borrower or any other force majeure (including, without limitation, any
strike or other labor disturbance) materially affecting the operation or
value of any Borrower (specifying whether or not such casualty or force
majeure is covered by insurance); and
(c) the occurrence of any event of default pursuant to any lease
pledged as Collateral hereunder, or the commencement of any material
litigation, dispute, investigation or proceeding that may involve a claim
for damages, injunctive relief, enforcement of other relief pending, being
instituted, or threatened by, against or involving a lessee under a lease
pledged as Collateral hereunder or any filing or commencement by or
against any such lessee of a petition, case, proceeding or other action
seeking reorganization, arrangement or readjustment of its debt, or any
relief under any existing or future law relating to bankruptcy,
insolvency, reorganization or relief of debtors, or any adverse change
which might impair the conduct of such lessee's business or might
materially affect financially or otherwise its business, operations,
assets, properties, prospects or condition of which any Borrower has
notice or knowledge.
(d) the commencement or any material change in the nature or
status of any litigation, dispute, investigation, or proceeding that may
involve a claim for damages, injunctive relief, enforcement, or other
relief pending, being instituted, or threatened by, against or involving
any Borrower, or any attachment, levy, execution, or other process being
instituted by or against any assets of any Borrower, or any other adverse
change which might impair the conduct of the business of the Borrowers or
might materially affect financially or otherwise the business, operations,
assets, properties, prospects, or condition of the Borrowers.
6.8 PAYMENT OF TAXES; LIENS. Each Borrower will promptly pay, or cause
to be paid, all taxes, assessments and other governmental charges which may
lawfully be levied or assessed (i) upon the income or profits of such Borrower,
(ii) upon any property, real, personal or mixed, belonging to such Borrower, or
upon any part thereof, or (iii) by reason of employee benefit plans sponsored by
such Borrower, and also any lawful claims for labor, material, and supplies
which, if unpaid, might become a lien or charge against any such property;
provided, however, no Borrower shall be required to pay any such tax,
assessment, charge, levy, or claim so long as the validity thereof shall be
actively contested in good faith by proper proceedings; but provided further
that any such tax, assessment, charge, levy, or claim shall be paid forthwith
upon the commencement of proceedings to foreclose any lien securing the same.
6.9 MAINTENANCE OF PROPERTY, LEASES. Each Borrower will maintain its
property in good condition and repair and, from time to time, make all necessary
and proper repairs, renewals, replacements, additions and improvements thereto,
so that any business carried on may be properly and advantageously conducted at
all times in accordance with prudent business management. Each Borrower will
maintain all leases on its property and ground leases to which it is a party in
good standing, will perform all of its obligations thereunder when due, and the
Borrowers, in the aggregate, will not amend, alter, modify, or change the terms
of more than ten percent (10%) of the total number of such leases, or terminate,
cancel, or permit any surrender of more than ten percent (10%) of the total
number of such leases (other than because the lease term has expired) without
the advance written approval of the Agent. To the extent that any leases have
terminated by their own terms or because of defaults of the tenants, each
Borrower will replace such leases with leases containing comparable provisions
and with tenants of similar quality, credit and otherwise.
6.10 ERISA BENEFIT PLANS. Each Borrower will comply with all
requirements of ERISA applicable to it and will not materially increase its
liabilities under or violate the terms of any present or future benefit plans
maintained by it without the prior approval of the Agent. Each Borrower will
furnish to the Agent as soon as possible and in any event within 10 days after
the Borrower or a duly appointed administrator of a plan (as defined in ERISA)
knows or has reason to know that any reportable event, funding deficiency, or
prohibited transaction (as defined in ERISA) with respect to any plan has
occurred, a statement of the chief financial officer of such Borrower describing
in reasonable detail such reportable event, funding deficiency, or prohibited
transaction and any action which such Borrower proposes to take with respect
thereof, together with a copy of the notice of such event given to the Pension
Benefit Guaranty Corporation or the Internal Revenue Service or a statement that
said notice will be filed with the annual report of the United States Department
of Labor with respect to such plan if such filing has been authorized.
6.11 INSURANCE OF PROPERTY. Each Borrower will keep its business and its
property insured at all times for full replacement value or otherwise in amounts
acceptable to Agent by commercially reasonable insurance companies against the
risks for which provision for such insurance is usually made by other Persons
engaged in a similar business similarly situated (including without limitation
insurance for fire and other hazards and insurance against liability on account
of damage to persons or property and insurance under all applicable workmen's
compensation laws) and to the same extent thereto and carry such other types and
amounts of insurance as are usually carried by Persons engaged in the same or a
similar business similarly situated, and upon request deliver to the Agent, on
behalf of the Banks, a certificate from the insurer setting forth the nature of
the risks covered by such insurance, the amount carried with respect to each
risk, and the name of the insurer. Each Borrower hereby agrees that any
proceeds from such insurance coverage shall be applied to either (i) repair or
rebuild the property for which such proceeds are being received, (ii) acquire a
substantially equivalent property with a substantially equivalent lease stream
of similar credit quality or (iii) repay any borrowings hereunder.
6.12 TRUE BOOKS. Each Borrower will keep proper and true books of record
and account, reasonably satisfactory to the Agent, in which full, true, and
correct entries will be made of all of its dealings and transactions, and
establish on its books such reserves as may be required by Generally Accepted
Accounting Principles with respect to all taxes, assessments, charges, levies,
and claims referred to in Section 6.8 hereof, and with respect to its business
in general, and will include such reserves in any interim as well as year-end
financial statements.
6.13 OBSERVANCE OF LAWS. Each Borrower will conform to and duly observe
all laws, regulations, and other valid requirements of any Governmental
Authority with respect to the conduct of its business, including but not limited
to, applicable ERISA, environmental and transportation laws.
6.14 FURTHER ASSURANCES. At its cost and expense, upon request of the
Agent, each Borrower will duly execute and deliver or cause to be duly executed
and delivered to the Agent, such further instruments or documents and do and
cause to be done such further acts as may be reasonably necessary or proper in
the opinion of the Agent to carry out more effectively the provisions and
purposes of this Agreement.
6.15 CHANGE OF NAME, PRINCIPAL PLACE OF BUSINESS, OFFICE, OR THE AGENT.
Each Borrower will notify the Agent of any change in the name of such Borrower,
the principal place of business of such Borrower, the office where the books and
records of such Borrower are kept, or any change in the registered agent of such
Borrower for the purposes of service of process. No Borrower will change the
chief executive office of such Borrower from Orange County, Florida, without
first notifying the Agent.
6.16 STATUS. CNLR shall at all times comply with all requirements of
applicable laws and regulations necessary to maintain REIT Status. Net I and
Net II shall at all times comply with all requirements of applicable laws and
regulations necessary to maintain Qualified REIT Subsidiary Status.
6.17 SYNDICATION OF CREDIT. Each Borrower agrees to cooperate with the
Agent in connection with its intended further syndication of the Credit, such
cooperation to include, but not be limited to, attendance by management
personnel of the Borrowers at meetings arranged by the Agent with
representatives of potentially participating commercial lending institutions,
provision of information regarding the Borrower's business operations and
financial condition, and response to questions and inquiries regarding the
Borrowers.
6.18 USE OF PROCEEDS FROM MORTGAGE LOANS. Each Borrower agrees to use
all net proceeds from any mortgage loans hereafter secured from Principal Mutual
Life Insurance Company, or an affiliate thereof, pursuant to the release of
certain properties by Banks pursuant to subsection 3.4(b) hereof to prepay
outstanding Advances hereunder.
SECTION 7. NEGATIVE COVENANTS.
The Borrowers covenant and agree that from the date of this Agreement
until payment in full and termination of the Credit and expiration of all
Letters of Credit issued thereunder, the Borrowers will fully comply with the
following provisions:
7.1 OTHER INDEBTEDNESS. No Borrower will, directly or indirectly,
create, incur, assume or permit to exist any indebtedness for borrowed money
without the prior written consent of Required Banks, except (a) pursuant to the
Loan Documents, (b) then existing debt assumed in connection with the
acquisition of properties encumbered by existing mortgages, in an aggregate
amount not to exceed Five Million Dollars ($5,000,000.00) outstanding at any
time, (c) additional debt in the form of a private placement or term
indebtedness (the "Term Credit"), so long as the Borrowers remains in compliance
with all terms and conditions of this Agreement at all times, including, but not
limited to, the financial covenants contained in Subsection 6.2 hereof, and (d)
indebtedness to Principal Mutual Life Insurance Company, or an affiliate
thereof, in an aggregate amount of not more than Fifty-Two Million Six Hundred
Thousand and No/100 Dollars ($52,600,000.00) secured by mortgage loans on the
properties to be released by Banks pursuant to subsection 3.4(b) hereof and
listed on Schedule I hereto.
7.2 LIMITATIONS ON MORTGAGES, LIENS, ETC. No Borrowers will, directly
or indirectly, create, incur, assume, or suffer or permit to exist any security
interest, pledge, lien, or other charge or encumbrance (including the lien or
retained security title of a conditional vendor or lessor) upon or with respect
to any property of the Borrowers without the prior written consent of all of the
Banks except (a) pursuant to the Loan Documents, (b) except workmen's,
materialmen's, or other like liens arising in the ordinary course of business in
respect of obligations which are not due or which are being contested in good
faith, (c) liens for taxes not yet due or being contested in good faith by
appropriate proceedings, (d) other similar encumbrances incurred in the ordinary
course of business, and not interfering with the ordinary course of the
business, (e) then existing mortgages securing indebtedness permitted under
Subsection 7.1(b); (f) liens or security interests in the Collateral (but no
other property of the Borrowers) securing indebtedness permitted under
Subsection 7.1(c); provided however, that such liens or security interests shall
be of equal priority and pari passu with the liens and security interests of the
Banks hereunder pursuant to the provisions of an intercreditor agreement or
similar arrangement in form and substance satisfactory to the Agent and all of
the Banks in their reasonable discretion and (g) mortgages on those properties
listed on Schedule I hereto securing indebtedness to Principal Mutual Life
Insurance Company, or an affiliate thereof, permitted under Subsection 7.1(d)
hereof.
7.3 NO GUARANTIES. No Borrower will, directly or indirectly, guarantee,
assume, endorse, become a surety or accommodation party for, or otherwise in any
way extend credit or become responsible for or remain liable or contingently
liable in connection with any indebtedness or other obligations of any other
Person or entity without the prior written consent of Required Banks except
guaranties and endorsements made in connection with the deposit of negotiable
instruments and other items for collection or credit in the ordinary course of
business and except in the ordinary course of acquiring properties so long as no
material effect on the operation or value of Borrowers results therefrom.
7.4 MERGER, SALE OF ASSETS, DISSOLUTION, ETC. No Borrower will,
directly or indirectly, (a) enter into any transaction of merger or
consolidation; or (b) allow any change in control of any Borrower; or (c)
transfer, sell, assign, lease, or otherwise dispose of all or a substantial part
of its properties or assets; or (d) transfer, sell, assign, lease, convey, or
otherwise dispose of any of its real property (including but not limited to the
property giving rise to the Collateral), except that a Borrower may, so long as
there exists no Event of Default or circumstance which with the giving of notice
or passage of time would become an Event of Default, sell real property in the
ordinary course of business to bona fide unrelated third parties, which either
is replaced with substantially equivalent properties with substantially
equivalent lease streams of similar credit quality, or for which the sale is a
cash sale and the proceeds of which, net only of reasonable seller's closing
costs, are applied by the Borrowers as a prepayment of the Revolving Credit
Facility; or (e) change the nature of its business; or (f) invest in, transfer
any assets to, or do business through any subsidiary except wholly-owned
subsidiaries engaged in the same business as the Borrower which agree to become
borrowers hereunder upon formation; or (g) wind up, liquidate, or dissolve
itself or its business; or (h) agree to any of the foregoing.
7.5 LIMITATIONS ON LOANS, ADVANCES, AND INVESTMENTS. No Borrower will,
directly or indirectly, make or have outstanding a loan or advance to or an
investment in, all or a substantial part of the assets or properties of, or own
or acquire stock or other securities of, any Person, except (a) stock or other
securities received in settlement of a debt that was created in the ordinary
course of business, (b) travel advances in the ordinary course of business to
its officers and employees, (c) readily marketable securities issued by the
United States of America, and (d) certificates of deposit or repurchase
agreements of a Bank or of any other financial institution of comparable
standing; (e) investments in wholly owned subsidiaries engaged in the same
business as the Borrower which agree to become borrowers hereunder upon
formation; or (f) notes and mortgages in favor of the Borrower which secure the
obligation of seller under a property acquisition contract to refund an earnest
money deposit or portion thereof.
7.6 REGULATION U. No Borrower will permit any part of the proceeds of
the Credit to be used to purchase or carry or to reduce or retire any loan
incurred to purchase or carry, any margin stock (within the meaning of
Regulation U of the Board of Governors of the Federal Reserve System) or to
extend credit to others for the purpose of purchasing or carrying any such
margin stock, or to be used for any other purpose which violates, or which would
be inconsistent with, the provisions of Regulation U or other applicable
regulation. Each Borrower covenants that it is not engaged and will not become
engaged as one of its principal or important activities in extending credit for
the purpose of purchasing or carrying such margin stock. If requested by the
Agent, each Borrower will furnish to the Agent in connection with any loan or
loans hereunder, a statement in conformity with the requirements of Federal
Reserve Form U-1 referred to in said Regulation. In addition, each Borrower
covenants that no part of the proceeds of the Credit will be used for the
purchase of commodity future contracts (or margins therefor for short sales) for
any commodity not required for the normal raw material inventory of such
Borrower.
7.7 INSIDER TRANSACTIONS. No Borrower will, directly or indirectly,
purchase, acquire or lease any property or asset from, or sell, dispose of or
lease any property or assets to, or otherwise deal with, in the ordinary course
of business or otherwise, (i) any stockholder or (ii) any other related entity,
except upon terms and conditions not less favorable to such Borrower than if no
such relationship existed and upon approval thereof by the independent members
of such Borrower's board of directors, or except for transactions of which the
Agent has been notified in writing by such Borrower and Required Banks have
consented thereto, which consent will not be unreasonably withheld.
7.8 CHANGES IN GOVERNING DOCUMENTS, ACCOUNTING METHODS, FISCAL YEAR. No
Borrower will amend in any respect its articles of incorporation or bylaws from
that in existence on the date of this Agreement or change its accounting methods
or practices, its depreciation or amortization policy or rates, or its fiscal
year end from that in existence as of the date of the financial statements
provided to the Agent pursuant to Section 6.1 hereof, except as required to
comply with law or with Generally Accepted Accounting Principles or except as
consented to in writing by the Agent, which consent shall not be unreasonably
withheld.
7.9 MANAGEMENT. No Borrower will directly or indirectly permit a
material change in the senior management of such Borrower. For purposes of this
Section, senior management of each of the Borrowers shall be deemed to include
the current officers of CNL Realty Advisors, Inc., a Florida corporation.
SECTION 8. EVENTS OF DEFAULT.
It shall be an Event of Default under the Credit if:
8.1 PAYMENT OF OBLIGATIONS TO THE BANKS. Any Borrower fails to make
payment of any principal, interest, or other amount due on any indebtedness owed
the Agent or the Banks hereunder, or fails to make any other payment to the
Agent or the Banks as contemplated hereunder either by the terms hereof or
otherwise.
8.2 REPRESENTATION OR WARRANTY. Any representation or warranty made or
deemed made by any Borrower herein or in any writing furnished in connection
with or pursuant to the loan application and loan commitment for the Credit or
in connection with or pursuant to the Loan Documents shall be false in any
material adverse respect on the date when made or when deemed made.
8.3 COVENANTS. Any Borrower defaults in the performance or observance
of or breaches any agreement, covenant, term, or condition binding on it
contained in the Loan Documents.
8.4 ANY BORROWER'S LIQUIDATION; DISSOLUTION; BANKRUPTCY; ETC. Any
liquidation or dissolution of any Borrower, suspension of the business of any
Borrower, or the filing or commencement by any Borrower of a voluntary petition,
case, proceeding, or other action seeking reorganization, arrangement,
readjustment of its debts; or commencement of an involuntary petition, case,
proceeding or other action against Borrowers seeking reorganization, arrangement
or readjustment of its debts, which is not vacated, discharged, stayed, bonded
or dismissed within 60 days of its commencement; or the entry of an order for
relief under any existing or future law of any jurisdiction, domestic or
foreign, state or federal, relating to bankruptcy, insolvency, reorganization or
relief of debtors, or any other action of any Borrower indicating its consent
to, approval of, or acquiescence in, any such petition, case, proceeding, or
other action seeking to have an order for relief entered with respect to it or
its debts; the application by any Borrower for, or the appointment, by consent
or acquiescence of, a receiver, trustee, custodian, or other similar official
for any Borrower or for all or a substantial part of its property; the making by
any Borrower of an assignment for the benefit of creditors; or the inability of
any Borrower or the admission by any Borrower in writing of its inability to pay
its debts as they mature.
8.5 ORDER OF DISSOLUTION. Any order is entered in any proceedings
against any Borrower decreeing the dissolution or split-up of such Borrower, and
such order remains in effect for more than sixty (60) days.
8.6 REPORTS AND CERTIFICATES. Any report, certificate, financial
statement, or other instrument delivered to the Agent or the Banks by any
Borrower is at any time false or misleading in any material adverse respect.
8.7 JUDGMENTS. The rendition of a final judgment against any Borrower
for the payment of damages or money in excess of Two Hundred Fifty Thousand
Dollars ($250,000.00) if the same is not discharged, bonded off or transferred
to other security or if a writ of execution or similar process is issued with
respect thereto and is not stayed within the time allowed by law for filing
notice of appeal of the final judgment.
8.8 LIENS IMPOSED BY LAW. The violation of any law or any act or
omission by any Borrower that results in the imposition of a lien by operation
of law on any of its property, if the lien is not discharged, bonded off or
transferred to other security within sixty (60) days after it has attached and
if the lien relates to a claim for the payment of damages or money in excess of
Two Hundred Fifty Thousand Dollars ($250,000.00).
8.9 CORPORATE EXISTENCE. Any act or omission (formal or informal) of
any Borrower or its officers, directors, shareholders, or partners leading to,
or resulting in, the termination, invalidation (partial or total), revocation,
suspension, interruption, or unenforceability of its existence, or the transfer
or disposition (whether by sale, lease, or otherwise) to any Person of all or a
substantial part of its property.
8.10 INVALIDITY OF SECURITY INTEREST AND LIENS. For any reason after the
execution and delivery thereof, any document delivered pursuant hereto that
creates, or was intended to create, a security interest or to provide collateral
security for indebtedness created hereunder ceases to be in full force and
effect or the liens intended to be created thereby cease to be or are not valid
and perfected first priority liens contemplated thereby and the failure by any
Borrower to cure such failure within a period of thirty (30) days.
