SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to __________
Commission File Number 1-6613
VALUE PROPERTY TRUST
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Maryland 23-1862664
- ------------------------------- --------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification)
incorporation or organization)
120 Albany Street, 8th Floor
New Brunswick, New Jersey 08901-2163
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 296-3080
<PAGE>
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ X ] No [ ].
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes [ X ] No [ ]
Number of Common Shares Outstanding at August 1, 1996: 11,226,310
<PAGE>
VALUE PROPERTY TRUST
INDEX
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheet at June 30, 1996 (Unaudited) and
September 30, 1995
Statement of Operations for the Three and Nine Months
Ended June 30, 1996 and 1995 (Unaudited)
Statement of Cash Flows for the Nine Months Ended
June 30, 1996 and 1995 (Unaudited)
Statement of Shareholders' Equity for the Nine Months
Ended June 30, 1996 (Unaudited)
Notes to the Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Part II: OTHER INFORMATION
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
Part I: Financial Information
Item 1. Financial Statements:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
BALANCE SHEET
(In Thousands)
- -----------------------------------------------------------------------------------------------------
June 30, September 30,
1996 1995
-------- -------------
(Unaudited)
<S> <C> <C>
ASSETS
Assets Held for Sale:
Mortgage loans .......................................... $ -- $ 21,966
Investments in partnerships ............................. 10,036 5,220
Real estate owned ....................................... 46,209 42,059
-------- --------
Total assets held for sale ........................ 56,245 69,245
-------- --------
Assets Held for Investment:
Mortgage loans .......................................... 790 35,013
Investments in partnerships ............................. 15,730 20,648
Real estate owned ....................................... 64,805 81,581
Notes receivable ........................................ -- 633
-------- --------
Total assets held for investment .................. 81,325 137,875
-------- --------
Total invested assets ............................. 137,570 207,120
Cash and cash equivalents .................................. 21,577 9,977
Restricted cash ............................................ 10,034 6,791
Interest receivable and other assets ....................... 5,380 8,441
-------- --------
Total assets ...................................... $174,561 $232,329
======== ========
LIABILITIES
Senior notes (due 1999) .................................... $ 67,379 $ --
Senior notes (due 2002) .................................... -- 109,975
Mortgage payable ........................................... -- 17,535
Accounts payable and accrued expenses ...................... 1,848 4,745
Interest payable ........................................... 357 --
-------- --------
Total liabilities ................................. 69,584 132,255
-------- --------
(Continued)
<PAGE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------
BALANCE SHEET
(In Thousands)
- -----------------------------------------------------------------------------------------------------
(Continued)
June 30, September 30,
1996 1995
-------- -------------
(Unaudited)
<S> <C> <C>
SHAREHOLDERS' EQUITY
Preferred shares, $1 par value: 3,500,000 shares authorized,
none issued ............................................. -- --
Common shares, $1 par value: 20,000,000 shares authorized,
11,226,310 and 11,226,215 shares issued and outstanding . 11,226 11,226
Additional paid-in capital ................................. 88,848 88,848
Retained earnings .......................................... 4,903 --
-------- --------
Total shareholders' equity ........................ 104,977 100,074
-------- --------
Total liabilities and shareholders' equity ........ $174,561 $232,329
======== ========
</TABLE>
See accompanying Notes to the Financial Statements.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS (Unaudited)
(In Thousands Except Per Share Data)
- -------------------------------------------------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended
June 30, June 30,
--------------------------- ---------------------------
1996 | 1995 1996 | 1995
-------- | -------- -------- | --------
(Post- | (Pre- (Post- | (Pre-
Confirmation) | Confirmation) Confirmation) | Confirmation)
<S> <C> <C> <C> <C>
Income: | |
Income on rental properties: | |
Rental income ................................. $ 6,793 | $ 6,328 $ 20,117 | $ 17,844
Operating expense reimbursements .............. 985 | 643 2,681 | 1,810
Interest and fee income on mortgage loans ......... 135 | 2,200 3,170 | 7,381
Interest on short-term investments ................ 543 | 818 1,310 | 2,682
Other ............................................. 6 | 50 17 | 97
-------- | -------- -------- | --------
Total income .................................. 8,462 | 10,039 27,295 | 29,814
| |
Expenses: | |
Interest .......................................... 2,064 | 10,378 9,049 | 30,210
Expenses of rental properties: | |
Depreciation and amortization ................. 585 | 1,914 1,780 | 5,400
Operating ..................................... 2,978 | 2,942 9,104 | 8,413
Administrative .................................... 819 | 1,068 2,459 | 3,266
Provision for losses on mortgage loans | |
and related investments ...................... -- | -- -- | 3,000
-------- | -------- -------- | --------
Total expense ................................. 6,446 | 16,302 22,392 | 50,289
| |
Income (loss) from operations before | |
reorganization expenses ........................... 2,016 | (6,263) 4,903 | (20,475)
Reorganization expenses .............................. -- | 1,063 -- | 2,568
-------- | -------- -------- | --------
Net income (loss) .................................... $ 2,016 | $ (7,326) $ 4,903 | $(23,043)
======== | ======== ======== | ========
| |
Per share: | |
| |
Net income ........................................... $ .18 | $ * $ .44 | $ *
======== | ======== ======== | ========
| |
Weighted average number of common | |
shares outstanding ................................ 11,226 | 11,226 11,226 | 11,226
======== | ======== ======== | ========
| |
</TABLE>
* Per share information is not meaningful due to adoption of
Fresh Start Reporting.
See accompanying Notes to the Financial Statements.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS (Unaudited)
(In Thousands)
- ------------------------------------------------------------------------------------------------------
Nine Months Ended
June 30,
---------------------------
1996 | 1995
--------- | ---------
(Post- | (Pre-
Confirmation) | Confirmation)
<S> <C> <C>
Cash flows from operating activities: |
Net income (loss) ......................................... $ 4,903 | $ (23,043)
Adjustments to reconcile net income (loss) to net |
cash provided by operating activities: |
Depreciation and amortization on real estate ..... 1,780 | 5,400
Decrease in payables and accrued expenses ........ (2,897) | (195)
Increase in interest payable ..................... 357 | 3,604
Decrease in receivables and other assets ......... 3,061 | 1,082
Provision for losses ............................. -- | 3,000
Recoveries of charge offs to allowance for losses -- | 317
--------- | ---------
Total adjustments ......................................... 2,301 | 13,208
--------- | ---------
Net cash provided by (used in) operating activities ............ 7,204 | (9,835)
--------- | ---------
|
Cash flows from investing activities: Investment in real estate: |
Real estate ........................................... (3,403) | (9,324)
Advances on mortgage loans ............................ (73) | (854)
Partnerships .......................................... (145) | (1,939)
Principal repayments on mortgage loans .................... 2,357 | 8,514
Sale of real estate ....................................... 14,677 | 3,350
Sale of mortgage loans and notes receivable ............... 53,991 | --
Principal repayments on notes receivable .................. 366 | 172
--------- | ---------
Net cash provided by (used in) investing activities ............ 67,770 | (81)
--------- | ---------
|
Cash flows from financing activities: |
Payment of mortgage payable ............................... (17,535) | --
Payment of senior notes (due 2002)......................... (109,975) | (28)
Borrowing of senior notes (due 1999)....................... 67,379 | --
Increase in restricted cash ............................... (3,243) | --
--------- | ---------
Net cash used in financing activities .......................... (63,374) | (28)
--------- | ---------
|
(Continued)
<PAGE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
STATEMENT OF CASH FLOWS (Unaudited)
(In Thousands)
- ------------------------------------------------------------------------------------------------------
(Continued)
Nine Months Ended
June 30,
---------------------------
1996 | 1995
--------- | ---------
(Post- | (Pre-
Confirmation) | Confirmation)
<S> <C> <C>
Net increase (decrease) in cash and cash equivalents ........... 11,600 | (9,944)
Cash and cash equivalents at beginning of period ............... 9,977 | 60,332
--------- | ---------
|
Cash and cash equivalents at end of period ..................... $ 21,577 | $ 50,388
========= | =========
|
Supplemental schedule of non-cash investment and |
financing activities: |
Charge offs against allowance for losses .............. $ -- | $ 5,515
========= | =========
|
Transfer of mortgage loans to real estate and |
investment in partnerships held for investment ... $ 5,120 | $ 39,753
========= | =========
|
Transfer of real estate owned held for investment |
to real estate owned held for sale ............... $ 18,733 | $ --
========= | =========
</TABLE>
See accompanying Notes to the Financial Statements.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited)
(In Thousands)
- ----------------------------------------------------------------------------------------------------------------------------------
For the Nine Months Ended June 30, 1996
Additional Total
Common Shares Paid-In Retained Shareholders'
Shares Amount Capital Earnings Equity
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance at September 30, 1995 ................. 11,226 $ 11,226 $ 88,848 $ -- $100,074
Net income .................................... -- -- -- 4,903 4,903
-------- -------- -------- -------- --------
Balance at June 30, 1996 ...................... 11,226 $ 11,226 $ 88,848 $ 4,903 $104,977
======== ======== ======== ======== ========
</TABLE>
See accompanying Notes to the Financial Statements.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
NOTES TO THE FINANCIAL STATEMENTS
NOTE 1. BASIS OF FINANCIAL INFORMATION AND PLAN OF REORGANIZATION
In connection with its emergence from the Chapter 11 proceeding (the
"1995 Restructuring"), the Trust implemented Fresh Start Reporting as
of September 30, 1995, as set forth in Statement of Position 90-7,
"Financial Reporting by Entities in Reorganization Under the Bankruptcy
Code." Fresh Start Reporting was required because (1) the
reorganization value of the Trust's assets immediately before the date
of confirmation was less than the total of all post-petition
liabilities, (2) there was more than a 50% change in the ownership of
the Trust, and (3) there was a permanent and substantive loss of
control by existing shareholders. As a result, all assets and
liabilities were restated to reflect their respective reorganization
value or fair value. The June 30, 1996 income statement and cash flow
statement amounts have been segregated by a black line in order to
signify that the fiscal 1996 income statement and cash flow statement
are that of a new reporting entity and have been prepared on a basis
not comparable to the pre-confirmation income statement and cash flow
statement.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, all adjustments, consisting of only normal recurring
accruals, considered necessary for a fair presentation have been
included. Operating results for the three-month and nine-month periods
ended June 30, 1996 are not necessarily indicative of the results that
may be expected for the fiscal year ending September 30, 1996.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. The most significant of these
estimates relate to the carrying value of the assets Held for Sale and
the estimated useful lives of assets Held for Investment. Actual
results could differ from those estimates.