THEN (i) upon the occurrence of any Event of Default described in
the foregoing Subsections 8.4 or 8.5, the unpaid principal amount of and accrued
interest on the Credit and all other obligations under the Loan Documents shall
automatically become immediately due and payable, without presentment, demand,
protest, or other requirement of any kind, all of which are expressly waived by
each Borrower and the commitments of each Bank to make Advances hereunder and
the obligation of the Issuing Bank to issue Letters of Credit hereunder shall
thereupon terminate; and (ii) upon the occurrence and during the continuance of
any other Event of Default: (a) the Agent shall, upon the written request or
with the written consent of the Required Banks take any one or more of the
following actions: (1) declare all or any portion of the amounts described in
(i) to be, and the same shall forthwith become, immediately due and payable,
without presentment, demand, protest, or other requirement of any kind, all of
which are expressly waived by each Borrower, and (2) declare all commitments to
make Advances hereunder and the obligation of the Issuing Bank to issue Letters
of Credit hereunder to be terminated, and (b) any Bank may give notice to the
Borrowers and the Agent terminating its commitment to make further Advances
hereunder. In any case the Borrowers shall be required to pay to the Agent a
sum equal to the maximum amount available under any Letters of Credit, which sum
the Agent will hold for reimbursement of any amounts drawn under Letters of
Credit and the Issuing Bank may terminate any Letters of Credit providing for
such termination by sending a notice of termination as provided therein. The
Agent may immediately proceed to do all other things provided for by law or the
Loan Documents to enforce the rights of the Agent, the Issuing Bank, and the
Banks hereunder and to collect all amounts owing to the Agent, the Issuing Bank,
and the Banks by the Borrowers. Without limiting the foregoing in any way, upon
any Event of Default, the Agent and the Banks shall be entitled to the
appointment of a receiver to take charge of the Collateral and each Borrower
hereby waives any objection to the appointment of a receiver. No right, power,
or remedy conferred upon the Agent, the Issuing Bank, or the Banks by the Loan
Documents shall be exclusive of any other right, power, or remedy referred to
therein or now or hereafter available at law or in equity. Notwithstanding the
foregoing, an Event of Default under subsection 8.3, 8.6, 8.7 or 8.8 above shall
not be deemed to have occurred if the matter described therein is cured within
thirty (30) days after written notice thereof has been given by the Agent to the
Borrowers, an Event of Default under subsections 8.1 or 8.2 above shall not be
deemed to have occurred if the matter described therein is cured within five (5)
days after written notice thereof has been given by the Agent to the Borrowers.
SECTION 9. THE AGENT
9.1 APPOINTMENT, AUTHORIZATION, AND ACTION.
(a) Each Bank hereby irrevocably appoints and authorizes the Agent
to act as its agent hereunder and take such action on its behalf and to exercise
such powers and discretion under this Agreement and the other Loan Documents as
are delegated to the Agent by the terms hereof, together with such powers as are
reasonably incidental thereto. The relationship between the Agent and each Bank
is and shall be that of agent and principal only and nothing herein or in any of
the other Loan Documents shall be construed to constitute the Agent a trustee
for any Bank or to establish a fiduciary relationship with any Bank or impose on
the Agent any duties, responsibilities, or obligations other than those
expressly set forth in this Agreement or the other Loan Documents.
(b) The Agent shall be entitled to use its discretion with respect
to exercising or refraining from exercising any rights or taking any actions
which may be vested in it or which it may be able to take under or in respect of
this Agreement and the other Loan Documents, unless this Agreement expressly
otherwise provides or unless the Agent shall have been instructed by the
Required Banks to exercise or refrain from exercising such rights or taking such
actions (in which case it shall be required to so act or refrain from acting
pursuant to the directions of the Required Banks); provided, however, that the
Agent shall not be required to take any action or refrain from acting in any
manner which in its judgment exposes the Agent to personal liability or which is
contrary to this Agreement or applicable law. The Agent agrees to give to each
Bank prompt notice of each notice given to it by any Borrower pursuant to the
terms of this Agreement.
9.2 DELEGATION OF DUTIES. The Agent may execute any of its duties under
this Agreement and the other Loan Documents by or through agents or attorneys-
in-fact and shall be entitled to advice of counsel concerning all matters
pertaining to such duties. The Agent shall not be responsible for the
negligence or misconduct of any agents or attorneys-in-fact selected by the
Agent with reasonable care.
9.3 EXCULPATORY PROVISIONS. Neither the Agent nor any of its officers,
directors, employees, agents, attorneys-in-fact, subsidiaries or affiliates
shall be (a) liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement or the other Loan
Documents (except for actions occasioned solely by its or such Person's own bad
faith, gross negligence or willful misconduct), or (b) responsible in any manner
to any of the Banks for any recitals, statements, representations, or warranties
made by any Borrower or any officer thereof contained in this Agreement or the
other Loan Documents or in any certificate, report, statement, or other document
referred to or provided for in, or received by the Agent under or in connection
with, this Agreement or the other Loan Documents or for the value, validity,
effectiveness, genuineness, enforceability, or sufficiency of this Agreement or
the other Loan Documents or for any failure of any Borrower to perform its
obligations hereunder or thereunder. The Agent shall not be under any
obligation to any Bank to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, this
Agreement, or to inspect the properties, books, or records of any Borrower.
9.4 RELIANCE BY THE AGENT. The Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing, resolution, notice,
consent, certificate, affidavit, letter, cablegram, telegram, telecopy, telex,
or teletype message, statement, order or other document or conversation believed
by it to be genuine and correct, and to have been signed, sent, or made by the
proper Person or Persons, and upon advice and statements of legal counsel
(including without limitation, counsel to any Borrower), independent
accountants, and other experts selected by the Agent. The Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless such
Note shall have been transferred in accordance with Section 11.4 hereof. The
Agent shall be fully justified in failing or refusing to take any action under
this Agreement and the other Loan Documents unless it shall first receive such
advice or concurrence of the Required Banks (or, when expressly required hereby
or by the relevant other Loan Document, all the Banks) as it deems appropriate
and it shall first be indemnified to its satisfaction by the Banks against any
and all liability and expense which may be incurred by it by reason of taking or
continuing to take any such action except for liabilities arising solely from
its own gross negligence or willful misconduct. The Agent shall in all cases be
fully protected in acting, or in refraining from acting, under this Agreement
and the other Loan Documents in accordance with a request of the Required Banks
(or, when expressly required hereby, all the Banks), and such request and any
action taken or failure to act pursuant thereto shall be binding upon all the
Banks and all future holders of the Note.
9.5 AGENT AND AFFILIATES. With respect to its Revolving Credit
Commitment and the Advances made by it, the Agent shall have the same rights and
powers under the Loan Documents as any other Bank and may exercise the same as
though it were not the Agent; and the term "Bank" or "Banks" shall, unless
otherwise indicated, include the Agent in its individual capacity. The Agent
and its affiliates may (without having to account therefor to any Bank) accept
deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from, and generally engage in any kind of
business with, any Borrower, and any Person who may do business with or own
securities of any Borrower all as if it were not the Agent. The Agent and its
affiliates may accept fees and other consideration from any Borrower for
services in connection with this Agreement or otherwise without having to
account for the same to the Banks.
9.6 NOTICE OF DEFAULT. The Agent shall not be deemed to have knowledge
or notice of the occurrence of any Event of Default hereunder unless it has
received written notice or telephonic notice confirmed immediately in writing
from a Bank or any Borrower referring to this Agreement, describing such Event
of Default and stating that such notice is a "notice of default". In the event
that the Agent receives such a notice, it shall promptly give notice thereof to
the Banks. The Agent shall take such action with respect to such Event of
Default as shall be reasonably directed by the Required Banks; provided that
unless and until the Agent shall have received such directions, the Agent may
(but shall not be obligated to) take such action, or refrain from taking such
action, with respect to such Event of Default as it shall deem advisable in the
best interests of the Banks.
9.7 NON-RELIANCE ON THE AGENT AND OTHER LENDERS. Each Bank expressly
acknowledges that neither the Agent nor any of its respective officers,
directors, employees, agents, attorneys-in-fact, subsidiaries or affiliates has
made any representations or warranties to it and that no act by the Agent
hereinafter taken, including any review of the affairs of any Borrower, shall be
deemed to constitute any representation or warranty by the Agent to any Bank.
Each Bank represents to the Agent that it has, independently and without
reliance upon the Agent or any other Bank, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of the Borrowers, and made its own decision to
enter into this Agreement. Each Bank also represents that it will,
independently and without reliance upon the Agent or any other Bank, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals, and decisions in taking or
not taking action under this Agreement and the other Loan Documents, and to make
such investigation as it deems necessary to inform itself as to the business,
operations, property, financial and other condition and creditworthiness of the
Borrowers. Except for notices, reports, and other documents expressly required
to be furnished to the Banks by the Agent hereunder or by the other Loan
Documents, the Agent shall not have any duty or responsibility to provide any
bank with any credit or other information concerning the business, operations,
property, financial, and other condition or creditworthiness of the Borrowers
which may come into the possession of the Agent or any of its respective
officers, directors, employees, agents, attorneys-in-fact, subsidiaries, or
affiliates.
9.8 ENFORCEMENT BY THE AGENT. All rights of action under this
Agreement and the other Loan Documents and all rights to any Collateral
hereunder may be enforced by the Agent and any suit or proceeding instituted by
the Agent in furtherance of such enforcement may be brought in its name as the
Agent without the necessity of joining any Banks as plaintiffs or defendants,
and the recovery of any judgment shall be for the benefit of the Banks, subject
to the expenses of the Agent. Unless otherwise permitted by the Required Banks,
no Bank (other than the Agent) shall attempt to enforce any rights of action
under this Agreement and the other Loan Documents or the rights to any
Collateral.
9.9 INDEMNIFICATION. The Banks agree to indemnify the Agent in its
capacity as such and to the extent not promptly reimbursed by the Borrowers and
without limiting the obligations of the Borrowers to do so, ratably according to
the respective principal amounts of the Advances then owing to each of them (or
if no Advances are at the time outstanding, ratably according to the respective
amounts of their Revolving Credit Commitments), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses, or disbursements or any kind or nature whatsoever that may be
imposed on, incurred by, or asserted against the Agent in any way relating to or
arising out of this Agreement or any other Loan Documents or the transactions
contemplated thereby, or any action taken or omitted by the Agent in connection
therewith (including, without limitation, the costs and expenses payable by the
Borrowers under Subsection 11.2); provided, however, that no Bank shall be
liable for any of the foregoing to the extent they arise from the Agent's gross
negligence, bad faith or willful misconduct. Without limiting the foregoing,
each Bank agrees to reimburse the Agent promptly upon demand for such Bank's
ratable share of any costs and expenses payable by the Borrowers under Section
11.2, to the extent that the Agent is not promptly reimbursed for such costs and
expenses by the Borrowers. The agreements contained in this Subsection shall
survive the repayment of the Advances and termination of the facilities
hereunder.
9.10 FAILURE TO ACT. Except for actions expressly required of the Agent
hereunder and under the other Loan Documents, the Agent shall in all cases be
fully justified in failing or refusing to act hereunder and thereunder unless it
shall receive further assurances to its satisfaction from the Banks of their
indemnification obligations hereunder against any and all liability and expense
which may be incurred by it by reason of taking or continuing to take any such
action.
9.11 SUCCESSOR AGENT. Subject to the appointment and acceptance of a
successor as provided below, the Agent may resign at any time by giving written
notice thereof to the Banks and the Borrowers. Upon any such resignation and
after consultation with the Borrowers, the Required Banks shall have the right
to appoint a successor Agent. If no successor Agent shall have been so
appointed by the Required Banks and shall have accepted such appointment, within
30 days after the retiring Agent's giving of notice of resignation, then the
retiring Agent may, on behalf of the Banks, and after consultation with the
Borrowers, appoint a successor Agent, which shall be a commercial bank organized
under the laws of the United States of America or of any State thereof and
having a combined capital and surplus of at least $500,000,000. Upon the
acceptance of any appointment as the Agent hereunder by a successor Agent, such
successor Agent shall thereupon succeed to and become vested with all the
rights, powers, discretion, privileges, and duties of the retiring Agent, and
the retiring Agent shall be discharged from its duties and obligations under the
Loan Documents. After any retiring Agent's resignation hereunder as the Agent,
the provisions of this Section shall inure to its benefit as to any actions
taken or omitted to be taken by its while it was the Agent under this Agreement.
SECTION 10. INDEMNIFICATION BY BORROWERS.
The Borrowers hereby jointly and severally agree to indemnify the Agent,
the Issuing Bank, and each Bank and their respective officers, directors,
employees, and agents (individually an "Indemnified Party" and collectively the
"Indemnified Parties") against and agrees to hold the Indemnified Parties
harmless from, any and all liabilities, losses, claims, damages, and expenses
(including reasonable counsel fees and expenses) of any kind whatsoever arising
out of, or in any way connected with, or as a result of (a) the transactions
contemplated in the Loan Documents, (b) the use of proceeds of the Credit, (c)
the execution and delivery of any subsequent credit documentation or other
document contemplated hereby or thereby by the parties hereto or the performance
of their respective obligations hereunder or thereunder or (d) any claim,
action, suit, investigation, or proceeding relating to the foregoing or to any
Borrower whether or not the Indemnified Party is a party thereto; provided that
in no event shall any Borrower be liable for indemnity hereunder by reason of
any act or omission caused by the bad faith, gross negligence, or willful
misconduct of any Indemnified Party. The foregoing indemnity shall be effective
regardless of any investigation made by or on behalf of the Agent, the Issuing
Bank, any Bank, or any Borrower.
SECTION 11. MISCELLANEOUS.
11.1 COURSE OF DEALING; AMENDMENTS; WAIVER. No course of dealing between
the parties hereto shall be effective to amend, modify, or change any provision
of this Agreement or any other Loan Document. No amendment or waiver of any
provision of this Agreement or any other Loan Document, nor consent to any
departure by the Borrowers therefrom, shall in any event be effective unless the
same shall be in writing and signed by all of the Banks, unless otherwise
specifically provided, and each such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given;
including, without limitation, any amendment, waiver, or consent which shall,
unless otherwise specifically provided, do any of the following: (i) increase
the Revolving Credit Commitment of any Bank or subject the Banks to any
increased or additional obligations under the Loan Documents; (ii) reduce the
principal of, or interest on, the Advances, or any fees or other amounts payable
hereunder; (iii) postpone any date for any payment of principal of, or interest
on, the Advances, or any fees, or extend the Revolving Credit Maturity Date;
(iv) amend this Subsection or change the amount of Revolving Credit Commitments,
unpaid Advance amounts, or number of Banks required for the Banks or any of them
to take action hereunder; or (v) release all or substantially all of any
Collateral or permit additional encumbrances thereon, other than as may be
expressly permitted in this Agreement or the other Loan Documents; and provided
further, that no amendment, waiver, or consent shall, unless in writing and
signed by the Agent in addition to the Banks required to take such action,
affect the rights or duties of the Agent under this Agreement.
11.2 PAYMENT OF EXPENSES, INCLUDING ATTORNEYS' FEES AND TAXES. The
Borrowers agree (a) to pay or reimburse the Agent, the Issuing Bank, and each
Bank for all of their reasonable and customary out-of-pocket costs and expenses
incurred in connection with the preparation, negotiation, execution, and
delivery of, and any amendment, supplement, or modification to, or waiver or
consent under, the Loan Documents, and the consummation of the transactions
contemplated thereby, including, without limitation, the reasonable and
customary fees and disbursements of counsel for the Agent, the Issuing Bank, and
each Bank, taxes, and all recording or filing fees, (b) to pay or reimburse the
Agent, the Issuing Bank, and each Bank for all of their costs and expenses
incurred in connection with the administration, supervision, collection, or
enforcement of, or the preservation of any rights under, the Loan Documents or
the Letters of Credit, including, without limitation, the fees and disbursements
of counsel for the Agent, the Issuing Bank, and the Banks, including attorneys'
fees out of court, in trial, on appeal, in bankruptcy proceedings, or otherwise,
(c) without limiting the generality of provision (a) hereof, to pay or reimburse
the Agent, the Issuing Bank, and the Banks for, and indemnify and hold the
Agent, the Issuing Bank, and the Banks harmless against liability for, any and
all documentary stamp taxes, annual and non-recurring intangible taxes, or other
taxes, together with any interest, penalties, or other liabilities in connection
therewith, that the Agent, the Issuing Bank, or any Bank now or hereafter
determines are payable with respect to the Loan Documents, the obligations
evidenced by the Loan Documents, any Advances, the Letters of Credit, and any
guaranties or mortgages or other security instruments, and (d) to pay,
indemnify, and hold the Agent, the Issuing Bank, and the Banks harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses, or disbursements of any kind or
nature whatsoever with respect to the execution, delivery, enforcement,
performance, and administration of the Loan Documents or the Letters of Credit.
The agreements in this Subsection shall survive repayment of all other amounts
payable hereunder or pursuant hereto, now or in the future, and shall be secured
by the Collateral.
11.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the Agent, each Bank, each Borrower, and their
respective successors and permitted assignees or transferees.
11.4 ASSIGNMENTS AND PARTICIPATIONS.
(a) No Borrower may assign or transfer any of its rights or
obligations under this Agreement without the prior written consent of each Bank.
(b) Each Bank may assign to one or more banks or other entities
all or a portion of its rights and obligations under this Agreement (including,
without limitation, all or a portion of its Revolving Credit Commitment and the
Advances owing to it; provided, however, that (i) the assignment shall be of a
uniform, and not a varying, percentage of all of the assigning the Bank's rights
and obligations under and in respect of the facility being assigned; (ii) the
amount of the Revolving Credit Commitment being assigned pursuant to the
assignment (determined as of the date of the assignment) shall not be less than
Five Million Dollars ($5,000,000.00) and shall be an integral multiple of One
Million Dollars ($1,000,000.00); (iii) the Borrowers and the Agent shall consent
to the assignment, which consent, in either case, shall not be unreasonably
withheld (except that no consent by the Borrowers or the Agent shall be required
in the case of any assignment to another Bank and no consent by the Borrowers
shall be required after an Event of Default shall have occurred and be
continuing); and (iv) the parties to the assignment shall execute and deliver to
the Agent an Assignment and Acceptance in the form attached hereto as Exhibit
"F", together with an assignment fee of $2,500.00.
(c) By executing and delivering an Assignment and Acceptance, the
assigning Bank thereunder and the assignee thereunder confirm to and agree with
each other and the other parties hereto as follows:
(i) other than the representation and warranty that it is
the legal and beneficial owner of the interest being assigned thereby free and
clear of any adverse claim, such assigning Bank makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties, or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency, or
value of this Agreement or any other instrument or document furnished pursuant
hereto;
(ii) such assigning Bank makes no representation or warranty
and assumes no responsibility with respect to the financial condition of the
Borrowers or the performance or observance by any Borrower of any of its
obligations or any other instrument or document furnished pursuant hereto;
(iii) such assignee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 6.1 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Assignment and Acceptance;
(iv) such assignee will, independently and without reliance
upon the Agent, such assigning Bank or any other Bank, and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under this
Agreement;
(v) such assignee appoints and authorizes the Agent to take
such action as the Agent on its behalf and to exercise such powers under this
Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof and thereof, together with such powers as are reasonably incidental
thereto; and
(vi) such assignee agrees that it will perform in accordance
with their terms all of the obligations which by the terms of this Agreement are
required to be performed by it as a Bank.
(d) Each Bank may sell participations to one or more banks or
other entities in all or a portion of its rights and obligations under this
Agreement (including, without limitation, all or a portion of its Revolving
Credit Commitment and the Advances owing to it); provided, however, that (i)
each such participation shall be in an amount not less than Five Million Dollars
($5,000,000.00); (ii) the Bank's obligations under this Agreement (including,
without limitation, its Revolving Credit Commitment) shall remain unchanged;
(iii) the Bank shall remain solely responsible to the other parties hereto for
the performance of such obligations; (iv) the Borrowers, the Agent, and the
other Banks shall continue to deal solely and directly with the Bank in
connection with the Bank's rights and obligations under this Agreement; and (v)
the Bank may not agree with the participant to require the participant's consent
or permit the participant to vote on whether to take or refrain from taking any
action or to approve any amendment or waiver of any provision of any Loan
Document, or any consent or any departure by any party therefrom, except that
the Bank may agree with the participant that the Bank will not, without the
consent or vote of the participant, agree to (1) increase the Revolving Credit
Commitment of such Bank or subject such Bank to any additional obligations; (2)
extend any revolving credit or line of credit termination or conversion date
affecting the Bank; (3) reduce the principal of, or interest on, the Advances
payable to the Bank or any fees or other amounts payable to the Bank; (4)
postpone any date for any payment of principal of, or interest on, the Advances
payable to the Bank or any fees or other amounts payable to the Bank; or (5)
release all or substantially all of the Collateral; in each case if the rights
of the participant are or would be affected thereby.
(e) Notwithstanding any of the foregoing to the contrary, nothing
herein is intended to prohibit the assigning, discounting, or pledging of all or
any portion of a Bank's interest in the Advances or the Note to any Federal
Reserve Bank as collateral security pursuant to regulations of the Board of
Governors of the Federal Reserve System and any Operating Circular issued by
such Federal Reserve Bank, and such Advances or interest in the Note shall be
fully transferrable as provided therein. No such assignment shall release the
assigning Bank from its obligations hereunder.