Income Taxes - The Trust is a real estate investment trust ("REIT")
that has elected to be taxed under Sections 856-860 of the Internal
Revenue Code of 1986, as amended (the "Code"). Accordingly, no
provision has been made for income taxes in the financial statements.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
The Trust estimates it has a net operating loss ("NOL") carryforward of
approximately $157 million for tax purposes at fiscal year end 1995.
Beginning with fiscal 1996, the NOL carryforward available to offset
taxable income for future years will be approximately $82 million after
the recognition for tax purposes of Cancellation of Indebtedness
("COD") income of approximately $75 million. The NOL carryforward will
be subject to Code Section 382 annual limitations on the use of the
NOL. The Trust estimates this annual limitation to be approximately $6
million with any portion of the Section 382 limitation not used in any
taxable year carried forward up to fifteen years.
Rental Income - Rental income is recognized on a straight-line basis
over the applicable term of the lease.
Loan Fee Income - Loan fees are recorded as income using the "interest
method." Accordingly, loan fees are deferred when received and are
recorded as income over the term of the loan in relation to outstanding
loan balances.
Allowance for Losses - With the implementation of Fresh Start
Reporting, as of September 30, 1995, the allowance for losses was reset
to zero. Further provisions for losses on mortgage loans and related
investments in accordance with Statement of Position 75-2, "Accounting
Practices of Real Estate Investment Trusts," may be necessary if there
is deterioration in real estate markets, or there is a significant
increase in the Trust's cost of capital.
Net Income Per Share - Net income per share is computed using the
weighted average common shares outstanding during the three months and
nine months ended June 30, 1996. Per share information is not disclosed
for any period ending prior to October 1, 1995 because such information
is not meaningful due to the implementation of Fresh Start Reporting on
September 30, 1995.
Depreciation and Amortization - Real Estate Owned Held for Investment
is depreciated using the straight line method over their estimated
useful lives.
The estimated lives are as follows:
Buildings 40 years
Equipment 5 years
Tenant Improvement Term of related lease
Real Estate Owned Held for Sale is not depreciated.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
Cash and Cash Equivalents - Cash and cash equivalents and restricted
cash include short-term investments (high grade commercial paper, bank
CD's and US Treasury Securities) with original maturities not exceeding
a term greater than 90 days. Restricted cash of $10.0 million is
restricted as to use under the terms of various escrow and lease
agreements and the New Indenture (See Note 4 below). Restricted cash
includes funds held in a Debt Service Reserve (equating to three months
of interest expense on the outstanding Floating Rate Notes), a Capital
Improvement Reserve and a Trapped Funds Account (See Note 4 below). The
Trapped Funds are released back to the Trust on a monthly basis after
the New Indenture Trustee pays the outstanding interest and certain
related expenses on the new Floating Rate Notes (See Note 4 below).
Investments in Partnerships - Investments in partnerships represent the
Trust's investment in real estate partnerships. The Trust owns a
majority percentage interest in these partnerships and receives
substantially all the cash flow. The Trust consolidates these
partnerships as real estate investments.
Real Estate Owned - At September 30, 1995, Real Estate Owned Held for
Investment is carried at reorganization value and is depreciated using
the straight line method over their estimated useful lives.
Real Estate Owned Held for Sale is carried at net realizable value
which approximates reorganization value. Such assets are not
depreciated.
NOTE 3. MORTGAGE LOANS AND INVESTMENTS IN REAL ESTATE
During the second quarter of fiscal 1996, the Trust completed the
disposition of substantially all of its mortgage loan portfolio. The
Trust received $55.0 million in net cash proceeds through a series of
transactions which included loan repayments and a bulk sale of mortgage
loans. The carrying value of the mortgage loans involved in these
transactions totaled $50.5 million. The Trust's remaining mortgage loan
holdings are currently less than $0.8 million.
At September 30, 1995, as a result of Fresh Start Reporting, all assets
and liabilities of the Trust were restated to reflect their respective
reorganization value or fair value. The accumulated depreciation on
real estate owned was reset to zero as a result of the adoption of
Fresh Start Reporting. At September 30, 1995, the Trust segregated the
real estate portfolio into two categories: Held for Sale and Held for
Investment. The Trust depreciates the Held for Investment category over
the estimated useful lives of the assets. The Held for Sale category is
not depreciated. During the first nine months of fiscal 1996, the Trust
reclassified seven properties totaling $18.7 million to Real Estate
Owned Held for Sale from Real Estate Owned Held for Investment and no
longer depreciates these assets.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
In conjunction with the adoption of Fresh Start Reporting on September
30, 1995, all gains or losses for a period of one year after such
adoption are applied against the carrying value of long lived assets
held for investment. Through June 30, 1996, the Trust has reduced the
carrying values of assets Held for Investment by $8.4 million as a
result of the net gains on both the disposition of substantially all of
its mortgage loan portfolio in March 1996 and the sale of six
properties classified as Real Estate Owned Held for Sale.