(f) The Borrowers agree that any participants shall have the same
rights of set-off against the Borrowers as granted the Banks in Subsection 11.6
hereof. Upon the written request of the Borrowers, the Banks will advise the
Borrowers of the names of any participants and the extent of their interest
herein.
11.5 CONFIDENTIAL INFORMATION.
(a) The Agent and the Banks shall exercise their good faith
efforts not to make any public disclosure of confidential information obtained
pursuant to the Loan Documents; provided, that the foregoing shall not be
construed to, now or in the future, apply to any information reflected in any
recorded document, information obtained from sources other than the Borrowers,
or otherwise in the public domain nor shall it be construed to prevent the Agent
or any Bank from (i) making any disclosure of any information (A) if required to
do so by any applicable law or regulation or accepted banking practice, (B) to
any governmental agency or regulatory body having or claiming authority to
regulate or oversee any aspect of the Agent's or such Bank's business or any of
its subsidiaries or affiliates in connection with the exercise of such authority
or claimed authority, (C) pursuant to subpoena, (D) to the extent the Agent or
such Bank or their respective counsel deems necessary or appropriate to do so to
effect or preserve the Collateral or to enforce any remedy provided for in the
Loan Documents or otherwise available by law, (ii) subject to the immediately
succeeding sentence, making such disclosures as such Bank reasonably deems
necessary or appropriate to any bank or financial institution (and/or counsel
thereto) which is a prospective assignee or participant under Subsection 11.4
(each such bank or financial institution, a "Prospective Bank") or (iii) making,
on a confidential basis, such disclosures as the Agent or such Bank deems
necessary or appropriate to the Agent's or such Bank's counsel or accountants
(including outside auditors).
(b) Each Bank agrees that prior to (a) disclosing to any
Prospective Bank any information which the Banks have agreed hereunder to hold
as confidential or (b) entering into an agreement granting to a Prospective Bank
an interest in the Advances, the applicable Bank shall make a good faith effort
to obtain an agreement executed by such Prospective Bank in form and substance
similar to the provisions of this Subsection; provided, that in no event shall
such Bank or the Agent be liable for any breach of such agreement by the
Prospective Bank.
11.6 LIENS; SET-OFF. Each Borrower hereby grants to the Agent and the
Banks (including any Banks added at a later time) a continuing lien to secure
all indebtedness of the Borrowers to the Agent and the Banks created hereunder
or pursuant to the Loan Documents upon any and all monies, securities, and other
property of such Borrower and the proceeds thereof, now or hereafter held or
received by or in transit to, the Agent or any Bank from or for the Borrowers,
and also upon any and all deposits (general or special) and credits of the
Borrowers, if any, at the Agent or any Bank, at any time existing. Upon the
occurrence of any Event of Default, the Agent, and the Banks are hereby
authorized at any time and from time to time, without notice to such Borrower,
to set off, appropriate, and apply any or all items hereinabove referred to
against indebtedness of the Borrowers owed to the Agent or the Banks under the
Loan Documents, whether now existing or hereafter arising. The Agent or any
Bank shall be deemed to have exercised such right of set-off and to have made a
charge against such items immediately upon the occurrence of such Event of
Default although made or entered on its books subsequent thereof.
Notwithstanding the foregoing, any Bank exercising any right to set-off
hereunder shall promptly thereafter deliver to the Agent and the Borrowers a
written notice thereof, provided that any failure to deliver such notice shall
not, in any event, limit such Bank's or any other Bank's right of set-off
hereunder.
11.7 NOTICES. Unless otherwise specifically provided herein, any notice
or other communication herein required or permitted to be given shall be in
writing and may be personally served, telecopied, telexed, or sent by United
States mail or courier service and shall be deemed to have been given when
delivered in person, receipt of telecopy or telex or four Business Days after
depositing it in the United States mail, registered or certified, with postage
prepaid and properly addressed. For the purposes hereof, the addresses of the
parties hereto (until notice of a change thereof is delivered as provided in
this Subsection 11.7) shall be as set forth under each party's name on the
signature pages hereof.
11.8 WAIVER OF DEFAULT. The Banks may, in accordance with the provisions
of Subsection 11.1, by written notice to the Borrowers, at any time and from
time to time, waive any Event of Default and its consequences, or any default in
the performance or observance of any condition, covenant, or other term hereof
and its consequences. Any such waiver shall be for such period and subject to
such conditions as shall be specified in any such notice. In the case of any
such waiver, the Borrowers and the Banks shall be restored to their former
positions prior to such Event of Default or default and shall have the same
rights as they had thereto, and any Event of Default or default so waived shall
be deemed to be cured and not continuing; but no such waiver shall extend to any
subsequent or other Event of Default or default, or impair any right consequent
thereto.
11.9 NO WAIVER; CUMULATIVE REMEDIES. No omission or failure of the Agent
or the Banks to exercise and no delay in exercising by the Agent or the Banks of
any power, or privilege, shall operate as a waiver thereof or be construed to be
a waiver thereof; nor shall any single or partial exercise of any right, power,
or privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, power, or privilege. The rights and remedies
provided in the Loan Documents are cumulative and not exclusive of any rights or
remedies provided by law, and the warranties, representations, covenants, and
agreements made therein shall be cumulative, except in the case of
irreconcilable inconsistency, in which case the provisions of this Agreement
shall control.
11.10 VENUE AND JURISDICTION. In any litigation in connection with or to
enforce this Agreement or any of the other Loan Documents, each Borrower
irrevocably consents to and confers personal jurisdiction on the courts of the
State of Florida located in Orange County or the United States courts located
within the Middle District of the State of Florida, expressly waives any
objections as to venue in any of such courts, and agrees that service of process
may be made on such Borrower by mailing a copy of the summons and complaint by
registered or certified mail, return receipt requested, to the address set forth
herein below the name of the Borrower on the signature page hereto (or otherwise
expressly provided in writing). Nothing contained herein shall, however,
prevent the Agent from bringing any action or exercising any rights within any
other state or jurisdiction or from obtaining personal jurisdiction by any other
means available by applicable law.
11.11 GOVERNING LAW. The validity, interpretation, and enforcement of
this Agreement, of the rights and obligations of the parties hereto, and of the
other documents delivered in connection herewith shall be governed by, and
construed and interpreted in accordance with, the laws of the State of Florida,
excluding those laws relating to the resolution of conflicts between laws of
different jurisdictions.
11.12 TITLE AND HEADINGS; TABLE OF CONTENTS. The titles and headings
preceding the text of the Sections and Subsections of this Agreement and the
Table of Contents have been inserted and included solely for convenience of
reference and shall neither constitute a part of this Agreement nor affect its
meaning, interpretation, or effect.
11.13 COMPLETE AGREEMENT. The Loan Documents contain the final, complete,
and exclusive expression of the understanding of the Borrowers, the Agent, and
the Banks with respect to the transactions contemplated by the Loan Documents
and supersede any prior or contemporaneous agreement or representation, oral or
written, by or between the parties related to the subject matter hereof.
11.14 LEGAL OR GOVERNMENTAL LIMITATIONS. Anything contained in this
Agreement to the contrary notwithstanding, the Banks shall not be obligated to
extend credit or make any loans to the Borrowers in an amount in violation of
any limitations or prohibitions provided by any applicable statute or
regulation.
11.15 COUNTERPARTS. This Agreement and any amendment hereof may be
executed in several counterparts and by each party on a separate counterpart,
each of which when so executed and delivered shall be an original, and all of
which together shall constitute one instrument.
11.16 ADDITIONAL BANKS.
(a) Agent may, upon the consent of the Borrowers, which consent
shall not be unreasonably withheld, at any time add one or more banks to this
Agreement by each such bank agreeing to be bound by the terms of this Agreement
by virtue of executing a signature page hereto, which shall contain the amount
of such bank's Revolving Credit Commitment. Upon the execution of a signature
page hereto and the satisfaction of the conditions and other terms herein, such
additional bank shall be deemed a "Bank" for the purposes of this Agreement and
shall enjoy all rights and assume all obligations of a Bank as set forth in this
Agreement.
(b) Upon the execution of a signature page hereto by the
additional Bank, the then existing Banks shall be deemed to sell and assign to
the additional Bank, without representation, warranty, or recourse, and the
additional Bank shall be deemed to purchase and assume from the existing Banks,
a portion of the rights and obligations of the existing Banks with respect to
the Credit such that after the sale and assignment each of the Banks (including
the additional Bank) shall own a portion of the Credit, the Advances, and the
Letter of Credit Contingent Obligations in an amount equal to its Pro Rata
Portion (after adjustment to take into account the Revolving Credit Commitment
of the additional Bank). Pursuant to such sale and assignment of a portion of
the Credit, the existing Banks are entitled to payment of all amounts owing
under the portions of the Credit sold and assigned, and the additional Bank
shall pay to the Agent, for the benefit of the existing Banks, at its Lending
Office specified in the signature pages hereof, in immediately available funds,
an amount equal to the additional Bank's Pro Rata Portion of all amounts owing
under the Credit.
(c) By executing and delivering a signature page hereto, the
additional Bank confirms to and agrees with the other parties hereto as follows:
(i) the Banks and the Agent make no representation or
warranty and assume no responsibility with respect to any statements,
warranties, or representations made in or in connection with this Agreement or
the execution, legality, validity, enforceability, genuineness, sufficiency, or
value of this Agreement or any other instrument or document furnished pursuant
hereto;
(ii) the Banks and the Agent make no representation or
warranty and assume no responsibility with respect to the financial condition of
the Borrowers or the performance or observance by any Borrower of any of its
obligations or any other instrument or document furnished pursuant hereto;
(iii) the additional Bank confirms that it has received a copy
of this Agreement, together with copies of the financial statements referred to
in Section 6.1 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Agreement;
(iv) the additional Bank will, independently and without
reliance upon the Agent or any of the Banks, and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under this Agreement;
(v) the additional Bank appoints and authorizes the Agent to
take such action as the Agent on its behalf and to exercise such powers under
this Agreement and the other Loan Documents as are delegated to the Agent by the
terms hereof and thereof, together with such powers as are reasonably incidental
thereto; and
(vi) the additional Bank agrees that it will perform in
accordance with their terms all of the obligations which by the terms of this
Agreement are required to be performed by it as a Bank.
11.17 WAIVER OF JURY TRIAL BY BORROWERS. EACH BORROWER HEREBY KNOWINGLY,
VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RESPECTIVE RIGHTS IT MAY HAVE TO A
TRIAL BY JURY WITH RESPECT TO ANY LITIGATION BASED ON THE LOAN DOCUMENTS OR
ARISING OUT OF, UNDER OR IN CONNECTION THEREWITH, OR ANY AGREEMENT CONTEMPLATED
TO BE EXECUTED IN CONNECTION THEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY PARTY WITH
RESPECT HERETO OR THERETO. FURTHERMORE, NO BORROWER SHALL SEEK TO CONSOLIDATE
ANY ACTION IN WHICH A JURY TRIAL HAS BEEN WAIVED WITH ANY ACTION IN WHICH A JURY
TRIAL CANNOT BE WAIVED. THIS WAIVER IS A MATERIAL INDUCEMENT FOR THE BANKS
ACCEPTING AND ENTERING INTO THE CREDIT CONTEMPLATED BY THE LOAN DOCUMENTS (OR
ANY AGREEMENT EXECUTED IN CONNECTION WITH THE LOAN DOCUMENTS) FROM, OR WITH, THE
BORROWERS.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
day and year first above written.
Signed, sealed and delivered
in the presence of: COMMERCIAL NET LEASE REALTY, INC.
a Maryland corporation
/s/Kevin B. Habicht
- ----------------------------------- -------------------------------------------
Kevin Habicht, Executive Vice President and
Chief Financial Officer
Address: 400 E. South Street, Suite 500
- -----------------------------------
Orlando, Florida 32801
TELECOPY NO. 407/423-2894
CONFIRMING TEL. NO. 407/422-1574
(SEAL)
Wire Instructions:
BANK: First Union National Bank of Florida
CITY, STATE: Jacksonville, Florida
Attn: Orlando Office
ABA: 063000021
FOR CREDIT TO: Commercial Net Lease
Realty, Inc.
ACCOUNT NO.: 2090000573765
[Signatures continued on next page]
SIGNATURE PAGE
--------------
Second Amended and Restated Revolving Line of Credit and Security
Agreement Among Commercial Net Lease Realty, Inc., Net Lease Realty I, Inc., Net
Lease Realty II, Inc., First Union National Bank of Florida, as the Agent and
the Banks Listed on the Signature Pages Thereof.
- -------------------------------------------------------------------------------
Witnesses: NET LEASE REALTY I, INC.
a Maryland corporation
/s/Kevin Habicht
- ----------------------------------- -------------------------------------------
Kevin Habicht, Executive Vice President and
Chief Financial Officer
Address: 400 E. South Street, Suite 500
- -----------------------------------
Orlando, Florida 32801
TELECOPY NO. 407/423-2894
CONFIRMING TEL. NO. 407/422-1574
(SEAL)
Wire Instructions:
BANK: First Union National Bank of Florida
CITY, STATE: Jacksonville, Florida
Attn: Orlando Office
ABA: 063000021
FOR CREDIT TO: Net Lease Realty I, Inc.
ACCOUNT NO.: 2090001569574
[Signatures continued on next page]
SIGNATURE PAGE
--------------
Second Amended and Restated Revolving Line of Credit and Security
Agreement Among Commercial Net Lease Realty, Inc., Net Lease Realty I, Inc., Net
Lease Realty II, Inc., First Union National Bank of Florida, as the Agent and
the Banks Listed on the Signature Pages Thereof.
- -------------------------------------------------------------------------------
Witnesses: NET LEASE REALTY II, INC.
a Maryland corporation
/s/Kevin Habicht
- ----------------------------------- -----------------------------------------
Kevin Habicht, Executive Vice President and
Chief Financial Officer
Address: 400 E. South Street, Suite 500
- -----------------------------------
Orlando, Florida 32801
TELECOPY NO. 407/423-2894
CONFIRMING TEL. NO. 407/422-1574
Wire Instructions:
BANK: First Union National Bank of Florida
CITY, STATE: Jacksonville, Florida
Attn: Orlando Office
ABA: 063000021
FOR CREDIT TO: Net Lease Realty II, Inc.
ACCOUNT NO.: 2090001569561
[Signatures continued on next page]
SIGNATURE PAGE
--------------
Second Amended and Restated Revolving Line of Credit and Security
Agreement Among Commercial Net Lease Realty, Inc., Net Lease Realty I, Inc., Net
Lease Realty II, Inc., First Union National Bank of Florida, as the Agent and
the Banks Listed on the Signature Pages Thereof.
- -------------------------------------------------------------------------------
Witnesses: FIRST UNION NATIONAL BANK OF
FLORIDA, a national banking
association, individually and as Agent
- -----------------------------------
By:/s/Bart Bishop
----------------------------------------
Bart Bishop, Vice President
- -----------------------------------
Address and Lending Office:
800 North Magnolia Avenue
7th Floor
Orlando, Florida 32801
TELECOPIER NO. 407/649-5732
CONFIRMING TEL. NO. 407/649-5233
Revolving Credit Commitment: Wire Instructions:
$35,000,000.00 ABA NO.: 063000021
First Union National Bank of Florida
214 Hogan Street
Jacksonville, FL 32202
[Signatures continued on next page]
SIGNATURE PAGE
--------------
Second Amended and Restated Revolving Line of Credit and Security
Agreement Among Commercial Net Lease Realty, Inc., Net Lease Realty I, Inc., Net
Lease Realty II, Inc., First Union National Bank of Florida, as the Agent and
the Banks Listed on the Signature Pages Thereof.
- -------------------------------------------------------------------------------
Witnesses: SOUTHTRUST BANK OF ALABAMA
NATIONAL ASSOCIATION, a national
banking association
- ------------------------------------
By:/s/John Herbert
----------------------------------------
John Herbert, Vice President
- ------------------------------------
Address: 150 Second Avenue North
Suite 450
St. Petersburg, Florida 33701
TELECOPIER NO. 813/898-5319
CONFIRMING TEL. NO. 813/898-4524
Lending Office: 420 N. 20th St.
Birmingham, AL 35203
TELECOPIER NO. 1-205-254-4240
CONFIRMING TEL. NO. 1-800-239-2300
Ext. 5791
Revolving Credit Commitment: Wire Instructions:
- ---------------------------
$20,000,000.00 ABA: 062000080
ACCOUNT NO.: 515549
ATTN: Susan Dollar
Southeastern Banking
re: Commercial Net Lease Realty, Inc.
[Signatures continued on next page]
SIGNATURE PAGE
--------------
Second Amended and Restated Revolving Line of Credit and Security
Agreement Among Commercial Net Lease Realty, Inc., Net Lease Realty I, Inc., Net
Lease Realty II, Inc., First Union National Bank of Florida, as the Agent and
the Banks Listed on the Signature Pages Thereof.
- -------------------------------------------------------------------------------
Witnesses: CREDITANSTALT CORPORATE FINANCE, INC.
By:/s/Robert M. Biringer
- ----------------------------------- ----------------------------------------
Robert M. Biringer, Sr. Vice President
By:/s/Joseph P. Longosz
- ----------------------------------- ----------------------------------------
Joseph P. Longosz, Vice President
Address and Lending Office:
Creditanstalt Corporate Finance, Inc.
Two Greenwich Plaza, Second Floor
Greenwich, CT 06830
TELECOPIER NO. 203/861-6594
TELEPHONE NO. 203/861-6588
With copy to:
Creditanstalt Bankverein
Two Ravinia Drive, Suite 1680
Atlanta, GA 30346
Attn: Joseph P. Longosz
TELECOPIER NO. 404/390-1851
TELEPHONE NO. 404/390-1850
Revolving Credit Commitment: Wire Instructions:
- ---------------------------
$20,000,000.00 BANK: Chemical Bank
CITY, STATE: New York, NY
ABA: 021000128
ACCOUNT TITLE: Creditanstalt, NY
ACCOUNT NO.: 544-7-73095
ATTN: 245 Park Avenue
New York, NY 10167
Attn: Dennis O'Dowd
With Copy To: Two Ravinia Drive
Suite 1680
Atlanta, GA 30346
Attn: Joseph P. Longosz
[Signatures continued on next page]
SIGNATURE PAGE
--------------
Second Amended and Restated Revolving Line of Credit and Security
Agreement among Commercial Net Lease Realty, Inc., Net Lease Realty I, Inc., Net
Lease Realty II, Inc., First Union National Bank of Florida, as the Agent and
the Banks Listed on the Signature Pages Thereof.
- -------------------------------------------------------------------------------
Witnesses: AMSOUTH BANK OF FLORIDA
By:/s/John R. Gassie
- ----------------------------------- ----------------------------------------
John R. Gassie, Vice President
- -----------------------------------
Address and Lending Office:
AmSouth Bank of Florida
65 North Orange Avenue
Orlando, Florida 32801
Attn: John R. Gassie
TELECOPIER NO. 407/649-8944
CONFIRMING TEL. NO. 407/649-8441
Revolving Credit Commitment: Wire Instructions:
- ---------------------------
$5,000,000.00 BANK: AmSouth Bank of Florida
CITY, STATE: Orlando, Florida
ABA: 063210112
ACCOUNT TITLE: AmSouth Bank of Florida
ACCOUNT NO.:
ATTN: 65 North Orange Avenue
Orlando, Florida 32801
Attn: John R. Gassie
[Signatures continued on next page]
SIGNATURE PAGE
--------------
Second Amended and Restated Revolving Line of Credit and Security
Agreement among Commercial Net Lease Realty, Inc., Net Lease Realty I, Inc., Net
Lease Realty II, Inc., First Union National Bank of Florida, as the Agent and
the Banks Listed on the Signature Pages Thereof.
- --------------------------------------------------------------------------------
Witnesses: COMERICA BANK - TEXAS
By:/s/Michael Scott Gosslie
- ----------------------------------- ----------------------------------------
Michael Scott Gosslie
Corporate Banking Officer
- -----------------------------------
Address and Lending Office:
1601 Elm Street, Second Floor
Commercial Real Estate
Dallas, Texas 75201
TELECOPIER NO. (214) 979-8383
CONFIRMING TEL. NO. (214) 979-8339
Revolving Credit Commitment: Wire Instructions:
- ---------------------------
$20,000,000.00 BANK: COMERICA BANK - TEXAS
CITY, STATE: Dallas, Texas
ABA: 111 000 753
LOAN TITLE: Commercial Net Lease Realty,
Inc.
LOAN NO.:
---------------------------------
ATTN: 1601 Elm Street, Second Floor
Commercial Real Estate
Dallas, Texas 75201
Attn: Judy Weinrobe
SECURED PROMISSORY NOTE
-----------------------
D- 750905
$13,150,000.00 December 14, 1995
Chicago, Illinois
FOR VALUE RECEIVED, the undersigned, COMMERCIAL NET LEASE REALTY, INC., a
Maryland corporation, hereby promises to pay to the order of PRINCIPAL MUTUAL
LIFE INSURANCE COMPANY, an Iowa corporation, at the Home Office of Principal
Mutual Life Insurance Company at 711 High Street, Des Moines, Iowa 50392, or at
such other place as the holder of this Note may designate, the principal sum of
Thirteen Million One Hundred Fifty Thousand and No/100 Dollars ($13,150,000.00)
or so much thereof as shall from time to time have been advanced, together with
interest on the unpaid balance of said sum from the date of disbursement at the
rate of six and seventy-five one hundredth percent (6.75%) per annum, computed
on the basis of a 360 day year composed of twelve 30-day months, in installments
as follows:
Beginning on January 15, 1996, interest shall be due and
payable in installments of Seventy-Three Thousand Nine
Hundred Sixty-Eight and 75/100th Dollars ($73,968.75)
with an installment in a like amount due and payable on
the same day of each month thereafter except that all
remaining principal and interest shall be due and
payable on December 15, 1999 ("Maturity Date"). All such
payments shall be made by wire transfer of immediately
available funds to the registered holder hereof at
Norwest Bank, Iowa, N.A., 7th and Walnut Streets, Des
Moines, Iowa 50304, for credit to Principal Mutual Life
Insurance Company, General Account No. 014752, RE:
D-750905 with reference to the undersigned. If on the
date of the first installment, interest is accrued for
more or less than one installment period, the amount of
said installment shall be increased or decreased by the
amount that the interest accrued exceeds or is less than
the interest for one installment period based on the
actual number of days elapsed to the date of said
installment. All principal and interest shall be paid
in lawful money of the United States of America.
No privilege is reserved by the undersigned to prepay any principal of
this Note prior to the Maturity Date, except that anytime after the date
hereof, so long as no default or Event of Default exists under this Note
or any instrument by which it is secured, privilege is reserved, after
giving sixty (60) days' prior written notice to the holder of this Note,
to prepay in full, but not in part, all principal and interest to the date
of payment, along with all sums, amounts, advances, or charges due under
any instrument or agreement by which this Note is secured, upon the
payment of a "Make Whole Premium." The "Make Whole Premium" shall be the
greater of (a) one percent (1%) of the principal amount to be prepaid, or
(b) the excess, if any, of:
(i) the aggregate present value as of the date of payment or prepayment
noticed as set forth above (hereinafter, the "Payment Date") of each
dollar of principal being paid or prepaid (taking into account the
application of such prepayment as set forth herein) and the amount of
interest (exclusive of interest accrued to the Payment Date) that would
have been payable in respect of such dollar of principal being paid or
prepaid if such payment or prepayment had not been made, determined by
discounting such amounts monthly at a rate which is equal to the "Treasury
Rate" from the due date of this Note, plus fifty (50) basis points, over
(ii) 100% of the principal amount being paid or prepaid.
The "Treasury Rate" will be equal to the arithmetic mean of the yields to
maturity converted to a monthly equivalent of United States Treasury
obligations with a constant maturity (as compiled by and published in the
United States Federal Reserve Bulletin [H.R. 15] (hereinafter "H.R. 15")
or its successor publication for each of the two weeks immediately
preceding the Payment Date) most nearly equal to the remaining "Weighted
Average Life to Maturity" of this Note as of the Payment Date. If the
yields referred to in the preceding sentence shall not have been so
published, the yields corresponding to the Payment Date shall be
calculated on the basis of the arithmetic mean of the arithmetic means of
the secondary market ask rates, as of approximately 3:30 P.M., New York
City time, on the last business days of each of the two weeks preceding
the Payment Date, for the actively traded U.S. Treasury security or
securities with a maturity or maturities most closely corresponding to the
"Weighted Average Life to Maturity", as reported by three primary United
States Government securities dealers in New York City of national standing
selected in good faith by the holder of this Note. If no maturity exactly
corresponding to such remaining "Weighted Average Life to Maturity" should
appear therein, yields for the next longer and the next shorter published
maturities shall be calculated pursuant to the foregoing sentence and the
Treasury Rate shall be interpolated from such yields on a straight-line
basis (rounding to the nearest month).
The "Weighted Average Life to Maturity" with respect to this Note means,
at the Payment Date, the number of years obtained by dividing the
"Remaining Dollar-years" of this Note by the outstanding principal amount
hereof. "Remaining Dollar-years" means the sum of the product obtained by
multiplying (A) the amount of each then remaining required principal
repayment (including repayment of any principal at the due date of this
Note) by (B) the number of years (rounded to the nearest one-twelfth)
which will elapse between the Payment Date and the date such required
payment is due.
The undersigned agrees that if the holder of this Note accelerates the
whole or any part of the principal sum evidenced hereby, or applies any proceeds
as if such application had been made as a result of such acceleration, pursuant
to the provisions of those certain mortgages and/or deeds of trust of even date
herewith between the undersigned and Principal Mutual Life Insurance Company
(collectively, the Mortgage ), the undersigned waives any right to prepay said
principal sum in whole or in part without premium and agrees to pay, as yield
maintenance protection and not as a penalty, the "Make Whole Premium" defined
herein.
Time is of the essence with respect to the payment of this Note.
If any payment of principal, interest or premium is not made when due,
damages will be incurred by the holder of this Note, including additional
expense in handling overdue payments, the amount of which is difficult and
impractical to ascertain. The undersigned therefore agrees to pay, upon demand,
the sum of four cents ($.04) for each one dollar ($1.00) of each said payment
which becomes overdue as a reasonable estimate of the amount of said damages,
subject, however, to the limitations contained in the second immediately
succeeding paragraph.
If any payment of principal, interest or premium is not made for a period
exceeding ten (10) days after due, or if any Event of Default has occurred or is
continuing under any instrument by which this Note is, or may hereafter be,
secured, the entire principal balance, interest then accrued, and premium,
whether or not otherwise then due, shall at the option of the holder of this
Note, become immediately due and payable without demand or notice, and whether
or not the holder of this Note has exercised said option, interest shall accrue
on the entire principal balance, interest then accrued, and any premium then
due, at a rate equal to the lesser of (i) four percent (4%) per annum above the
then applicable rate of interest payable under this Note or (ii) the maximum
rate allowed by applicable law until fully paid or if the holder of this Note
has not exercised said option, for the duration of such Event of Default.
Notwithstanding anything herein or in any of the Loan Documents
(hereinafter defined) to the contrary, no provision contained herein or therein
which purports to obligate the undersigned to pay any amount of interest or any
fees, costs or expenses which are in excess of the maximum permitted by
applicable law, shall be effective to the extent it calls for the payment of any
interest or other amount in excess of such maximum. Any such excess shall, if
inadvertently collected, be credited as a reduction of principal, effective as
of the date inadvertently collected. Any payment of principal in excess of the
then outstanding principal balance resulting from the inadvertent collection of
interest shall be refunded to the undersigned, effective as of the date
inadvertently collected, together with interest at the rate specified in
Subsection 687.04(2) of the Florida Statutes or any successor statute. All
agreements between the undersigned and the holder hereof, whether now existing
or hereafter arising and whether written or oral, are hereby limited so that in
no contingency, whether by reason of demand for payment or acceleration of the
maturity hereof or otherwise, shall the interest contracted for, charged or
received by the holder hereof exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, interest would otherwise
be payable to the holder hereof in excess of the maximum lawful amount, the
interest payable to the holder hereof shall be reduced to the maximum amount
permitted under applicable law; and if from any circumstance the holder hereof
shall ever receive anything of value deemed interest by applicable law in excess
of the maximum lawful amount, an amount equal to any excessive interest shall,
at the option of the holder hereof, be applied to the reduction of the principal
hereof and not to the payment of interest, or if such excessive interest exceeds
the unpaid balance of principal hereof such excess shall be refunded to the
undersigned. This paragraph shall control all agreements between the
undersigned and the holder hereof.
The undersigned and any endorsers or guarantors waive presentment, protest
and demand, notice of protest, demand and dishonor and nonpayment and notice of
acceleration and notice of intent to accelerate maturity, and agree the due date
of this Note or any installment may be extended without affecting any liability
hereunder, and further promise to pay all reasonable costs and expenses,
including attorney's and paralegal s fees, incurred by the holder hereof in
connection with any default or in any proceeding (whether incurred in any trial,
appellate, bankruptcy, condemnation or any other proceeding) to interpret and/or
enforce any provision of this Note or any instrument by which it is secured. No
release of the undersigned from liability hereunder shall release any other
maker, endorser or guarantor hereof.
This Note is secured by instruments and agreements of even date herewith
executed and delivered by the undersigned to Principal Mutual Life Insurance
Company creating among other things legal and valid encumbrances on and an
assignment of all of the undersigned's interest in any leases of certain
Premises set forth on Schedule A attached hereto and made a part hereof
(collectively, the Premises ). Terms used herein which are defined in such
instruments or agreements and not otherwise defined herein have the same
definition as in such instruments and agreements. In no event shall such
documents be construed inconsistently with the terms of this Note, and in the
event of any discrepancy between any such documents and this Note, the terms
hereof shall govern. The proceeds of this Note are to be used for business,
commercial, investment or other similar purposes, and no portion thereof will be
used for any personal, family or household use. This Note shall be governed by
and construed in accordance with the laws of the State of Florida.
Notwithstanding any provision to the contrary in this Note, the Mortgage,
or any other instrument or agreement by which this Note is secured (collectively
referred to herein as the "Loan Documents"), and except as otherwise provided in
this paragraph, the liability of the undersigned under the Loan Documents shall
be limited to the interest of the undersigned in the Premises and the rents,
issues, proceeds and profits thereof. In the event of foreclosure of the liens
evidenced by the Loan Documents, no judgment for any deficiency upon the
indebtedness evidenced by the Loan Documents shall be sought or obtained by the
holder of this Note against the undersigned . Nothing contained in this
paragraph shall:
(a) prevent the failure of the undersigned to make any payment or to
perform any obligation under any of the Loan Documents within the time
periods provided therein from being an Event of Default thereunder;
(b) be construed as limiting the obligations of the undersigned to any
lessee under any lease of the Premises;
(c) in any way limit or impair the lien or enforcement of the Loan
Documents pursuant to the terms thereof; or
(d) limit the obligations of any indemnitor or guarantor, if any, of
obligations of the undersigned under the Loan Documents.
Notwithstanding the foregoing paragraph, the undersigned, but not its
shareholders, officers, directors, employees or agents, shall be personally
liable to the holder of this Note for:
(a) failure of the undersigned to comply with paragraphs 2 (taxes and
assessments) and 3 (insurance) of the Mortgage with respect to
amounts accruing prior to a Sale of the Premises, as defined below;
(b) any event or circumstance for which the undersigned indemnifies the
holder of this Note under paragraph 1(m) (environmental indemnity)
of the Mortgage;
(c) failure of the undersigned to pay utilities accruing prior to a Sale
of the Premises, as defined below, on or before the date such
payments are due;
(d) operation and maintenance of the Premises applicable to the time
period prior to a Sale of the Premises, as defined below;
(e) any sums expended by the holder of this Note in fulfilling the
obligations of the undersigned as lessor under any lease of the
Premises prior to a sale of the Premises pursuant to foreclosure or
power of sale, a bona fide sale (permitted by the terms of paragraph
1(l) of the Mortgage or consented to in writing by the holder of
this Note) to an unrelated third party or upon conveyance to the
holder of this Note of the Premises by a deed acceptable to the
holder of this Note in form and content (each of which shall be
referred to as a "Sale" for purposes of this paragraph) or expended
by the holder of this Note after a Sale of the Premises for
obligations of the undersigned which arose prior to a Sale of the
Premises;
(f) any rents or other income regardless of type or source of payment
(including, but not limited to, CAM charges, lease termination
payments, refunds of any type, prepayment of rents, settlements of
litigation, or settlements of past due rents) from the Premises
which the undersigned has received or has a right to receive after
an Event of Default under the Loan Documents or an event which with
the passage of time, the giving of notice or both would constitute
an Event of Default, either or both of which has occurred and is
continuing, and which are not applied to (A) expenses of operation
and maintenance of the Premises and the taxes, assessments, utility
charges and insurance of the Premises, taking into account
sufficient reserves for the same and for replacements and recurring
items, and (B) payment of principal, interest and other charges when
due under the Loan Documents; provided that any payments to parties
related to the undersigned shall be considered expenses of operation
only if they are at market rates or fees consistent with market
rates or fees for the same or similar services;
(g) any security deposits of tenants not turned over to the holder of
this Note upon conveyance of the Premises to the holder of this Note
pursuant to foreclosure or power of sale or by a deed acceptable to
the holder of this Note in form and content;
(h) misapplication or misappropriation of tax reserve accounts, tenant
improvement reserve accounts, security deposits, prepaid rents or
other similar sums paid to or held by the undersigned or any other
entity or person in connection with the operation of the Premises;
(i) any waste committed or allowed by the undersigned with respect to
the Premises prior to a Sale of the Premises,;
(j) any insurance or condemnation proceeds or other similar funds or
payments with respect to a casualty or condemnation occurring prior
to a Sale of the Premises, applied by the undersigned in a manner
other than as expressly provided in the Loan Documents;
(k) any breach or violation of paragraph 1(l) (due on sale or
encumbrance) of the Mortgage, other than the filing of a nonmaterial
mechanic's lien affecting the Premises, the granting of any utility
or other nonmaterial easement or servitude burdening the Premises,
or any other transfer or encumbrance not in the nature of a
transfer, reduction or impairment of any material economic interest
in the Premises; and
(l) any fraud or willful misrepresentation by the undersigned regarding
the Premises, the making or delivery of any of the Loan Documents or
in any materials or information provided by the undersigned in
connection with the loan.
Notwithstanding anything herein contained to the contrary, the
undersigned, but not its shareholders, officers, directors, employees, or
agents shall be personally liable to the holder of the Note for the amount
set forth on Schedule B attached hereto and made a part hereof which is
allocated to the respective portion of the Premises (the Applicable
Portion of the Premises ), plus the Make Whole Premium calculated on such
amount had such amount been prepaid as of the date of the occurrence set
forth below:
(a) in the event of any amendment, modification or termination by the
undersigned of the particular Lease (as defined in the Mortgage or
Deed of Trust with respect to the Applicable Portion of the
Premises) for the Applicable Portion of the Premises without the
prior written consent of the holder of the Note;
(b) in the event the Lessee (as defined in the Mortgage or Deed of Trust
with respect to the Applicable Portion of the Premises) under the
particular Lease for the Applicable Portion of the Premises is not
obligated to notify the holder of the Note of a default by the
undersigned and the undersigned defaults under said Lease and the
holder of the Note does not receive notice of said default following
the occurrence thereof within a reasonable period of time to effect
cure of said default; or
(c) in the event the undersigned violates any exclusive use or non-
compete provision granted to the Lessee under the particular lease
for the Applicable Portion of the Premises.
If more than one, all obligations and agreements of the undersigned are
joint and several.
This Note may not be changed or terminated orally, but only by an
agreement in writing and signed by the party against whom enforcement of any
waiver, change, modification or discharge is sought. All of the rights
privileges and obligations hereunder shall inure to the benefit of the heirs,
successors and assigns of the holder hereof and shall bind the heirs, successors
and assigns of the undersigned.
The parties hereto intend and believe that each provision of this Note
comports with all applicable law. However, if any provision in this Note is
found by a court of law to be in violation of any applicable law, and if such
court should declare such provision of this note to be unlawful, void or
unenforceable as written, then it is the intent of all parties hereto that such
provision shall be given full force and effect to the fullest possible extent
that it is legal, valid and enforceable, that the remainder of this Note shall
be construed as if such unlawful, void or unenforceable provision were not
contained herein, and that the rights, obligations and interests of the
undersigned and the holder hereof under the remainder of this Note shall
continue in full force and effect.
AFTER CONSULTING WITH COUNSEL AND CAREFUL CONSIDERATION, THE UNDERSIGNED
AND THE HOLDER (BY ITS ACCEPTANCE HEREOF) KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE THE RIGHT EITHER OF THEM MAY HAVE TO A TRIAL BY JURY
WITH RESPECT TO ANY LITIGATION ARISING OUT OF THIS NOTE OR ANY OTHER
INSTRUMENT OR AGREEMENT BY WHICH THIS NOTE IS, OR MAY HEREAFTER BE,
SECURED, OR OUT OF ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS
(ORAL OR WRITTEN), OR ACTIONS OF THE UNDERSIGNED OR THE HOLDER. THIS
WAIVER IS A MATERIAL INDUCEMENT TO THE HOLDER'S ACCEPTANCE OF THIS NOTE.
COMMERCIAL NET LEASE REALTY, INC.,
a Maryland corporation
By:/s/Kevin B. Habicht
-------------------------------
Name: Kevin B. Habicht
Title: Executive Vice President
SCHEDULE A
[LIST OF PREMISES]
SEARS BARNES & NOBLE
15701 U.S. Highway 19 4136 N. Road 98
Clearwater, FL Lakeland, FL
BEST BUY LINENS 'N THINGS
5625 S. Padre Island Drive 200 Trotters Way
Corpus Christi, TX Freehold, NJ
OFFICEMAX F/N/A BIZMART MARSHALL'S
5625 S. Padre Island Drive 200 Trotters Way
Corpus Christi, TX Freehold, NJ
FOOD LION
2303 Bedford Avenue
Lynchburg, VA
SCHEDULE B
[ALLOCATED LOAN AMOUNTS]
PREMISES ALLOCATED LOAN AMOUNT
1. Sears $3,431,523
15701 U.S. Highway 19
Clearwater, FL
2. Food Lion $1,666,804
2303 Bedford Avenue
Lynchburg, VA
3. Best Buy $1,585,849
5625 S. Padre Island Drive
Corpus Christi, TX
4. OfficeMax f/n/a Bizmart $1,799,500
5625 S. Padre Island Drive
Corpus Christi, TX
5. Barnes & Noble $2,088,720
4136 N. Road 98
Lakeland, FL
6. Linens 'n Things $3,664,355
200 Trotters Way
Freehold, NJ
7. Marshalls $4,289,470
200 Trotters Way
Freehold, NJ
MORTGAGE AND SECURITY AGREEMENT
D- 750905
THIS MORTGAGE AND SECURITY AGREEMENT made as of December 14, 1995, by and
between COMMERCIAL NET LEASE REALTY, INC., a Maryland corporation, having a
principal place of business at 400 E. South Street, Suite 500, Orlando, Florida
32801-2878, herein called Mortgagor, and PRINCIPAL MUTUAL LIFE INSURANCE
COMPANY, an Iowa corporation, having its principal place of business and post
office address at 711 High Street, Des Moines, Iowa 50392, herein called
Mortgagee,
WITNESSETH:
THAT Mortgagor is justly indebted to Mortgagee for money borrowed in the
principal sum of Thirteen Million One Hundred Fifty Thousand and No/100 Dollars
($13,150,000.00) evidenced by Mortgagor's promissory note (herein called the
Note) of even date herewith, made payable and delivered to Mortgagee, in which
Note Mortgagor promises to pay to Mortgagee the said principal sum or so much
thereof as may be advanced from time to time by Mortgagee, together with
interest at the rate, at the times, and in installments as in the Note provided,
until the entire principal and accrued interest have been paid, but in any
event, the unpaid balance (if any) remaining due on the Note shall be due and
payable on the 15th day of December, 1999 ("Maturity Date").