The following table summarizes the Trust's investments in real estate
owned at June 30, 1996.
<TABLE>
<CAPTION>
Type of Number Carrying Accumulated Book
Property of Properties Amount Depreciation Value
-------- ------------- -------- ------------ -----
<S> <C> <C> <C> <C>
Real Estate Owned Held for Sale:
Real Estate Owned 11 46,361 (152) 46,209
Investments in Partnerships 2 10,100 (64) 10,036
--- ------- ------ -------
Total 13 56,461 (216) 56,245
=== ======= ====== =======
Real Estate Owned Held for Investment:
Real Estate Owned 18 66,131 (1,326) 64,805
Investments in Partnerships 3 15,912 (182) 15,730
--- ------- ------ -------
Total 21 82,043 (1,508) 80,535
=== ======= ====== =======
</TABLE>
NOTE 4. BORROWINGS
Mortgage Payable - The Trust prepaid the mortgage loan of $13.9 million
(the "Mortgage Payable") during the third quarter of fiscal 1996. See
discussion below with respect to the Trust's prepayment of the Old
Notes.
Senior Notes - The Old Notes were secured obligations (secured by a
first priority lien on all of the Trust's collateral) governed by the
Old Indenture between the Trust and Wilmington Trust Co., as Trustee,
dated as of the effective date of the Trust's reorganization (September
29, 1995). Interest on the Old Notes accrued at 11-1/8% per annum and
was payable semi-annually in arrears on each June 30 and December 31.
The Old Indenture included affirmative covenants, negative covenants
and financial covenants.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
On March 28, 1996, the Trust entered into a financing agreement which
provided for the issuance of $67.4 million of new Floating Rate Notes
(the "Floating Rate Notes"), which issuance occurred on April 30, 1996.
The Floating Rate Notes bear interest at 30 day LIBOR + 1.375%, payable
monthly, and have a stated maturity date of May 1, 1999.
The indenture relative to the Floating Rate Notes (the "New Indenture")
generally requires that, on a monthly basis, the Trust deposit into a
Trapped Funds Account (as defined in the New Indenture) maintained by
the indenture trustee (the "New Indenture Trustee") for the Floating
Rate Notes all Cash Flow and Asset Sale Proceeds (each as defined in
the New Indenture). Cash Flow from the Trapped Funds Account will be
distributed by the New Indenture Trustee to pay the New Indenture
Trustee's expenses, pay all accrued but unpaid interest on the Floating
Rate Notes and to maintain a debt service reserve account before any
monies are released to the Trust. In the event of a sale of, or certain
casualty, or indemnification events with respect to, any of the
twenty-four properties mortgaged under the terms of the debt
instruments, the proceeds therefrom will be used to retire up to 125%
of a portion of the Floating Rate Notes that has been allocated to such
property before any monies are released to the Trust. The New Indenture
includes affirmative covenants and negative covenants. At June 30,
1996, the Trust was in compliance with the New Indenture.
The proceeds received from the Floating Rate Notes, together with
approximately $56.5 million of cash on hand, were used to prepay the
Trust's Old Notes and Mortgage Payable. The face amount outstanding of
the Old Notes and the Mortgage Payable at the time of repayment was
$110.0 million and $13.9 million, respectively. The Old Notes and
Mortgage Payable were repaid in full on April 30, 1996.
On April 24, 1996, effective April 30, 1996, the Trust entered into an
interest rate protection agreement (the "Swap") that serves to cap the
floating interest component of the Floating Rate Notes at 8%. The Trust
paid a one-time fee of $377,000 to the counterparty to the Swap.
During the third quarter of fiscal 1996, the Trust sold five real
estate properties. In July 1996, the Trust used $4.2 million of the net
proceeds received from the sale of the encumbered property to prepay a
portion of the Floating Rate Notes, as required under the terms of the
New Indenture.
NOTE 5. SHARE OPTION PLAN
1995 Share Option Plan
On October 2, 1995, the Board of Trustees adopted a 1995 Share Option
Plan (the "1995 Plan") for trustees, officers, employees and other key
persons of the Trust. On February 15, 1996, the Trust's shareholders
approved the adoption of the 1995 Plan at the Trust's 1996 Annual
Meeting of Shareholders.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
The 1995 Plan provides for the grant of options to purchase up to
870,000 Common Shares at not less than 100% of the fair market value of
the Common Shares, subject to adjustment for share splits, share
dividends and similar events. To the extent that awards under the 1995
Plan do not vest or otherwise revert to the Trust, the Common Shares
represented by such awards may be the subject of subsequent awards.
The 1995 Plan provides for the grant of incentive stock options
("Incentive Options") which qualify under Section 422 of the Code and
nonqualified stock options ("Non-Qualified Options"). Holders of
options also receive dividend equivalent rights. Under the 1995 Plan,
894,000 shares were granted with a price range from $10.00 to $12.25
per share and 55,000 shares were canceled at a price of $10.00 per
share during the first nine months of fiscal 1996. The options expire
four years from the date of grant.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following section includes a discussion and analysis of the results
of operations for the nine months ended and three months ended June 30,
1996 and 1995. The Trust has, for the past several years, reported
significant net losses. As a result of the 1995 Restructuring, past
results should not be indicative of future operating performance.
Future results of operations of the Trust will not be comparable to the
historical operating performance.
Results of Operations - Nine Months Ended June 30, 1996 vs. Nine Months
Ended June 30, 1995 - Net income for the nine months ended June 30,
1996 was $4.9 million or $0.44 per share compared to a net loss of
$23.0 million for the nine months ended June 30, 1995. Per share
information is not disclosed for any period ending prior to October 1,
1995 because such information is not meaningful due to the
implementation of Fresh Start Reporting on September 30, 1995.
Rental income increased $2.3 million to $20.1 million for the nine
months ended June 30, 1996 from $17.8 million for the nine months ended
June 30, 1995. In addition to rental income, the Trust received from
tenants reimbursement of certain operating expenses totaling $2.7
million and $1.8 million for the nine months ended June 30, 1996 and
1995, respectively. These increases were primarily due to the addition
of real estate foreclosed upon during the year. At September 30, 1995
the Trust owned 38 properties. During fiscal 1996 two properties were
added and six properties were sold to end the quarter ended June 30,
1996 with 34 properties. The occupancy level increased to 88.7% at June
30, 1996 compared to 81.1% at September 30, 1995.
Interest and fee income on mortgage loans decreased $4.2 million to
$3.2 million for the nine months ended June 30, 1996 compared to $7.4
million for the nine months ended June 30, 1995. The decrease is
attributable to the foreclosure of approximately $49.8 million in
carrying value of mortgage loans and approximately $20.9 million in
mortgage loan repayments. Another factor contributing to the decline
was the sale of substantially all of the Trust's mortgage loan
portfolio in March 1996. As a result of the sale, interest income
earned on the mortgage loan portfolio will be substantially reduced in
the future. The Trust's remaining mortgage loan portfolio is currently
less than $0.8 million.
Interest on short-term investments decreased $1.4 million to $1.3
million for the nine months ended June 30, 1996 compared to $2.7
million in the nine months ended June 30, 1995. The decline was due to
the reduction in cash balances as a result of the $25.0 million payment
made on April 11, 1995 required to implement the 1995 Restructuring and
an additional $46.0 million payment made on September 29, 1995. Prior
to these payments, the Trust was accumulating cash and since September
30, 1993, had not made any payments of interest or principal on its
indebtedness. Partially offsetting this decline was interest earned on
the cash proceeds of $55.0 million received as a result of the Trust's
disposition of substantially all of its mortgage loan portfolio in
March 1996.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
Interest expense decreased $21.2 million to $9.0 million for the nine
months ended June 30, 1996 compared to $30.2 million for the nine
months ended June 30, 1995. The decrease was due to the reduction of
the Trust's outstanding senior indebtedness from $290.0 million for the
majority of fiscal 1995 to $110.0 million for the majority of fiscal
1996 as a result of the 1995 Restructuring, which occurred at the end
of the fourth quarter of fiscal 1995. On April 30, 1996, the Trust
issued new Floating Rate Notes in the amount of $67.4 million and used
the proceeds from the issuance along with approximately $56.5 million
in cash on hand to repay the Old Notes and the Mortgage Payable. The
new Floating Rate Notes bear interest at a lower rate than the Old
Notes. Another factor contributing to this decrease was a $3.5 million
principal reduction in the first quarter of fiscal 1996 on the Mortgage
Payable.
Depreciation and amortization on rental properties decreased $3.6
million to $1.8 million for the nine months ended June 30, 1996 from
$5.4 million for the nine months ended June 30, 1995, primarily as a
result of the adoption of Fresh Start Reporting. Prior to Fresh Start
Reporting, the Trust depreciated all real estate investments. At
September 30, 1995, the Trust segregated the real estate portfolio into
two categories: Held for Sale and Held for Investment. The Trust
depreciates the Held for Investment category over the estimated useful
lives of the assets. The Held for Sale category is not depreciated.
During the first nine months of fiscal 1996, the Trust reclassified
seven properties totaling $18.7 million to Real Estate Owned Held for
Sale from the category Real Estate Owned Held for Investment.
Operating expenses increased $0.7 million to $9.1 million for the nine
months ended June 30, 1996 from $8.4 million for the nine months ended
June 30, 1995. The increase was due to the addition of two real estate
properties foreclosed upon during the first quarter of fiscal 1996 and
increased occupancy levels. The occupancy levels at ended June 30, 1996
increased to 88.7% from 82.4% at June 30, 1995. The increase was
partially offset by the sale of five real estate properties in the
third quarter of fiscal 1996.
Administrative expenses decreased $0.8 million to $2.5 million for the
nine months ended June 30, 1996 compared to $3.3 million for the nine
months ended June 30, 1995. The decrease was due to a reduction in
staffing levels, occupancy and insurance premiums, partially offset by
an increase in professional fees.
Provision for losses on mortgage loans and related investments
decreased $3.0 million for the nine months ended June 30, 1996 from
$3.0 million recorded in the nine months ended June 30, 1995. For the
first nine months of fiscal 1996, the Trust did not provide a provision
for losses.