THAT Mortgagor has delivered this date, as security for the Note, deeds of
trust, mortgages or similar instruments (collectively, Other Mortgages )
necessary to grant a mortgage lien on those certain properties more particularly
described on Exhibit B attached hereto and made a part hereof ( Related
Premises ).
THAT the Mortgagor and Mortgagee intend for this mortgage and the Other
Mortgages to be of equal priority.
NOW, THEREFORE, to secure the payment of the said indebtedness in
accordance with the terms and conditions hereof and of the Note, and all
extensions, modifications and renewals thereof and the performance of the
covenants and agreements contained herein, and also to secure the payment of any
and all other indebtedness, including without limitation indebtedness arising
under the Other Mortgages, direct or contingent, that may now or hereafter
become owing from Mortgagor to Mortgagee, and in consideration of Ten Dollars in
hand paid, receipt of which is hereby acknowledged, Mortgagor does by these
presents give, grant, bargain, sell, alien, enfeoff, convey and confirm unto
Mortgagee, its successors and assigns forever, that certain real estate and all
of Mortgagor's estate, right, title and interest therein, located in the County
of Monmouth, State of New Jersey, more particularly described in Exhibit A
attached hereto and made a part hereof, which real estate, together with the
following described property, rights and interests, is collectively referred to
herein as the "Premises."
Together with Mortgagor's interest as lessor in and to all leases of the
said Premises, or any part thereof, heretofore or hereafter made and entered
into by Mortgagor during the life of this mortgage or any extension or renewal
hereof and all rents, issues, proceeds and profits accruing and to accrue from
the Premises (which are pledged primarily and on a parity with the real estate
and not secondarily).
Together with all and singular the tenements, hereditaments, easements,
appurtenances, passages, waters, water courses, riparian rights, rights in trade
names, other rights, liberties and privileges thereof or in any way now or
hereafter appertaining, including homestead and any other claim at law or in
equity as well as any after-acquired title, franchise or license and the
reversion and reversions and remainder and remainders thereof.
Together with, the right in case of foreclosure hereunder of the
encumbered property for Mortgagee to take and use the name by which the
buildings and all other improvements situated on the Premises are commonly known
and the right to manage and operate the said buildings under any such name and
variants thereof.
Together with all right, title and interest of Mortgagor in any and all
buildings and improvements of every kind and description now or hereafter
erected or placed on the said real estate and all materials intended for
construction, reconstruction, alteration and repairs of such buildings and
improvements now or hereafter erected thereon, all of which materials shall be
deemed to be included within the Premises immediately upon the delivery thereof
to the Premises, and all fixtures now or hereafter owned by Mortgagor and
attached to or contained in and used in connection with the Premises including,
but not limited to, all machinery, motors, elevators, fittings, radiators,
awnings, shades, screens, and all plumbing, heating, lighting, ventilating,
refrigerating, incinerating, air-conditioning and sprinkler equipment and
fixtures and appurtenances thereto; and all items of furniture, furnishings,
equipment and personal property owned by Mortgagor used or useful in the
operation of the Premises; and all renewals or replacements thereof or articles
in substitution therefor, whether or not the same are or shall be attached to
said buildings or improvements in any manner; it being mutually agreed, intended
and declared that all the aforesaid property owned by Mortgagor and placed by it
on the real estate or used in connection with the operation or maintenance of
the Premises shall, so far as permitted by law, be deemed to form a part and
parcel of the real estate and for the purpose of this mortgage to be real estate
and covered by this mortgage, and as to any of the property aforesaid which does
not so form a part and parcel of the real estate or does not constitute a
"fixture" (as such term is defined in the Uniform Commercial Code) this mortgage
is hereby deemed to be, as well, a Security Agreement under the Uniform
Commercial Code for the purpose of creating hereby a security interest in such
property which Mortgagor hereby grants to Mortgagee as Secured Party. Mortgagor
agrees to execute any and all documents, including financing statements which
may be required to perfect the security interest granted hereby.
Together with all right, title and interest of Mortgagor, now or hereafter
acquired, in and to any and all strips and gores of land adjacent to and used in
connection with the Premises and all right, title and interest of Mortgagor, now
owned or hereafter acquired, in, to, over and under the ways, streets, sidewalks
and alleys adjoining the Premises.
Together with all funds now or hereafter held by Mortgagee under any
escrow security agreement or under any of the terms hereof, including but not
limited to funds held under the provisions of paragraph 4 hereof.
THIS IS A FIRST MORTGAGE.
TO HAVE AND TO HOLD the same unto the Mortgagee, its successors and
assigns forever, for the purposes and uses herein set forth.
Mortgagor represents that it is the absolute owner in fee simple of the
Premises described in Exhibit A, which Premises are free and clear of any liens
or encumbrances except for Permitted Exceptions (as hereinafter defined), and
except for taxes which are not yet due or delinquent. Permitted Exceptions , as
used in this mortgage means those matters approved by Mortgagee in the
Mortgagee s title insurance policy insuring the lien of this mortgage.
Mortgagor shall forever warrant and defend the title to the Premises against all
claims and demands of all persons whomsoever and will on demand execute any
additional instrument which may be required to give Mortgagee a valid first lien
on all of the Premises, except for Permitted Exceptions.
Mortgagor further represents that: (i) the Premises is not subject to any
casualty damage; (ii) except as disclosed in those certain Phase I Environmental
Reports conducted by Ecolsciences, Inc. and dated November 27, 1995 and November
28, 1995, respectively (collectively, the "Report"), there is no Hazardous
Material (as hereinafter defined) on the Premises, nor has any Hazardous
Material been discharged from the Premises or penetrated any surface or
subsurface rivers or streams crossing or adjoining the Premises or the aquifer
underlying the Premises; and (iii) Mortgagor has complied or caused the Premises
to comply with all statutes, laws, ordinances, rules and regulations of all
local, state or federal authorities having jurisdiction over the Premises or its
use relative to any Hazardous Material. "Hazardous Material" as used in this
mortgage means any hazardous or toxic material, substance, pollutant,
contaminant or waste which is defined by those or similar terms or is regulated
as such under any statute, law, ordinance, rule or regulation of any local,
state or federal authority having jurisdiction over the Premises or its use,
including but not limited to (a) the Federal Water Pollution Control Act (33
U.S.C. Section 1251) as amended; (b) the Resource Conservation and Recovery
Act (42 U.S.C. Section 6901 et. seq.) as amended; (c) the Comprehensive
Environmental Response, Compensation and Liability Act, (42 U.S.C. Section
9601 et. seq.) as amended; (d) the Federal Clean Air Act (42 U.S.C. Section
7401 et. seq.) as amended; (e) the New Jersey Industrial Site Recovery Act,
P.L. 1993 c. 139 ( ISRA ), formerly the New Jersey Environmental Cleanup
Responsibility Act, N.J.S.A. 13:1K-6 et seq. ( ECRA ); (f) the New Jersey
Spill Compensation and Control Act, as amended; N.J.S.A. 58:10-23.11 et seq.
(the Spill Act ) and (g) the New Jersey Underground Storage of Hazardous
Substances Act, as amended, N.J.S.A. 58:10A-21 et seq. ( USTA ) (hereinafter
referred to collectively as "Environmental Laws") but shall not include
products typically sold by Lessee (hereinafter defined) in the ordinary
course of its business and supplies for cleaning and maintenance and standard
office supplies in commercially reasonable amounts provided, however, that such
items are incidental to the use of the Premises and are stored and used in
compliance with all Environmental Laws.
MORTGAGOR COVENANTS AND AGREES AS FOLLOWS:
1. Mortgagor shall
(a) pay each item of indebtedness secured by this mortgage when
due according to the terms hereof and of the Note;
(b) pay a late charge equal to four percent (4%) of any payment of
principal, interest or premium which is not paid on or before
the due date thereof to cover the expense involved in handling
such late payment;
(c) pay on or before the due date thereof any indebtedness which
may be secured by a lien or charge on the Premises (except for
construction liens, which are prohibited under paragraph 1(f)
hereof), and upon request of Mortgagee exhibit satisfactory
evidence of the discharge thereof;
(d) except as otherwise expressly permitted by the Lease (as
hereinafter defined), so long as the Leases are in full force
and effect (provided, however, if Lessees are obligated to
obtain the consent of Mortgagor, as landlord, then Mortgagee s
consent shall be required prior to such action being taken)
complete within a reasonable time the construction of any
building now or at any time in process of construction upon
the real estate;
(e) except as otherwise expressly permitted by the Leases, so long
as the Leases are in full force and effect (provided, however,
if Lessees are obligated to obtain the consent of Mortgagor,
as landlord, then Mortgagee s consent shall be required prior
to such action being taken) make no material alteration to the
Premises without the prior written consent of Mortgagee,
except such as are required by law or ordinance;
(f) except as otherwise expressly permitted by the Leases, so long
as the Leases are in full force and effect (provided, however,
if Lessees are obligated to obtain the consent of Mortgagor,
as landlord, then Mortgagee s consent shall be required prior
to such action being taken) remove or demolish no building or
other improvement at any time a part of the Premises, and
shall keep the Premises, including the buildings and
improvements, in good condition and repair, without waste, and
free from construction liens or other liens or claims for
liens and encumbrances not expressly subordinated to the lien
hereof;
(g) except as otherwise expressly permitted by the Leases, so long
as the Leases are in full force and effect (provided, however,
if Lessees are obligated to obtain the consent of Mortgagor,
as landlord, then Mortgagee s consent shall be required prior
to such action being taken) comply, and cause each lessee or
other user of the Premises to comply, with all requirements of
law and ordinance, and all rules and regulations, now or
hereafter enacted, by authorities having jurisdiction of the
Premises and the use thereof, all orders and directions of the
National Fire Protection Association or similar body, and all
covenants, conditions and restrictions of record pertaining to
the Premises, including the buildings and improvements, and
the use thereof;
(h) except as otherwise expressly permitted by the Leases, so long
as the Leases are in full force and effect (provided, however,
if Lessees are obligated to obtain the consent of Mortgagor,
as landlord, then Mortgagee s consent shall be required prior
to such action being taken) cause or permit no change to be
made in the general use of the Premises without Mortgagee's
prior written consent;
(i) except as otherwise expressly permitted by the Leases, so long
as the Leases are in full force and effect (provided, however,
if Lessees are obligated to obtain the consent of Mortgagor,
as landlord, then Mortgagee s consent shall be required prior
to such action being taken) initiate or acquiesce in no zoning
reclassification or material change in zoning without
Mortgagee's prior written consent;
(j) except as otherwise expressly permitted by the Leases, so long
as the Leases are in full force and effect (provided, however,
if Lessees are obligated to obtain the consent of Mortgagor,
as landlord, then Mortgagee s consent shall be required prior
to such action being taken) make or permit no use of the
Premises that could with the passage of time result in the
creation of any right of use, or any claim of adverse
possession or easement on, to or against any part of the
Premises in favor of any person or the public;
(k) except as otherwise expressly permitted by the Leases, so long
as the Leases are in full force and effect (provided, however,
if Lessees are obligated to obtain the consent of Mortgagor,
as landlord, then Mortgagee s consent shall be required prior
to such action being taken) subject to the provisions of
paragraph 5(c) hereof, promptly repair, restore or rebuild any
buildings or improvements now or hereafter a part of the
Premises which may become damaged or be destroyed by any cause
whatsoever, so that upon completion of the repair, restoration
and rebuilding of the buildings and improvements there will be
no liens of any nature arising out of the construction and the
Premises will be of substantially the same character and will
have a commercial value at least as great as the commercial
value thereof prior to the damage or destruction;
(l) not, directly or indirectly, due to assignment of beneficial
interest under a trust, partnership interest in a partnership,
or otherwise, cause or permit any sale, transfer or conveyance
of the Premises, including the sale, transfer or conveyance of
the Premises to Lessees (as hereinafter defined), or create,
suffer or permit any encumbrance or lien on the Premises other
than the lien hereof, the leases of the Premises assigned to
Mortgagee and other exceptions expressly referred to herein
(except for construction liens, which are prohibited under
paragraph 1(f) hereof), it being understood and agreed that
the indebtedness evidenced by the Note and its terms are
personal to Mortgagor and in accepting the same Mortgagee has
relied upon what it perceived as the willingness and ability
of Mortgagor to perform its obligations hereunder, under the
Note, and as lessor under leases of the Premises; Mortgagee
may consent to a sale, transfer, conveyance or encumbrance and
expressly waive this provision in writing to Mortgagor however
any such consent and waiver shall not constitute any consent
or waiver of this provision as to any sale, transfer,
conveyance or encumbrance other than that for which the
consent and waiver was expressly granted; Mortgagee's ability
to consent to any sale, transfer, conveyance or encumbrance
and waive this provision implies no standard of reasonableness
in determining whether or not such consent shall be granted
and the same may be based upon what Mortgagee solely deems to
be in its best interest; without limiting Mortgagee's right to
withhold its consent and waiver entirely, such consent and
waiver may be conditioned upon an increase in the rate of
interest under the Note and the imposition of other terms and
conditions thereunder or hereunder; any sale, transfer,
conveyance or encumbrance made, created or permitted in
violation of this provision shall be null and void and in
addition to the other rights and remedies available to
Mortgagee hereunder, Mortgagee shall have the option of
declaring the unpaid principal balance of the Note, together
with all accrued and unpaid interest, premium, if any and all
other sums and charges evidenced thereby or owing hereunder,
immediately due and payable;
(m) not cause or permit any Hazardous Material to exist on or
discharge from the Premises, and comply with all Environmental
Laws and promptly: (i) pay any claim against Mortgagor or the
Premises, (ii) remove any charge or lien upon the Premises,
and (iii) indemnify and hold Mortgagee harmless from any and
all loss or damage, resulting from any Hazardous Material that
exists on or is discharged from the Premises; provided,
however, that this indemnity does not apply to Hazardous
Material that exists on or is discharged from the Premises due
to acts or omissions occurring after Mortgagor or any person
or entity in any way related to Mortgagor no longer holds
title to or has any interest in the Premises;
(n) not cause or permit any Hazardous Material to exist on or
discharge from any property owned or used by Mortgagor which
would result in any charge or lien upon the Premises;
(o) notify Mortgagee of any Hazardous Material that exists on or
is discharged from the Premises within ten (10) days after
Mortgagor first has knowledge of such existence or discharge;
(p) if other than a natural person, do all things necessary to
preserve and keep in full force and effect its existence,
franchises, rights and privileges under the laws of the state
of its formation and, if other than its state of formation,
the state where the Premises is located;
(q) do all things necessary to preserve and keep in full force and
effect Mortgagee's title insurance coverage insuring the lien
of this mortgage as a first and prior lien, subject only to
the Permitted Exceptions and any other exceptions after the
date of this mortgage approved in writing by Mortgagee,
including without limitation, delivering to Mortgagee not less
than 30 days prior to the effective date of any rate
adjustment, modification or extension of the Note any new
policy or endorsement which may be required to assure
Mortgagee of such continuing coverage;
(r) not directly or indirectly, commit waste;
(s) pay or cause any lessee to pay all utilities on the Premises
prior to becoming delinquent; and
(t) at all times cause its interest in the Premises to be leased
to (i) Raceway Village, L.T., Inc., a New Jersey corporation
d/b/a Linens N Things ( Linens ) under a lease dated December
15, 1993, and any and all amendments and supplements (the
Linens Lease) and (ii) Marshall s of Freehold, N.J., Inc.
( Marshalls ) under a lease dated December 15, 1993 and any
and all amendments and supplements (the Marshall Lease )
(Linens and Marshalls are herein collectively and
individually, as the context may require, referred to as
Lessee and Linens Lease and Marshalls Lease are herein
collectively and individually, as the context may require,
referred to as the Lease ) and shall punctually perform all
obligations, covenants and agreements required to be performed
as lessor under the Lease in accordance therewith and do all
things necessary to compel performance by Lessee of all its
obligations, covenants and agreements under the Lease and the
Lessee Estoppel Certificate executed by Lessee and delivered
to Mortgagee in connection with the delivery of this mortgage
and funding of the Note (the Estoppel ). The term Lease
used herein shall include any future lease of the Premises
approved by Mortgagee and the term Lessee shall include any
future lessee of a future lease approved by Mortgagee.
2. (a) Mortgagor shall pay or cause to be paid when due and before
any penalty attaches or interest accrues all general taxes,
special taxes, assessments (including assessments for benefits
from public works or improvements whenever begun or
completed), water charges, sewer service charges, CAM charges,
if any, vault or space charges and all other like charges
against or affecting the Premises or against any property or
equipment located on the Premises, or which might become a
lien on the Premises, and shall, within 10 days following
Mortgagee's request, furnish to Mortgagee a duplicate receipt
of such payment. If any such tax, assessment or charge may
legally be paid in installments, Mortgagor may, at its option,
pay such tax, assessment or charge in installments.
(b) To prevent default hereunder Mortgagor shall pay or cause to
be paid in full, under protest in the manner provided by law,
any tax, assessment or charge which Mortgagor may desire to
contest; provided, however, that
(i) if contest of any tax, assessment or charge may be made
without the payment thereof, and
(ii) such contest shall have the effect of preventing the
collection of the tax, assessment or charge so contested
and the sale or forfeiture of the Premises or any part
thereof or any interest therein to satisfy the same,
then Mortgagor may at its option and in its discretion and
upon the giving of written notice to Mortgagee of its intended
action and upon the furnishing to Mortgagee of such security
or bond as Mortgagee may require, contest any such tax,
assessment or charge in good faith and in the manner provided
by law. All costs and expenses incidental to such contest
shall be paid by Mortgagor. In the event of a ruling or
adjudication adverse to Mortgagor, Mortgagor shall promptly
pay such tax, assessment or charge. Mortgagor shall indemnify
and save harmless the Mortgagee and the Premises from any loss
or damage arising from such contest and shall, if necessary to
prevent sale, forfeiture or any other loss or damage to the
Premises or to the Mortgagee, pay such tax, assessment or
charge or take whatever action is necessary to prevent any
sale, forfeiture or loss.
3. (a) Mortgagor shall at all times keep in force (i) property
insurance insuring all buildings and improvements which now
are or hereafter become a part of the Premises for perils
covered by an all-risk or a causes of loss-special form
insurance policy with an ordinance or law coverage endorsement
containing both replacement cost and agreed amount
endorsements or options; (ii) commercial general liability
insurance naming Mortgagee as additional insured protecting
Mortgagor and Mortgagee against liability for bodily injury or
property damage occurring in, on or adjacent to the Premises,
with a combined single limit of not less than One Million
Dollars ($1,000,000.00) per occurrence with not less than a
Five Million Dollar ($5,000,000.00) aggregate limit and excess
umbrella liability insurance of not less than Twenty Five
Million Dollars ($25,000,000.00); (iii) boiler and machinery
insurance if the property has a boiler or is an office
building; (iv) rental value insurance for the perils specified
herein for one hundred percent (100%) of the rents (including
operating expenses, real estate taxes, assessments and
insurance costs which are lessee's liability) for a period of
twelve (12) months; and (v) insurance against all other
hazards as may be reasonably required by Mortgagee, including,
without limitation, insurance against loss or damage by flood
and earthquake.