The 1995 Restructuring was completed in the fourth quarter of fiscal
1995. Reorganization expenses related to the Chapter 11 filing and debt
restructuring expenses were $2.6 million for the nine months ended June
30, 1995. These expenses reflect professional fees incurred by the
representatives of the creditors, shareholders and the Trust.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
Results of Operations - Quarter Ended June 30, 1996 vs. Quarter Ended
June 30, 1995 Net income for the quarter ended June 30, 1996 was $2.0
million or $0.18 per share compared to a net loss of $7.3 million for
the quarter ended June 30, 1995. Per share information is not disclosed
for any period ending prior to October 1, 1995 because such information
is not meaningful due to the implementation of Fresh Start Reporting on
September 30, 1995.
Rental income increased $0.5 million to $6.8 million in the quarter
ended June 30, 1996 from $6.3 million for the quarter ended June 30,
1995. In addition to rental income, the Trust received from tenants
reimbursement of certain operating expenses totaling $1.0 million and
$0.6 million for the quarters ended June 30, 1996 and 1995
respectively. These increases were primarily due to the addition of
three properties foreclosed upon from March 31, 1995 and partially
offset by six properties which were sold. The Trust owned 37 and 34
properties at June 30, 1995 and 1996, respectfully. The occupancy level
increased to 88.7% at June 30, 1996 compared to 82.4% at June 30, 1995.
Interest and fee income on mortgage loans decreased $2.1 million to
$0.1 million for the quarter ended June 30, 1996 compared to $2.2
million for the quarter ended June 30, 1995. This decrease was due
primarily to the sale of substantially all of the Trust's mortgage loan
portfolio in March 1996. As a result of the sale, interest income is
expected to be substantially reduced in the future compared to prior
periods. The Trust's remaining mortgage loan portfolio is currently
less than $0.8 million.
Interest on short-term investments declined $0.3 million to $0.5
million for the quarter ended June 30, 1996 compared to $0.8 million
for the quarter ended June 30, 1995. The decline was due to the
reduction in cash balances as a result of the $25.0 million payment
made on April 11, 1995 required to implement the 1995 Restructuring and
an additional $46.0 million payment made on September 29, 1995. Prior
to these payments, the Trust was accumulating cash and since September
30, 1993, had not made any payments of interest or principal on its
indebtedness. Partially offsetting the decline was interest earned on
cash proceeds of $55.0 million received as a result of the Trust's
disposition of substantially all of its mortgage loan portfolio in
March 1996.
Interest expense decreased $8.3 million to $2.1 million for the current
quarter compared to $10.4 million for the quarter ended June 30, 1995.
The decrease was due to the reduction of the outstanding senior
indebtedness from $290.0 million for the majority of fiscal 1995 to
$110.0 million for the majority of fiscal 1996 as a result of the 1995
Restructuring, which occurred at the end of the fourth quarter of
fiscal 1995. On April 30, 1996, the Trust issued new Floating Rate
Notes in the amount of $67.4 million and used the proceeds from the
issuance along with approximately $56.5 million in cash on hand to
repay the Old Notes and the Mortgage Payable. The new Floating Rate
Notes bear interest at a lower rate than the Old Notes. Another factor
contributing to this decrease was a $3.5 million principal reduction in
the first quarter of fiscal 1996 on the Mortgage Payable.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
Depreciation and amortization on rental properties decreased $1.3
million to $0.6 million for the quarter ended June 30, 1996 from $1.9
million for the quarter ended June 30, 1995, primarily as a result of
the adoption of Fresh Start Reporting on September 30, 1995. Prior to
Fresh Start Reporting, the Trust depreciated all real estate
investments. At September 30, 1995, the Trust segregated the real
estate portfolio into two categories: Held for Sale and Held for
Investment. The Trust depreciates the Held for Investment category over
the estimated useful lives of the assets. The Held for Sale category is
not depreciated. During the third quarter of fiscal 1996, the Trust
reclassified six properties totaling $18.1 million to the Held for Sale
category from the Held for Investment category.
Operating expenses remained level at $2.9 million for the quarter ended
June 30, 1996 and June 30, 1995. The occupancy level at June 30, 1996
increased to 88.7% from the occupancy level at June 30, 1995 of 82.4%.
The increase in costs associated with higher occupancy levels was
offset by sale of five properties in the third quarter of fiscal and
one in the first quarter of fiscal 1996.
Administrative expenses decreased $0.3 million to $0.8 million for the
quarter ended June 30, 1996 compared to $1.1 million for the quarter
ended June 30, 1995. This decrease was due to a reduction in staffing
levels, occupancy and insurance premiums, partially offset by an
increase in professional fees.
The 1995 Restructuring was completed in the fourth quarter of fiscal
1995. Reorganization expenses related to the Chapter 11 filing and debt
restructuring expenses were $1.1 million for the quarter ended June 30,
1995. These expenses reflect professional fees incurred by the
representatives of the creditors, shareholders and the Trust.
Liquidity and Capital Resources - Prior to its restructuring, the Trust
faced significant liquidity problems. The Trust did not generate
sufficient cash flow from normal operations and was not able to
liquidate mortgage loans and real estate investments in order to meet
scheduled amortization on its indebtedness. As a result of the 1995
Restructuring, management believes the cash flow from operating
activities will be sufficient to meet minimum debt service
requirements. In the near term, capital expenditure needs will be met
through liquidation of existing assets and the cash available at June
30, 1996. However, the Trust's present liquidity, cash flow from
operating activities and ability to liquidate existing assets to meet
its obligations can be adversely impacted by a negative change in the
economy, particularly as those changes may relate to real estate
assets. The Trust may, in the future, seek to raise additional capital
through the issuance of equity securities and/or the incurrance of
additional indebtedness for the purpose of meeting additional capital
expenditures or retiring or refinancing its indebtedness.
Taxable income required to be distributed will be less than taxable
income for financial reporting purposes under generally accepted
accounting principles due to differences related to depreciation,
utilization of NOL carryforward (subject to the Code Section 382
limitations) and timing differences related to bad debt deductions.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
On March 28, 1996, the Trust entered into a financing agreement which
provided for the issuance of $67.4 million of new Floating Rate Notes,
which issuance occurred on April 30, 1996. The Floating Rate Notes bear
interest at 30 day LIBOR + 1.375%, payable monthly, and have a stated
maturity date of May 1, 1999.
The New Indenture generally requires that, on a monthly basis, the
Trust deposit into a Trapped Funds Account maintained by the New
Indenture Trustee all Cash Flow and Asset Sale Proceeds. Cash Flow from
the Trapped Funds Account will be distributed by the New Indenture
Trustee to pay the New Indenture Trustee's expenses, pay all accrued
but unpaid interest on the Floating Rate Notes and to maintain a debt
service reserve account before any monies are released to the Trust. In
the event of a sale of, or certain casualty or indemnification events
with respect to, any of the twenty-four properties mortgaged under the
terms of the debt instruments, the proceeds therefrom will be used to
retire up to 125% of a portion of the Floating Rate Notes that has been
allocated to such property before any monies are released to the Trust.
The New Indenture includes affirmative covenants and negative
covenants. At June 30, 1996, the Trust was in compliance with the New
Indenture.
The proceeds received from the Floating Rate Notes, together with
approximately $56.5 million of cash on hand, were used to prepay the
Trust's Old Notes and Mortgage Payable. The face amount outstanding of
the Old Notes and the Mortgage Payable at the time of repayment was
$110.0 million and $13.9 million, respectively. The Old Notes and
Mortgage Payable were repaid in full on April 30, 1996.
On April 24, 1996, effective April 30, 1996, the Trust entered into an
interest rate protection agreement (the "Swap") that serves to cap the
floating interest component of the Floating Rate Notes at 8%. The Trust
paid a one-time fee of $377,000 to the counterparty to the Swap.
In conjunction with the adoption of Fresh Start Reporting on September
30, 1995, all gains or losses for a period of one year after such
adoption are applied against the carrying value of long lived assets
held for investment. Through June 30, 1996, the Trust has reduced the
carrying values of assets Held for Investment by $8.4 million as a
result of net gains on both the disposition of substantially all of its
mortgage loan portfolio in March 1996 and the sale of six properties
classified as Real Estate Owned Held for Sale.
During the nine months ended June 30, 1996 the Trust reclassified seven
properties totaling $18.7 million to Real Estate Owned Held for Sale
from Real Estate Owned Held for Investment. During the nine months
ended June 30, 1996 the Trust sold six properties with a carrying value
of $11.2 million classified as Real Estate Owned Held for Sale.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
For the nine months ended June 30, 1996, cash provided by operating
activities increased $17.0 million to $7.2 million compared to cash
used by operating activities of $9.8 million for the nine months ended
June 30, 1995. The increase in cash provided by operating activities
was primarily attributable to lower interest payments due to a
reduction in the rate and average balance associated with the senior
indebtedness. The average balance decreased to $100.5 million in fiscal
1996 from $290.0 million in fiscal 1995. The average rate on the senior
indebtedness decreased to 10.80% in fiscal 1996 from 13.15% in fiscal
1995.
For the nine months ended June 30, 1996, cash provided by investing
activities increased $67.9 million to $67.8 million compared to cash
used by operating activities of $0.1 million for the nine months ended
June 30, 1995. The increase was primarily attributable to the
disposition of substantially all of the Trust's mortgage loan portfolio
in March 1996 and the sale of Real Estate Owned Held for Sale.
For the nine months ended June 30, 1996, cash used in financing
activities increased $63.3 million to $63.4 million compared to cash
used by financing activities of $28,000 for the nine months ended June
30, 1995. The increase was primarily attributable to the repayment of
the Old Notes and the Mortgage Payable offset by the issuance of $67.4
million in new Floating Rate Notes, which all occurred on April 30,
1996. Also contributing to the increase was the addition of $3.2
million in restricted cash. Restricted cash increased by $9.0 million
relating to the funds held by the New Indenture Trustee in the Debt
Service Reserve, Capital Improvement Reserve and Trapped Funds Account.
The increase in the restricted cash was offset by reductions related to
the termination pay plan, various escrow and lease agreements and the
$3.5 million principal reduction in the first quarter of fiscal 1996 on
the Mortgage Payable.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
Part II: Other Information
Item 1. Legal Proceedings
A third party has alleged the existence of a purchase contract
with respect to one of the Trust's properties which the Trust
disputes. This dispute has lead to litigation. However, the
Trust believes that this litigation, when resolved, will not
have a material adverse effect on the business, financial
condition or results of operations of the Trust.