(b) All insurance shall be in form, content and amounts approved
by Mortgagee and written by an insurance company or companies
rated A, class size X or better in the most current issue of
Best's Insurance Reports and which is licensed to do business
in the state in which the Premises are located and domiciled
in the United States or a governmental agency or
instrumentality approved by Mortgagee. The policies for such
insurance shall have attached thereto standard mortgagee
clauses in favor of and permitting Mortgagee to collect any
and all proceeds payable thereunder and shall include a 30 day
(except for nonpayment of premium, in which case, a 10 day)
notice of cancellation clause in favor of Mortgagee. All
policies or certificates of insurance shall be delivered to
and held by Mortgagee as further security for the payment of
the Note and any other obligations arising under the Loan
Documents, with evidence of renewal coverage delivered to
Mortgagee at least 30 days before the expiration date of any
policy. Not more frequently than once every three years, if
Mortgagee has a reasonable belief that the replacement cost
value is not correct, it shall notify Mortgagor and Mortgagor,
at its expense, will furnish Mortgagee with an appraisal of
the full insurable replacement cost value of the Premises,
made by fire insurance appraisers satisfactory to Mortgagee
and fire insurance companies generally. Mortgagor shall not
carry separate insurance, concurrent in kind or form and
contributing in the event of loss, with any insurance required
herein.
Notwithstanding anything hereinabove to the contrary,
Mortgagee agrees to accept the coverage amounts and carriers
provided to Mortgagee as of the date hereof. In the event of
a default under the Loan Documents or Lease or a decline in
the rating of an approved carrier then Mortgagee shall have
the right to require Mortgagor to obtain the insurance
required pursuant to this paragraph 3.
4. (a) Mortgagor shall, upon request of Mortgagee, deposit with and
pay to Mortgagee, on each payment date specified in the Note ,
a sum equivalent to: (1) the taxes and assessments assessed
or levied against and next due on the Premises divided by the
number of payments that will become due and payable under the
Note before the date when such taxes and assessments will
become due and payable, plus (2) the premiums that will next
become due and payable for insurance required by this mortgage
to be furnished by Mortgagor divided by the number of payments
that will become due and payable under the Note before the
date when such premiums will become due and payable.
Mortgagee shall use such deposits to pay the taxes,
assessments and premiums when the same become due. Mortgagee
shall not be liable for interest on such deposits. Mortgagor
shall procure and deliver to Mortgagee, in advance, statements
for such charges. If the total payments made by Mortgagor
under this paragraph plus interest, if any, accrued thereon
exceed the amount of payments actually made by Mortgagee for
taxes, assessments and insurance premiums, such excess shall
be credited by Mortgagee on subsequent deposits to be made by
Mortgagor. If, however, the deposits are insufficient to pay
the taxes, assessments and insurance premiums when the same
shall be due and payable, Mortgagor will pay to Mortgagee any
amount necessary to make up the deficiency, five (5) business
days before the date when payment of such taxes, assessments
and insurance premiums shall be due. If at any time Mortgagor
shall tender to Mortgagee, in accordance with the provisions
of the Note secured by this mortgage, full payment of the
entire indebtedness represented thereby, Mortgagee shall, in
computing the amount of such indebtedness, credit to the
account of Mortgagor any balance remaining in the funds
accumulated and held by Mortgagee under the provisions of this
paragraph. If there is a default under any of the provisions
of this mortgage resulting in a public sale of the Premises,
or if Mortgagee otherwise acquires the Premises after default,
Mortgagee shall apply, at the time of commencement of such
proceedings, or at the time the Premises is otherwise
acquired, the balance then remaining in the funds accumulated
under this paragraph as a credit on the interest accrued and
unpaid and the balance to the principal then remaining unpaid
under the Note. The provisions of this paragraph shall not
affect the enforceability of the covenants relating to taxes,
assessments and insurance premiums provided for in this
mortgage except to the extent that obligations for the same
have been actually met by compliance with this paragraph.
(b) Any funds held under this paragraph shall not constitute any
deposit or account of the Mortgagor or moneys to which the
Mortgagor is entitled upon demand, or upon the mere passage of
time, or sums to which Mortgagor is entitled to any interest
or crediting of interest by virtue of Mortgagee's mere
possession of such deposits. Mortgagee shall not be required
to segregate such deposits or hold such deposits in any
separate account for the benefit of Mortgagor. Mortgagee may
hold such deposits in its general account or any other account
and may commingle such deposits with any other moneys of
Mortgagee or moneys which Mortgagee is holding on behalf of
any other person or entity. Mortgagor hereby consents to the
investment of such deposits by Mortgagee as outlined herein.
(c) Notwithstanding anything hereinabove to the contrary, so long
as the Lease is in full force and effect and there are no
defaults under the Lease, this Mortgage, the Note or any other
instrument securing the Note, Mortgagor shall not be obligated
to make the deposits required by this Section 4.
5. In the event of any damage to or destruction of the buildings or
improvements which are a part of the Premises:
(a) Mortgagor will immediately notify Mortgagee thereof in the
manner provided in this mortgage for the giving of notices.
Mortgagee may in its discretion (and it is hereby authorized
to) either settle and adjust any claim under such insurance
policies, or allow Mortgagor to agree with the insurance
company or companies on the amount to be paid upon the loss.
In either case, the proceeds shall be paid to Mortgagee and
Mortgagee is authorized to collect and to give receipts
therefor. In the event Mortgagee elects to either settle or
adjust any claim under such insurance policies, and provided
there is no Event of Default or event which with the passage
of time or notice or both would constitute an Event of Default
which has occurred and is continuing, Mortgagor shall have the
right to participate in said settlement or adjustment;
provided, however, that any settlement or adjustment shall be
subject to the written approval of Mortgagee.
(b) Such proceeds, after deducting therefrom any expenses incurred
in the collection thereof, including reasonable attorneys'
fees and costs, shall be applied at the option of Mortgagee
either to the cost of rebuilding and restoring the buildings
and improvements or in reduction of the indebtedness secured
hereby whether or not then due and payable, provided however,
that if no Event of Default has occurred and Mortgagee has not
otherwise previously accelerated the whole or any part of the
indebtedness secured hereby, such reduction shall be without
Make Whole Premium. Any excess proceeds remaining after said
indebtedness is fully paid shall be promptly remitted to
Mortgagor.
(c) Regardless of the cause of the damage or destruction or the
availability or sufficiency of insurance proceeds until all
indebtedness secured hereby shall be fully paid, Mortgagor
shall be obligated to repair, restore and rebuild any
buildings or improvements so damaged or destroyed, provided
however, that if any insurance proceeds have been paid to
Mortgagee under any insurance policies maintained by Mortgagor
under the provisions of Paragraph 3 hereof, Mortgagor shall be
so obligated only if Mortgagee elects to apply such proceeds
to the cost of rebuilding and restoration. Repair and
restoration of the buildings and improvements shall be
commenced promptly after the occurrence of the loss and shall
be prosecuted to completion diligently, and the buildings and
improvements shall be so restored and rebuilt as to be of at
least equal value and substantially the same character as
prior to such damage and destruction. In the event the
estimated costs of rebuilding and restoration exceed 25% of
the indebtedness then remaining unpaid as secured hereby, the
drawings and specifications pertaining to such rebuilding and
restoration shall be subject to the prior written approval of
Mortgagee.
(d) In the event that Mortgagor is to be reimbursed out of the
insurance proceeds, such proceeds shall be made available from
time to time upon the furnishing to Mortgagee of satisfactory
evidences of the estimated cost of completion thereof and such
architect's certificates, waivers of lien, contractor's sworn
statements, and other evidence of cost and of payment and of
the continued priority of the lien hereof over any potential
liens of mechanics and materialmen as Mortgagee may require
and approve. No payment made by Mortgagee prior to the final
completion of the work shall, together with all payments
theretofore made, exceed 90% of the value of the work
performed to the time of payment, and at all times the
undisbursed balance of said proceeds shall be at least
sufficient to pay for the cost of completion of the work free
and clear of liens. Any proceeds remaining after payment of
the cost of rebuilding and restoration shall, at the option of
Mortgagee, either be applied in reduction of the indebtedness
secured hereby, provided, however, that if no Event of Default
has occurred and Mortgagee has not otherwise previously
accelerated the whole or any part of the indebtedness secured
hereby, such reduction shall be without Make Whole Premium, or
paid to Mortgagor.
(e) Should such damage or destruction occur after foreclosure or
sale proceedings have been instituted, the proceeds of any
such insurance policy or policies, if not applied in
rebuilding or restoration of the buildings or improvements,
shall be used to pay the indebtedness, then due and owing in
the event of a non-judicial sale or the amount due in
accordance with any decree of foreclosure or deficiency
judgment that may be entered in connection with such
proceedings, and the balance, if any, shall be paid to the
owner of the equity of redemption if he shall then be entitled
to the same, or otherwise as any court having jurisdiction may
direct. Following any foreclosure sale, or other sale of the
Premises by Mortgagee pursuant to the terms hereof, Mortgagee
is authorized without the consent of Mortgagor to assign any
and all insurance policies to the purchaser at the sale and to
take such other steps as Mortgagee may deem advisable to cause
the interests of such purchaser to be protected by any of such
insurance policies.
(f) Notwithstanding anything hereinabove to the contrary, so long
as the Lease is in full force and effect, there are no
defaults by Mortgagor, as landlord, under the Lease, which are
not cured within any applicable grace period, and there is no
Event of Default under this mortgage, all proceeds shall be
applied and any obligation to reconstruct and repair shall be
in accordance with the terms of the Lease. In the event the
Lease expressly permits the Lessee to reconstruct and repair
the Premises without giving approval rights to Mortgagor, as
landlord, or to Mortgagee, then Mortgagee s approval shall not
be required. If the Lease requires Lessee to obtain the
approval of Mortgagor, as landlord or of Mortgagee prior to
reconstructing and repairing the Premises or the Mortgagor is
obligated to reconstruct and repair the Premises, the
Mortgagee s prior written approval shall be required.
6. Mortgagor hereby assigns, transfers and sets over to Mortgagee the
entire proceeds of any award or claim for damage to any of the
Premises taken or damaged under the power of eminent domain or by
condemnation. In the event of the commencement of any eminent
domain or condemnation proceeding affecting the Premises:
(a) Mortgagor shall notify Mortgagee thereof in the manner
provided in this mortgage for the giving of notices.
Mortgagee may participate in such proceeding, and Mortgagor
shall deliver to Mortgagee all documents requested by it to
permit such participation.
(b) Mortgagee may elect to apply the proceeds of the award upon or
in reduction of the indebtedness secured hereby whether or not
then due and payable, provided however, that if no Event of
Default has occurred and Mortgagee has not otherwise
previously accelerated the whole or any part of the
indebtedness secured hereby, such reduction shall be without
Make Whole Premium, or require Mortgagor to restore or
rebuild, in which event the proceeds shall be held by
Mortgagee and used to reimburse Mortgagor for the cost of
restoring and rebuilding all buildings and improvements in
accordance with plans and specifications to be submitted to
and approved by Mortgagee.
(c) In the event Mortgagee elects to reimburse Mortgagor for the
costs of restoring and rebuilding the Premises, then the
proceeds of the award shall be paid out in the same manner as
provided in this mortgage for the payment of insurance
proceeds in reimbursement of the costs of rebuilding and
restoration. If the amount of such award is insufficient to
cover the cost of restoring and rebuilding, Mortgagor shall
pay such cost in excess of the award before being entitled to
reimbursement out of the award. Any proceeds remaining after
payment of cost of restoring and rebuilding shall, at the
option of Mortgagee, either be applied on account of the
indebtedness secured hereby, provided, however, that if no
Event of Default has occurred and Mortgagee has not otherwise
previously accelerated the whole or any part of the
indebtedness secured hereby, such reduction shall be without
Make Whole Premium, or be paid to Mortgagor.
(d) Notwithstanding anything hereinabove to the contrary, so long
as the Lease is in full force and effect, there are no
defaults by Mortgagor, as landlord, under the Lease, which are
not cured within any applicable grace period, and there is no
Event of Default under this mortgage, all proceeds of the
award shall be applied and all reconstruction and repair shall
be undertaken in accordance with the terms of the Lease. In
the event the Lease permits Lessee to reconstruct and repair
the Premises without approval rights given to Mortgagor, as
landlord, or to Mortgagee, the Mortgagee s approval shall not
be required. If the Lease expressly requires Lessee to obtain
the approval of Mortgagor, as landlord, or of Mortgagee prior
to reconstructing and repairing the Premises, or the Mortgagor
is obligated to reconstruct and repair the Premises, then
Mortgagee s prior written approval shall be required.
7. If by the laws of the United States of America or of any state or
governmental subdivision having jurisdiction of Mortgagor or of the
Premises or of the transaction evidenced by the Note and this
mortgage, any tax or fee is due or becomes due in respect of the
issuance of the Note hereby secured or the making, recording and
registration of this mortgage, except for Mortgagee's income tax,
Mortgagor covenants and agrees to pay such tax or fee in the manner
required by such law, and to hold harmless and indemnify Mortgagee,
its successors and assigns, against any liability incurred by reason
of the imposition of any such tax or fee.
8. In the event of the enactment after the date hereof of any
applicable law deducting from the value of land for the purpose of
taxation any lien thereon, or imposing upon Mortgagee the payment of
the whole or any part of the taxes or assessments or charges or
liens herein required to be paid by Mortgagor, or changing in any
way the laws relating to the taxation of mortgages or debts secured
by mortgages or Mortgagee's interest in the Premises, or the manner
of collection of taxes, so as to affect this mortgage or the debt
secured hereby or the holder thereof, except for Mortgagee's income
tax, then and in any such event Mortgagor shall, upon demand by
Mortgagee, pay such taxes or assessments or reimburse Mortgagee
therefor; provided, however, that, if in the opinion of counsel for
Mortgagee (a) it might be unlawful to require Mortgagor to make such
payment or (b) the making of such payment might be construed as
imposing a rate of interest beyond the maximum permitted by law,
then and in such event Mortgagee may elect to declare all of the
indebtedness secured hereby to be and become due and payable 60 days
from the giving of written notice of such election to Mortgagor,
provided, however, that if no Event of Default has occurred and
Mortgagee has not otherwise previously accelerated the whole or any
part of the indebtedness secured hereby, such reduction shall be
without Make Whole Premium.
9. (a) Upon the occurrence of any Event of Default under this
mortgage, Mortgagee may, but need not, make any payment or
perform any act herein required of Mortgagor, in any form and
manner deemed expedient and may, but need not, make full or
partial payments of principal or interest on prior
encumbrances, if any, and purchase, discharge, compromise or
settle any tax lien or other prior lien or title or claim
thereof, or redeem from any tax sale or forfeiture affecting
said Premises, or contest any tax or assessment. All moneys
paid for any of the purposes herein authorized and all
reasonable expenses paid or incurred in connection therewith,
including reasonable attorneys' fees and costs and reasonable
attorneys' fees and costs on appeal, and any other money
advanced by Mortgagee to protect the Premises and the lien
hereof, shall be so much additional indebtedness secured
hereby and shall become immediately due and payable without
notice and with interest thereon at the Default Rate (as
hereinafter defined) from the date of expenditure or advance
until paid.
(b) In making any payment hereby authorized relating to taxes or
assessments or for the purchase, discharge, compromise or
settlement of any prior lien, Mortgagee may make such payment
according to any bill, statement or estimate secured from the
appropriate public office without inquiry into the accuracy
thereof or into the validity of any tax, assessment, sale,
forfeiture, tax lien or title or claim thereof or without
inquiry as to the validity or amount of any claim for lien
which may be asserted.
10. If one or more of the following events (herein called "Events of
Default") shall have occurred:
(a) default shall be made in the payment of any principal,
interest or premium, utilities, taxes or assessments referred
to in this mortgage or insurance premiums for the insurance
required pursuant to this mortgage when due under the Note or
this mortgage, and such default shall have continued for 10
days; or
(b) Mortgagor shall be dissolved, or a decree or order for relief
shall be entered by a court having jurisdiction in respect of
Mortgagor in a voluntary or involuntary case under the
Federal Bankruptcy Code as now or hereafter constituted, or
Mortgagor shall file a voluntary petition in bankruptcy or
for reorganization or an arrangement or any composition,
readjustment, liquidation, dissolution or similar relief
pursuant to any similar present or future state or federal
bankruptcy law, or shall be adjudicated a bankrupt or become
insolvent, or shall commit any act of bankruptcy as defined in
such law, or shall take any action in furtherance of any of
the foregoing; or
(c) a petition or answer shall be filed proposing the adjudication
of Mortgagor as a bankrupt or its reorganization or
arrangement, or any composition, readjustment, liquidation,
dissolution or similar relief with respect to it pursuant to
any present or future federal or state bankruptcy or similar
law, and Mortgagor shall consent to the filing thereof, or
such petition or answer shall not be discharged within 60 days
after the filing thereof; or
(d) by the order of a court of competent jurisdiction, a receiver,
trustee or liquidator of the Premises or any part thereof or
of Mortgagor or of substantially all of its assets shall be
appointed and shall not be discharged or dismissed within 60
days after such appointment, or if Mortgagor shall consent to
or acquiesce in such appointment; or
(e) with respect to the matters not described in the other
subparagraphs of this paragraph 10, default shall be made in
the due observance or performance of any covenant, condition
or agreement of the Mortgagor contained in this mortgage, the
Note and Assignment of Lease and Rents of even date herewith
from Mortgagor to Mortgagee or in any other instrument or
agreement by which the Note is secured (the "Loan Documents"),
and such default shall have continued for 30 days after notice
specifying such default is given by Mortgagee to Mortgagor; or
(f) any representation or warranty made by Mortgagor in the Loan
Documents shall prove to be untrue or inaccurate in any
material respect; or
(g) the failure of Mortgagor to give notice to Mortgagee in the
manner provided in this mortgage for the giving of notices
within 30 days after the death of any natural person who is
personally liable for the payment of the indebtedness secured
hereby or any part thereof, whether such person is the
Mortgagor or any indemnitor or guarantor and whether or not
such person has executed the Note or this mortgage;
(h) the death of any natural person who is personally liable for
the payment of the indebtedness secured hereby or any part
thereof, whether such person is the Mortgagor or any
indemnitor or guarantor and whether or not such person has
executed the Note or this mortgage or the death of any general
partner of Mortgagor; or
(i) an Event of Default under any mortgage or deed of trust made
by Mortgagor in favor of Mortgagee encumbering a Related
Premises;
(j) amendment, modification or termination by Mortgagor of the
Lease without Mortgagee s prior written consent; or
(k) default by Mortgagor under the Lease and (a) with respect to a
non-monetary obligation, either (i) Mortgagor shall not have
commenced cure thereof within five (5) days following receipt
of notice from Lessee, (ii) Mortgagor shall have failed to
proceed diligently to complete said cure within the time
allowed for such cure under the terms of the Lease, or (iii)
Mortgagor shall have failed to provide Mortgagee with weekly
progress reports of its efforts to effect said cure, and (b)
with respect to a monetary obligation, Mortgagor shall have
failed to make the payment required to effect the cure of said
default no later than four (4) days prior to the last day
allowed for such cure under the terms of the Lease and
Mortgagor has failed to provide Mortgagee with evidence of
said payment.
then, in each and every such case, the whole of said principal sum
hereby secured shall, at the option of the Mortgagee and without
further notice to Mortgagor, become immediately due and payable
together with accrued interest thereon and a Make Whole Premium
calculated in accordance with the provisions hereof, and whether or
not Mortgagee has exercised said option, interest shall accrue on
the entire principal balance and any interest or premium then due,
at the Default Rate until fully paid or if Mortgagee has not
exercised said option, for the duration of any Event of Default.
If any default under "(e)" above shall be of such nature that it
cannot be cured or remedied within 30 days, Mortgagor shall be
entitled to a reasonable period of time to cure or remedy such Event
of Default, provided Mortgagor commences the cure or remedy thereof
within the 30 day period following the giving of notice and
thereafter proceeds with diligence to complete such cure or remedy.
11. Mortgagor agrees that if Mortgagee accelerates the whole or any part
of the principal sum hereby secured, or applies any proceeds as if
such application had been made as a result of such acceleration,
pursuant to the provisions hereof, Mortgagor waives any right to
prepay the principal sum hereby secured in whole or in part without
premium and agrees to pay, as yield maintenance protection and not
as a penalty, a "Make Whole Premium," except as otherwise provided
herein.
The "Make Whole Premium" shall be the greater of (a) one percent
(1%) of the principal amount to be prepaid, or (b) the excess, if
any, of
(i) the aggregate present value as of the date of payment or
prepayment noticed as set forth above (hereinafter, the
"Payment Date") of each dollar of principal being paid
or prepaid (taking into account the application of such
prepayment as set forth herein) and the amount of
interest (exclusive of interest accrued to the Payment
Date) that would have been payable in respect of such
dollar of principal being paid or prepaid if such
payment or prepayment had not been made, determined by
discounting such amounts monthly at a rate which is
equal to the "Treasury Rate" from the due date of this
Note, plus fifty (50) basis points, over
(ii) 100% of the principal amount being paid or prepaid.
The "Treasury Rate" will be equal to the arithmetic mean of the
yields to maturity converted to a monthly equivalent of United
States Treasury obligations with a constant maturity (as compiled by
and published in the United States Federal Reserve Bulletin [H.R.
15] (hereinafter "H.R. 15") or its successor publication for each of
the two weeks immediately preceding the Payment Date) most nearly
equal to the remaining "Weighted Average Life to Maturity" of this
Note as of the Payment Date. If the yields referred to in the
preceding sentence shall not have been so published, the yields
corresponding to the Payment Date shall be calculated on the basis
of the arithmetic mean of the arithmetic means of the secondary
market ask rates, as of approximately 3:30 P.M., New York City time,
on the last business days of each of the two weeks preceding the
Payment Date, for the actively traded U.S. Treasury security or
securities with a maturity or maturities most closely corresponding
to the "Weighted Average Life to Maturity", as reported by three
primary United States Government securities dealers in New York City
of national standing selected in good faith by the holder of this
Note. If no maturity exactly corresponding to such remaining
"Weighted Average Life to Maturity" should appear therein, yields
for the next longer and the next shorter published maturities shall
be calculated pursuant to the foregoing sentence and the Treasury
Rate shall be interpolated from such yields on a straight-line basis
(rounding to the nearest month).
The "Weighted Average Life to Maturity" with respect to this Note
means, at the Payment Date, the number of years obtained by dividing
the "Remaining Dollar-years" of this Note by the outstanding
principal amount hereof. "Remaining Dollar-years" means the sum of
the product obtained by multiplying (A) the amount of each then
remaining required principal repayment (including repayment of any
principal at the due date of this Note) by (B) the number of years
(rounded to the nearest one-twelfth) which will elapse between the
Payment Date and the date such required payment is due.
12. Upon the occurrence of any Event of Default, in addition to any
other rights or remedies provided in the Loan Documents, at law, in
equity or otherwise, Mortgagee shall have the right to foreclose the
lien hereof, and to the extent permitted herein and by applicable
law to sell the Premises by sale independent of the foreclosure
proceedings. In any suit to foreclose the lien hereof, and in any
sale of the Premises, there shall be allowed and included as
additional indebtedness payable by Mortgagor to Mortgagee and
secured hereby all expenditures and expenses which may be paid or
incurred by or on behalf of Mortgagee for attorneys' fees and costs,
including attorneys' fees and costs on appeal, appraisers' fees,
expenditures for documentary and expert evidence, stenographer's
charges, publication and advertising costs, survey costs,
environmental audits and costs (which may be estimated as to items
to be expended after the entry of any decree) of procuring all such
abstracts of title, title searches and examinations, title insurance
policies, Torrens certificates and similar data and assurances with
respect to title as Mortgagee deems reasonably necessary either to
prosecute such suit or to consummate such sale or to evidence to
bidders at any sale the true condition of the title to or the value
of the Premises.
13. The proceeds of any foreclosure sale, or other sale of the Premises
in accordance with the terms hereof or as permitted by law, shall be
distributed and applied in the following order of priority: First,
to the payment of all costs and expenses incident to the foreclosure
and/or sale proceedings, including all items as are mentioned in any
preceding or succeeding paragraph hereof; second, to the payment of
all other items which under the terms hereof constitute secured
indebtedness in addition to that evidenced by the Note, with
interest thereon as herein provided; third, to the payment of all
principal and accrued interest remaining unpaid on the Note; fourth,
any surplus to the Mortgagor, its successors or assigns, as their
rights may appear.
14. During the continuance of any Event of Default, Mortgagor shall
forthwith upon demand of Mortgagee surrender to Mortgagee possession
of the Premises, and Mortgagee shall be entitled to take actual
possession of the Premises or any part thereof personally or by its
agents or attorneys, and Mortgagee in its discretion may, with or
without force and with or without process of law, enter upon and
take and maintain possession of all or any part of the Premises
together with all documents, books, records, papers and accounts of
the Mortgagor or the then owner of the Premises relating thereto,
and may exclude Mortgagor, its agents or assigns wholly therefrom,
and may as attorney-in-fact or agent of the Mortgagor, or in its own
name as Mortgagee and under the powers herein granted:
(a) hold, operate, manage or control the Premises and conduct the
business, if any, thereof, either personally or by its agents,
and with full power to use such measures, legal or equitable,
as in its discretion it deems proper or necessary to enforce
the payment or security of the income, rents, issues and
profits of the Premises, including actions for the recovery of
rent, actions in forcible detainer and actions in distress for
rents, hereby granting full power and authority to exercise
each and every of the rights, privileges and powers herein
granted at any and all times hereafter, without notice to
Mortgagor;
(b) cancel or terminate any lease or sublease for any cause or on
any ground which would entitle Mortgagor to cancel the same;
(c) elect to cancel any lease or sublease made subsequent to this
mortgage or subordinated to the lien hereof unless this
mortgage has specifically been made subordinate to such lease
or sublease;
(d) extend or modify any then existing leases and make new leases,
which extensions, modifications or new leases may provide for
terms to expire, or for options to lessees to extend or renew
terms to expire, beyond the Maturity Date of the Note and the
issuance of a deed or deeds to a purchaser or purchasers at a
foreclosure sale, it being understood and agreed that any such
leases, and the options or other such provisions to be
contained therein, shall be binding upon Mortgagor and all
persons whose interests in the Premises are subject to the
lien hereof and shall be binding also upon the purchaser or
purchasers at any foreclosure sale, notwithstanding any
redemption from sale, discharge of the indebtedness secured
hereby, satisfaction of any foreclosure decree, or issuance of
any certificate of sale or deed to any purchaser;
(e) make all necessary or proper repairs, decorating, renewals,
replacements, alterations, additions, betterments and
improvements to the Premises as it may deem judicious, insure
and reinsure the same and all risks incidental to Mortgagee's
possession, operation and management thereof, and receive all
income, rents, issues and profits.
Mortgagee shall not be obligated to perform or discharge, nor does
it hereby undertake to perform or discharge, any obligation, duty or
liability under any lease, and the Mortgagor shall and does hereby
agree to indemnify and to hold Mortgagee harmless of and from all
liability, loss or damage which it might incur under said leases or
under or by reason of the assignment thereof, and of and from any
and all claims or demands whatsoever which may be asserted against
it by reason of any alleged obligations or undertakings on its part
to perform or discharge any of the terms, covenants or agreements
contained in said leases, except if caused by Mortgagee s gross
negligence or willful misconduct. Should Mortgagee incur any such
liability, loss or damage under any of said leases, or under or by
reason of the assignment thereof, or in the defense of any claims or
demands, the amount thereof, including costs, expenses and
reasonable attorneys' fees and costs, including reasonable
attorneys' fees and costs on appeal, shall be secured hereby and
Mortgagor shall reimburse Mortgagee therefor immediately upon
demand, together with interest at the Default Rate from the date of
payment by Mortgagee to the date of reimbursement.
15. Mortgagee in the exercise of the rights and powers hereinabove
conferred upon it shall have the full power to use and apply the
avails, rents, issues and profits of the Premises to the payment of
or on account of the following, at the election of Mortgagee and in
such order as Mortgagee may determine:
(a) to the payment of the expenses of operating the Premises,
including cost of management and leasing thereof (which shall
include reasonable compensation to Mortgagee and its agent or
agents if management is delegated to an agent or agents, and
shall also include lease commissions and other compensation
and expenses of seeking and procuring tenants and entering
into leases), established claims for damages, if any, and
premiums on insurance as hereinabove authorized;
(b) to the payment of taxes and special assessments now due or
which may hereafter become due on the Premises;
(c) to the payment of all repairs, decorating, renewals,
replacements, alterations, additions, betterments and
improvements of the Premises and of placing the Premises in
such condition as will in the judgment of Mortgagee make it
readily rentable; and/or
(d) to the payment of any principal, interest or other
indebtedness secured hereby or any deficiency which may result
from any foreclosure sale.
16. During the continuance of any Event of Default under this mortgage,
Mortgagee may apply to any court having jurisdiction for the
appointment of a receiver of the Premises. Such appointment may be
made either before or after sale, without notice, without regard to
the solvency or insolvency of Mortgagor at the time of application
for such receiver and without regard to the then value of the
Premises or the adequacy of Mortgagee's security. Mortgagee or any
holder of the Note may be appointed as such receiver. The receiver
shall have power to collect the rents, issues and profits of the
Premises during the pendency of any foreclosure proceedings and, in
case of a sale, during the full redemption period, if any, as well
as during any further times when Mortgagor, except for the
intervention of such receiver, would be entitled to collect such
rents, issues and profits. In addition, the receiver shall have all
other powers which shall be necessary or are usual in such cases for
the protection, possession, control, management and operation of the
Premises during the whole of said period. The court from time to
time may authorize the receiver to apply the net income in his hands
at Mortgagee's election and in such order as Mortgagee may determine
in payment in full or in part of:
(a) principal, interest and all other indebtedness secured hereby
or provided by any decree foreclosing this mortgage, or any
tax, special assessment or other lien which may be or become
superior to the lien hereof or of such decree, provided such
application is made prior to foreclosure sale; and
(b) the deficiency in case of a sale and deficiency.
17. (a) Mortgagor agrees that all reasonable costs, charges and
expenses, including reasonable attorneys' fees, incurred or
expended by Mortgagee arising out of or in connection with any
action, proceeding or hearing, legal, equitable or
quasi-legal, including the preparation therefor and any appeal
therefrom, in any way affecting or pertaining to this
mortgage, the Note or the Premises, shall be promptly paid by
Mortgagor. All such sums not promptly paid by Mortgagor shall
be added to the indebtedness secured hereby and shall bear
interest at the Default Rate from the date of such advance and
shall be due and payable on demand.
(b) Mortgagor hereby agrees that upon the occurrence of an Event
of Default and the acceleration of the principal sum secured
hereby pursuant to this mortgage, to the full extent that such
rights can be lawfully waived, Mortgagor hereby waives and
agrees not to insist upon, plead, or in any manner take
advantage of, any notice of acceleration, any stay, extension,
exemption, homestead, marshaling or moratorium law or any law
providing for the valuation or appraisement of all or any part
of the Premises prior to any sale or sales thereof under any
provision of this mortgage or before or after any decree,
judgment or order of any court or confirmation thereof, or
claim or exercise any right to redeem all or any part of the
Premises so sold and hereby expressly waives to the full
extent permitted by applicable law on behalf of itself and
each and every person or entity acquiring any right, title or
interest in or to the all or any part of the Premises, all
benefit and advantage of any such laws which would otherwise
be available to Mortgagor or any such person or entity, and
agrees that neither Mortgagor nor any such person or entity
will invoke or utilize any such law to otherwise hinder, delay
or impede the exercise of any remedy granted or delegated to
Mortgagee herein but will permit the exercise of such remedy
as though any such laws had not been enacted. Mortgagor
hereby further expressly waives to the full extent permitted
by applicable law on behalf of itself and each and every
person or entity acquiring any right, title or interest in or
to all or any part of the Premises any and all rights of
redemption from any sale or any order or decree of foreclosure
obtained pursuant to provisions of this mortgage.
18. Mortgagor hereby assigns to Mortgagee directly and absolutely, and
not merely collaterally, the rents, issues, profits, royalties, and
payments payable under any lease of the Premises, or portion
thereof, including any oil, gas or mineral lease, or any
installments of money payable pursuant to any agreement or any sale
of the Premises or any part thereof, subject only to a license, if
any, granted by Mortgagee to Mortgagor with respect thereto prior to
the occurrence of a default hereunder. Mortgagee, without regard to
the adequacy of any security for the indebtedness hereby secured,
shall be entitled to (a) collect such rents, issues, profits,
royalties, payments and installments of money and apply the same as
more particularly set forth in this paragraph, all without taking
possession of the Premises, or (b) enter and take possession of the
Premises or any part thereof, in person, by agent, or by a receiver
to be appointed by the court and to sue for or otherwise collect
such rents, issues, profits, royalties, payments and installments of
money. Mortgagee may apply any such rents, issues, profits,
royalties, payments and installments of money so collected, less
costs and expenses of operation and collection, including reasonable
attorneys' fees and costs and reasonable attorneys' fees and costs
on appeal, upon any principal, interest and all other indebtedness
secured hereby, at Mortgagee's option and in such order as Mortgagee
may determine, and, if such costs and expenses and reasonable
attorneys' fees and costs shall exceed the amount collected, the
excess shall be immediately due and payable. The collection of such
rents, issues, profits, royalties, payments and installments of
money and the application thereof as aforesaid shall not cure or
waive any Event of Default or notice of default hereunder or
invalidate any act done pursuant to such notice, except to the
extent any such Event of Default is fully cured. Failure or
discontinuance of Mortgagee at any time, or from time to time, to
collect any such moneys shall not impair in any manner the
subsequent enforcement by Mortgagee of the right, power and
authority herein conferred on Mortgagee. Nothing contained herein,
including the exercise of any right, power or authority herein
granted to Mortgagee, shall be, or be construed to be, an
affirmation by Mortgagee of any tenancy, lease or option, or an
assumption of liability under, or the subordination of the lien or
charge of this mortgage to any such tenancy, lease or option.
Mortgagor hereby agrees that, in the event Mortgagee exercises its
rights as in this paragraph provided, Mortgagor waives any right to
compensation for the use of Mortgagor's furniture, furnishings or
equipment in the Premises for the period such assignment of rents or
receivership is in effect, it being understood that the rents,
issues, profits, royalties, payments and installments of money
derived from the use of any such items shall be applied to
Mortgagor's obligations hereunder as above provided.
19. (a) Mortgagor has executed and delivered that certain Assignment
of Leases and Rents of even date herewith assigning to
Mortgagee directly and absolutely, and not merely
collaterally, the interest of Mortgagor as lessor under the
existing leases of the Premises, as well as all other leases
which may hereafter be made in respect of the Premises, and
the rents and other income arising thereunder and from the use
of the Premises. Said Assignment of Leases and Rents grants
to Mortgagee specific rights and remedies in respect of said
leases and governs the collection of rents and other income
thereunder and from the use of the Premises, and such rights
and remedies so granted shall be cumulative of those granted
herein.
(b) Mortgagor shall keep and perform all terms, conditions and
covenants required to be performed by it as lessor under the
aforesaid leases; shall promptly advise Mortgagee in writing
of any claim of default by Mortgagor made by a lessee under
any such lease or of any default thereunder by a lessee; and
shall promptly provide Mortgagee with a copy of any notice of
default or other notice served upon Mortgagor by any such
lessee. Mortgagor will not cancel, modify or alter, or accept
the surrender of, any existing or future lease of the Premises
or any part thereof without first obtaining written consent of
Mortgagee unless otherwise specifically permitted in the
Assignment of Leases and Rents of even date herewith.
20. (a) All rights and remedies granted to Mortgagee in the Loan
Documents shall be in addition to and not in limitation of any
rights and remedies to which it is entitled in equity, at law
or by statute, and the invalidity of any right or remedy
herein provided by reason of its conflict with applicable law
or statute shall not affect any other valid right or remedy
afforded to Mortgagee. No waiver of any Event of Default or
of any default in the performance of any covenant contained in
the Note or any other instrument securing the Note shall at
any time thereafter be held to be a waiver of any rights of
the Mortgagee hereunder, nor shall any waiver of a prior Event
of Default or default operate to waive any subsequent Event of
Default or default. All remedies provided for herein, in the
Note and in any other instrument securing the Note are
cumulative and may, at the election of Mortgagee, be exercised
alternatively, successively, or concurrently. No act of
Mortgagee shall be construed as an election to proceed under
any one provision herein to the exclusion of any other
provision or to proceed against one portion of the Premises to
the exclusion of any other portion.
(b) This mortgage is subject to any existing statutory condition
and upon the further condition that all covenants and
agreements of Mortgagor herein shall be fully or timely
performed, time being of the essence under this mortgage. No
breach of any such condition or agreement shall be permitted,
and in the event of any such breach, Mortgagee shall have any
statutory power of sale, and this mortgage shall be subject to
foreclosure as provided by law.
21. By accepting payment of any sum secured hereby after its due date,
Mortgagee does not waive its right either to require prompt payment
when due of all other sums or installments so secured or to declare
a default for failure to pay such other sums or installments.
22. Notwithstanding anything herein or in the Note to the contrary, no
provision contained herein or in the Note which purports to obligate
Mortgagor to pay any amount of interest or any fees, costs or
expenses which are in excess of the maximum permitted by applicable
law, shall be effective to the extent that it calls for the payment
of any interest or other sums in excess of such maximum. All
agreements between Mortgagor and Mortgagee, whether now existing or
hereafter arising and whether written or oral, are hereby limited so
that in no contingency, whether by reason of demand for payment of
or acceleration of the maturity of any of the indebtedness secured
hereby or otherwise, shall the interest contracted for, charged or
received by Mortgagee exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, interest
would otherwise be payable to Mortgagee in excess of the maximum
lawful amount, the interest payable to Mortgagee shall be reduced to
the maximum amount permitted under applicable law; and if from any
circumstance Mortgagee shall ever receive anything of value deemed
interest by applicable law in excess of the maximum lawful amount,
an amount equal to any excessive interest shall at Mortgagee's
option, be refunded to Mortgagor or be applied to the reduction of
the principal balance of the indebtedness secured hereby and not to
the payment of interest or, if such excessive interest exceeds the
unpaid balance of principal of the indebtedness secured hereby, such
excess shall be refunded to Mortgagor. This paragraph shall control
all agreements between Mortgagor and Mortgagee.
23. In the event one or more provisions of the Loan Documents shall be
held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any
other provision hereof, and this mortgage shall be construed as if
any such provision had never been contained herein.
24. If the payment of the indebtedness secured hereby or of any part
thereof shall be extended or varied, or if any part of the security
be released, all persons now or at any time hereafter liable
therefor, or interested in said Premises, shall be held to assent to
such extension, variation or release, and their liability and the
lien and all provisions hereof shall continue in full force, the
right of recourse against all such persons being expressly reserved
by Mortgagee notwithstanding such variation or release.
25. Upon payment in full of the indebtedness secured hereby and the
performance by Mortgagor of all of the obligations imposed on
Mortgagor in the Loan Documents, these presents shall be null and
void, and Mortgagee shall release this mortgage and the lien hereof
by proper instrument executed in recordable form.
26. If no Event of Default has occurred and is continuing under this
mortgage, Mortgagor shall have the privilege of making prepayments
on the principal of the Note (in addition to the required payments)
if and only to the extent and upon the terms and conditions, if any,
expressly set forth in the Note. If not expressly so set forth, the
Note is not subject to such prepayment.
27. (a) Subject to restrictions applicable to Mortgagor, as landlord,
expressly provided in the Lease, so long as the Lease is in
full force and effect, Mortgagor hereby grants to Mortgagee
and its respective agents, attorneys, employees, consultants,
contractors and assigns, an irrevocable license and
authorization to enter upon and inspect the Premises and all
facilities located thereon at reasonable times and the right
to conduct a Phase I environmental audit after the occurrence
of an Event of Default or in the event of any sale or
conveyance of this mortgage.
(b) In the event that there has been an Event of Default or an
event which with the passage of time or the giving of notice
or both would constitute an Event of Default or Mortgagee has
formed a reasonable belief, based on its inspection of the
Premises or other factors known to it, that Hazardous
Materials may be present on the Premises, then, subject to
restrictions applicable to Mortgagor, as landlord, expressly
provided in the Lease, so long as the Lease is in full force
and effect, Mortgagor shall perform such tests at Mortgagee's
request, including without limitation, subsurface testing,
soil and ground water testing, and other tests which may
physically invade the Premises or facilities from a consultant
and pursuant to a scope of work approved by Mortgagee (the
"Tests"), as Mortgagee, in its sole discretion, determines as
necessary to (i) investigate the condition of the Premises,
(ii) protect the security interests created under this
mortgage or (iii) determine compliance with all laws relating
to Hazardous Materials, the provisions of this mortgage and
other matters relating thereto, and Mortgagor shall provide
true and accurate written copies of the results of the Tests
to Mortgagee upon receipt of the results. In the event that
Mortgagor fails to conduct the Tests requested by Mortgagee
and to provide Mortgagee with the results within sixty (60)
days of such request or such additional time as Mortgagee
shall agree in writing in its sole discretion, or if Mortgagee
is not reasonably satisfied with the results of any of the
Tests or of any Phase I environmental audit, then, subject to
any restrictions applicable to Mortgagor, as landlord,
expressly provided in the Lease, so long as the Lease is in
full force and effect, Mortgagor grants to Mortgagee and its
respective agents, attorneys, employees, consultants,
contractors and assigns, an irrevocable license and
authorization to conduct the Tests necessary in Mortgagee's
sole discretion to accomplish (i) through (iii) in this
paragraph.
28. Within 15 days after any written request by either party, the other
party shall certify, by a written statement duly acknowledged, the
amount of principal and interest then owing on the Note and whether
the certifying party knows of any offsets or defenses exist against
the indebtedness secured hereby.
29. (a) Mortgagor shall furnish to Mortgagee within 90 days after the
end of each fiscal year of Mortgagor a detailed financial
report prepared in accordance with generally accepted
principles of accounting consistently applied, certified by
Mortgagor s chief financial officer in a manner and otherwise
in form and substance acceptable to Mortgagee covering the
full and complete operation of the Premises, including without
limitation: (i) income and expense statements , and (ii) a
report of the leasing status of the Premises as of the end of
such year, identifying the lessee, square footage leased,
rental amount, rental concessions and/or rental deferments,
escalation rentals, if any, percentage rents, if any,
expiration date under each lease of the Premises and a listing
of sales volumes attained by lessees of the Premises under
percentage leases for the immediately preceding year. Such
reports shall be prepared by an accountant who may be an
employee of Mortgagor, or of an affiliate of Mortgagor,
acceptable to Mortgagee. In addition to the reports referred
to herein, Mortgagor shall promptly supply any additional
information or records relating to the Premises or its
operation as Mortgagee may from time to time reasonably
request.
(b) Mortgagor shall submit to Mortgagee during the life of this
mortgage within 60 days after the end of each quarter
quarterly balance sheets, income statements and statements of
change for Mortgagor. Quarterly internal financial statements
and quarterly 10Qs filed with the Securities and Exchange
Commission will satisfy the requirement contained in this
subparagraph (b).
(c) Mortgagor shall submit to Mortgagee during the life of this
mortgage within 90 days following the end of each fiscal year
annual balance sheets, income statements and statements of
change for Mortgagor. Annual audits with copies of 10Ks
filed with the Securities and Exchange Commission will satisfy
the requirement contained in this subparagraph (c).
30. Any notice which any party hereto may desire or be required to give
to the other shall be deemed to be an adequate and sufficient notice
if given in writing and service is made by either (i) registered or
certified mail, postage prepaid, in which case notice shall be
deemed to have been received three (3) business days following
deposit to the mail; or (ii) nationally recognized overnight air
courier, next day delivery, prepaid, in which case such notice shall
be deemed to have been received one (1) business day following
delivery to such courier. All notices shall be addressed to
Mortgagor at its address given on the first page hereof or to
Mortgagee at 711 High Street, Des Moines, Iowa 50392, Attn:
Commercial Real Estate Loan Administration, Loan No. 750905, or to
such other place as either party may by written notice to the other
hereafter designate as a place for service of notice.
31. This mortgage and all the provisions hereof shall extend to and be
binding upon Mortgagor and all persons claiming by, under or through
Mortgagor, and the word "Mortgagor" when used herein shall include
all such persons and all persons liable for the payment of the
indebtedness secured hereby or any part thereof, whether or not such
persons have executed the Note or this mortgage. The word
"Mortgagee" as used herein shall include the successors and assigns
of the Mortgagee named herein, and the holder or holders from time
to time of the Note secured hereby.
32. Mortgagor has had the opportunity to fully negotiate the terms
hereof and modify the draftsmanship of this mortgage. Therefore,
the terms of this mortgage shall be construed and interpreted
without any presumption, inference, or rule requiring construction
or interpretation of any provision of this mortgage against the
interest of the party causing this mortgage or any portion of it to
be drafted. Mortgagor is entering into this mortgage freely and
voluntarily without any duress, economic or otherwise.
33. This mortgage shall be governed by and construed in accordance with
the laws of the State of New Jersey, except for the provisions
hereof which pertain to the payments of interest or amounts deemed
to constitute interest, all of which provisions, like the Note,
shall be governed by the laws of the State of Florida.
34. As used herein, the term "Default Rate" means a rate equal to the
lesser of (i) 4% per annum above the then applicable interest rate
payable under the Note or (ii) the maximum rate allowed by
applicable law. The Default Rate is not a penalty, but rather a
rate of interest negotiated by the parties to compensate Mortgagee
additionally in the Event of Default.
35. Notwithstanding any provision of this mortgage, the Note or any
other instruments evidencing or securing the loan evidenced by the
Note which might be construed to the contrary, the assignment of
rents and other amounts provided for herein is an absolute
assignment and not merely a collateral assignment or a security
interest, and is effective whether or not a default occurs
hereunder, subject only to a license, if any, granted by Mortgagee
to Mortgagor with respect thereto prior to the occurrence of a
default hereunder, the extent of which may be more fully described
in the Assignment of Leases and Rents. It is the intention of
Mortgagor and Mortgagee that the assignment effectuated by this
mortgage with respect to such rents and other amounts payable under
the leases shall be a direct and currently effective assignment and
shall not constitute merely the granting of a lien, security
interest or pledge for the purpose of securing the indebtedness
secured hereby. In the event that a court of competent jurisdiction
determines that, notwithstanding such expressed intent of the
parties, Mortgagee's interest in the rents and other amounts payable
under the leases constitutes a lien on or security interest in or
pledge thereof, it is agreed and understood that the forwarding of a
notice to Mortgagor after the occurrence of a default, advising
Mortgagor of the revocation of any license then in favor of
Mortgagor to collect such rents or other amounts payable under the
leases, or of the existence of a default, shall be sufficient action
by Mortgagee to (i) perfect such lien on or security interest in or
pledge of the rents and other amounts payable under the leases, (ii)
take possession thereof, and (iii) entitle Mortgagee to immediate
and direct payment of the rents and other amounts payable under the
leases, for application as provided in this mortgage, all without
the necessity of any further action by Mortgagee, including, without
limitation, any action to obtain possession of the land,
improvements or any other portion of the premises. Notwithstanding
the direct and absolute assignment of the rents and other amounts
payable under the leases as herein described, there shall be no
pro tanto reduction in any portion of the indebtedness secured by
this mortgage except with respect to rents and other amounts payable
under the leases actually received by Mortgagee and applied by
Mortgagee toward payment of the indebtedness. Mortgagee may, upon
written notice to Mortgagor, elect to (i) exclude from the
assignment provided in this mortgage any of the leases as specified
in such notice so that the interest under such indicated lease is
not assigned to Mortgagee, and (ii) subordinate the lien and other
terms and provisions of this mortgage to any of the leases as
indicated in said notice to Mortgagor.
36. MORTGAGOR KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES, TO THE
EXTENT PERMITTED BY LAW, TRIAL BY JURY IN ANY ACTIONS BROUGHT BY
MORTGAGOR OR MORTGAGEE IN CONNECTION WITH THIS MORTGAGE, ANY OF THE
LOAN DOCUMENTS, THE INDEBTEDNESS SECURED HEREBY, OR ANY OTHER
STATEMENTS OR ACTIONS OF MORTGAGEE.
37. (a) Notwithstanding any provision to the contrary in the Note,
this mortgage or any other instrument or agreement by which
the Note is secured and except as otherwise provided in this
paragraph, the liability of Mortgagor under the Loan Documents
shall be limited to the interests of Mortgagor in the Premises
and the rents, issues, proceeds and profits thereof. In the
event of foreclosure of the liens evidenced by the Loan
Documents, no judgment for any deficiency upon the
indebtedness evidenced by the Loan Documents shall be sought
or obtained by Mortgagee against Mortgagor. Nothing contained
in this paragraph shall:
(i) prevent the failure of Mortgagor to make any payment or
to perform any obligation under any of the Loan
Documents within the time periods provided therein from
being an Event of Default thereunder;
(ii) be construed as limiting the obligations of Mortgagor to
any tenant under any lease of the Premises;
(iii) in any way limit or impair the lien or enforcement of
the Loan Documents pursuant to the terms thereof; or
(iv) limit the obligations of any indemnitor or guarantor, if
any, of Mortgagor's obligations under the Loan
Documents.
(b) Notwithstanding subparagraph (a) above, Mortgagor, but not its
shareholders, officers, directors, employees or agents, shall
be personally liable to Mortgagee for:
(i) Mortgagor's failure to comply with paragraphs 2 (taxes
and assessments) and 3 (insurance) hereof with respect
to amounts accruing prior to a Sale of the Premises, as
defined below;
(ii) any event or circumstance for which Mortgagor
indemnifies Mortgagee under paragraph 1(m)
(environmental indemnity) hereof;
(iii) Mortgagor's failure to pay utilities accruing prior to a
Sale of the Premises, as defined below, on or before the
date such payments are due;
(iv) operation and maintenance of the Premises applicable to
the time period prior to a Sale of the Premises, as
defined below;
(v) any sums expended by Mortgagee in fulfilling the
obligations of Mortgagor as lessor under any lease of
the Premises prior to a sale of the Premises pursuant to
foreclosure or power of sale, a bona fide sale
(permitted by the terms of paragraph 1(l) hereof or
consented to in writing by Mortgagee) to an unrelated
third party or upon conveyance to Mortgagee of the
Premises by a deed acceptable to Mortgagee in form and
content (each of which shall be referred to as a "Sale"
for purposes of this paragraph) or expended by Mortgagee
after a Sale of the Premises for obligations of
Mortgagor which arose prior to a Sale of the Premises;
(vi) any rents or other income regardless of type or source
of payment (including, but not limited to, CAM charges,
lease termination payments, refunds of any type,
prepayment of rents, settlements of litigation, or
settlements of past due rents) from the Premises which
Mortgagor has received or has a right to receive after
an Event of Default under the Loan Documents or an event
which with the passage of time, the giving of notice or
both would constitute an Event of Default, either or
both of which has occurred and is continuing, and which
are not applied to (A) expenses of operation and
maintenance of the Premises and the taxes, assessments,
utility charges and insurance of the Premises, taking
into account sufficient reserves for the same and for
replacements and recurring items, and (B) payment of
principal, interest and other charges when due under the
Loan Documents; provided that any payments to parties
related to Mortgagor shall be considered expenses of
operation only if they are at market rates or fees
consistent with market rates or fees for the same or
similar services;
(vii) any security deposits of tenants not turned over to
Mortgagee upon conveyance of the Premises to Mortgagee
pursuant to foreclosure or power of sale or by a deed
acceptable to Mortgagee in form and content;
(viii) misapplication or misappropriation of tax reserve
accounts, tenant improvement reserve accounts,
security deposits, prepaid rents or other similar
sums paid to or held by Mortgagor or any other
entity or person in connection with the operation
of the Premises;
(ix) any waste committed or allowed by Mortgagor with respect
to the Premises prior to a Sale of the Premises;
(x) any insurance or condemnation proceeds or other similar
funds or payments with respect to a casualty or
condemnation occurring prior to a Sale of the Premises
applied by Mortgagor in a manner other than as expressly
provided in the Loan Documents;
(xi) of any breach or violation of paragraph 1(l) (due on
sale or encumbrance) hereof, other than the filing of a
nonmaterial mechanic's lien affecting the Premises, the
granting of any utility or other nonmaterial easement or
servitude burdening the Premises, or any other transfer
or encumbrance not in the nature of a transfer,
reduction or impairment of any material economic
interest in the Premises; and
(xii) of any fraud or willful misrepresentation by Mortgagor
regarding the Premises, the making or delivery of any of
the Loan Documents or in any materials or information
provided by Mortgagor in connection with the loan.
(c) Notwithstanding anything herein contained to the contrary,
Mortgagor, but not its shareholders, officers, directors,
employees or agents, shall be personally liable to Mortgagee
for $3,664,355.00, if the event relates to the portion of the
Premises leased to Linens or $4,289,470.00 if the event
relates to the portion of the Premises leased to Marshalls,
plus the Make Whole Premium which would be due with respect to
such allocated amount had such amount been prepaid as of the
date of the occurrence set forth below:
(i) in the event of an amendment, modification or
termination by Mortgagor of the Lease without the prior
written consent of Mortgagee.
(ii) in the event Lessee is not obligated to notify Mortgagee
of a default by Mortgagor and Mortgagor defaults under
the Lease and Mortgagee does not receive notice of said
default following the occurrence thereof within a
reasonable period of time to effect cure of said
default; or
(iii) in the event Mortgagor violates any exclusive use or
non-compete provision granted to Lessee under the Lease.
38. This mortgage and the indebtedness secured hereby is for the sole
purpose of conducting or acquiring a lawful business, professional
or commercial activity or for the acquisition or management of real
or personal property as a commercial investment, and all proceeds of
such indebtedness shall be used for said business or commercial
investment purpose. Such proceeds will not be used for the purchase
of any security within the meaning of the Securities Exchange Act of
1934, as amended, or any regulation issued pursuant thereto,
including without limitation, Regulations G, T and X of the Board of
Governors of the Federal Reserve System. This is not a purchase
money mortgage where a seller is providing financing to a buyer for
the payment of all or any portion of the purchase price, and the
Premises secured hereby is not a residence or homestead or used for
mining, grazing, agriculture, timber or farming purposes.
39. Unless Mortgagee shall otherwise direct in writing, Mortgagor shall
appear in and defend all actions or proceedings purporting to affect
the security hereunder, or any right or power of the Mortgagee. The
Mortgagee shall have the right to appear in such actions or
proceedings. Mortgagor shall save Mortgagee harmless from all costs
and expenses, including reasonable attorneys' fees and costs of a
title search, continuation of abstract and preparation of survey,
incurred by reason of any action, suit, proceeding, hearing, motion
or application before any court or administrative body in and to
which Mortgagee may be or become a party by reason hereof. Such
proceedings shall include but not be limited to condemnation,
bankruptcy, probate and administration proceedings, as well as any
other action, suit, proceeding, right, motion or application wherein
proof of claim is by law required to be filed or in which it becomes
necessary to defend or uphold the terms of this mortgage or
otherwise purporting to affect the security hereof or the rights or
powers of Mortgagee. All money paid or expended by Mortgagee in
that regard, together with interest thereon from date of such
payment at the Default Rate shall be additional indebtedness secured
hereby and shall be immediately due and payable by Mortgagor without
notice.
40. During the occurrence of an Event of Default, all rents, issues and
profits collected or received by Mortgagor shall be accepted and
held for Mortgagee in trust and shall not be commingled with the
funds and property of Mortgagor, but shall be promptly paid over to
Mortgagee.
41. Mortgagee shall have all rights and remedies provided to a secured
party by the Uniform Commercial Code with respect to such portion of
the Premises, if any, as is governed by the Uniform Commercial Code.
42. In the event Mortgagee s consent is required by the terms of this
mortgage, Mortgagee shall attempt to respond, approve or disapprove
within ten (10) days of receipt of Mortgagor s request therefor.
Mortgagor acknowledges, however, that the failure of Mortgagee to
respond, approve or disapprove any such request shall not be deemed
to be a consent.
43. Mortgagor will comply with all provisions hereof and of the Freehold
Raceway Village Condominium Master Deed and Declaration of
Restrictive Covenants and Protective Covenants ( Master Deed ),
which documents and definitions contained therein are made a part
hereof as if recited at length herein.
44. The Mortgagor acknowledges and agrees that the Mortgagee shall have
the following rights with respect to the Mortgagor s interests in
the Condominium and the Freehold Raceway Village Condominium
Association, Inc. ( Condominium Association ):
(a) The Mortgagor shall notify Mortgagee in writing within ten
(10) days of any of the following events or Mortgagor s
receipt of notice thereof, as the case may be:
(i) any condemnation or any casualty loss which affects the
Condominium or the Premises;
(ii) any delinquency in the payment of assessments or charges
owed by Mortgagor to the Condominium Association; the
suspension of Mortgagor s rights in the Association; and
any default by Mortgagor under the Master Deed or By-
Laws giving rise to a cause of action against the
Mortgagor;
(iii) any lapse, cancellation or material modification of any
insurance policy or fidelity bond required to be
maintained by the Condominium Association; and
(iv) any proposed action which would affect the rights of the
Mortgagee, including but not limited to any amendment of
the Master Deed, termination of the Condominium, or
amendment of the By-Laws of the Condominium Association.
(b) The consent of Mortgagee shall be required (which consent
shall not be unreasonably withheld):
(i) to add or amend any provisions of the Master Deed or By-
Laws of the Association affecting any of the following:
(A) voting;
(B) assessments, assessment liens or subordination of
such liens;
(C) boundaries of the Condominium;
(D) convertibility of the Units into Common Elements
or of Common Elements into the Units (except for
any changes in the location of any access road):
(E) expansion or contraction of the Condominium or the
addition, annexation or withdrawal of property to
or from the Condominium;
(F) imposition of any right of first refusal or
similar restriction on the right of a Unit owner
to sell, transfer or otherwise convey his or her
Units;
(G) creation of Subunits and Subboard; and
(H) any provisions which are for the express benefit
of permitted mortgage holders, insurer or
guarantors of first mortgages on a Unit or which
affects the priority or validity of this Mortgage.
(ii) to terminate the Condominium.
45. Mortgagor and Mortgagee may agree to change the interest rate,
maturity date, or other term or terms of this Mortgage, of any of
the documents referred to herein or of the Indebtedness. Any such
agreement shall be in writing, duly executed by both Mortgagor and
Mortgagee. In the event that any such agreement shall occur, it
shall, to the extent permitted by law, be deemed a "modification" as
defined in N.J.S.A. 46:9-8.1 et seq., and this Mortgage shall be
subject to, and the Mortgagee shall be the beneficiary of, the
mortgage lien priority provisions of such statute.
IN WITNESS WHEREOF, Mortgagor has caused this mortgage to be duly executed
and delivered as of the date first above written.
COMMERCIAL NET LEASE REALTY, INC.,
a Maryland corporation
WITNESS:
By: /s/Julian E. Whitehurst By: /s/Kevin B. Habicht
----------------------------------- -------------------------------
Name: Julian E. Whitehurst Name: Kevin B. Habicht
Title: Executive Vice President
By: /s/Deborah A. Sieffert
-----------------------------------
Name: Deborah A. Sieffert
This document prepared by:
Barbara C. Raffaldini
Polsky & Riordan, Ltd.
205 North Michigan, Suite 3909
Chicago, IL 60601
312-540-0200
State of ILLINOIS )
) SS.
County of COOK )
I, Wanda A. Underwood, a Notary Public, in and for said County, in the
State aforesaid, do hereby certify that Kevin B. Habicht, the Executive Vice
President of COMMERCIAL NET LEASE REALTY, INC., a Maryland corporation, who is
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that (s)he signed and delivered said instrument as his/her own free and
voluntary act and as the free and voluntary act of said corporation for the uses
and purposes therein set forth.
Given under my hand and notarial seal this 14th day of December, 1995.
My commission expires: /s/Wanda A. Underwood
-------------------------------------
Notary Public
07/21/98
[LETTERHEAD OF KPMG PEAT MARWICK LLP]
The Board of Directors
Commercial Net Lease Realty, Inc.
We consent to the use of our reports incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Orlando, Florida
January 18, 1996