Item 5. Other Information
THE LIQUIDITY AND CAPITAL RESOURCES SECTION OF MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS AND THIS PART II MAY CONTAIN FORWARD-LOOKING
STATEMENTS. IN EACH CASE THERE MAY EXIST FACTORS WHICH COULD
CAUSE ACTUAL RESULTS OR EVENTS TO DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN SUCH STATEMENTS. THESE FACTORS INCLUDE THOSE
SET FORTH UNDER THE RELEVANT CAPTIONS IN THE REFERENCED
SECTIONS OF THE 10-Q.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
Number Description
------- -----------
4.1 Indenture dated as of April 30, 1996 among certain
subsidiaries of Value Property Trust and LaSalle National
Bank, as trustee, governing the Floating Rate Senior
Notes due 1999.
4.2 Form of Mortgage, Assignment of Rents and Leases and
Security Agreement between certain subsidiaries of Value
Property Trust and LaSalle National Bank, as trustee and
mortgagee.
4.3 Form of Security Agreement between certain subsidiaries of
Value Property Trust and LaSalle National Bank, as
trustee.
10.1 Interest Rate Swap Agreement among certain subsidiaries of
Value Property Trust and Merrill Lynch Derivatives
Products AG dated April 24, 1996, and effective April 30,
1996.
<PAGE>
VALUE PROPERTY TRUST FORM 10Q
- --------------------------------------------------------------------------------
(b) Reports on Form 8-K
The Trust filed a Current Report on Form 8-K dated April 11,
1996 under Item 4 and Item 7 of Form 8-K regarding the decline
of Ernst & Young LLP to stand for reelection and the selection
and engagement of Coopers & Lybrand LLP as independent
auditors for the Trust.
The Trust filed an amendment to a Current Report on Form 8-K/A
dated March 14, 1996 under Item 2 and Item 5 of Form 8-K
regarding the Trust's disposition of substantially all of its
mortgage loan portfolio, the execution of the financing
agreement with respect to the Floating Rate Notes, and the
Trust's issuance of the notice to the Indenture Trustee for
the Old Notes, directing it to call 100% of the outstanding
Old Notes. The Current Report on Form 8-K was amended to
include an exhibit under Item 7 of Form 8-K regarding pro
forma financial information regarding the disposition of
substantially all of the Trust's mortgage loan portfolio, the
issuance of new Floating Rate Notes and the prepayment of the
Old Notes.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Value Property Trust
/s/ George R. Zoffinger
-------------------------------------
George R. Zoffinger
President and Chief Executive Officer
(Principal Executive Officer)
/s/ Robert T. English
-------------------------------------
Robert T. English
Chief Financial Officer
(Principal Financial Officer)
DATE: August XX, 1996
<PAGE>
================================================================================
VPT REAL ESTATE CORP. I
VPT REAL ESTATE CORP. II
VPT REAL ESTATE CORP. III
VPT REAL ESTATE CORP. IV
VPT REAL ESTATE CORP. V
as Issuers
and
LASALLE NATIONAL BANK
as Trustee for the Holders of the Notes
---------------------
INDENTURE
Dated as of April 30, 1996
---------------------
$67,379,000
Floating Rate Senior Secured Notes Due 1999
================================================================================
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS
-----------
SECTION 1.02. OTHER DEFINITIONS
-----------------
SECTION 1.03. RULES OF CONSTRUCTION
---------------------
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING
---------------
SECTION 2.02. EXECUTION AND AUTHENTICATION
----------------------------
SECTION 2.03. REGISTRAR AND PAYING AGENT
--------------------------
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST
-----------------------------------
SECTION 2.05. LISTS OF HOLDERS OF THE NOTES
-----------------------------
SECTION 2.06. TRANSFER AND EXCHANGE
---------------------
SECTION 2.07. REPLACEMENT NOTES
-----------------
SECTION 2.08. OUTSTANDING NOTES
-----------------
SECTION 2.09. TREASURY NOTES
--------------
SECTION 2.10. TEMPORARY NOTES
---------------
SECTION 2.11. CANCELLATION
------------
SECTION 2.12. DEFAULTED INTEREST
------------------
SECTION 2.13. RECORD DATE
-----------
SECTION 2.14. CUSIP NUMBER
------------
ARTICLE 3
APPLICATION OF MONIES AND REDEMPTIONS
SECTION 3.01. NOTICES TO TRUSTEE
------------------
SECTION 3.02. PRO RATA REDEMPTION
-------------------
SECTION 3.03. NOTICE OF COMPLETE REDEMPTION
-----------------------------
SECTION 3.04. EFFECT OF NOTICE OF COMPLETE REDEMPTION
---------------------------------------
OF ALL OUTSTANDING NOTES, ETC.
------------------------------
SECTION 3.05. DEPOSITS INTO THE TRAPPED FUNDS ACCOUNT
---------------------------------------
SECTION 3.06. OPTIONAL REDEMPTION
-------------------
SECTION 3.07. MANDATORY REDEMPTION
--------------------
SECTION 3.08. APPLICATION OF MONIES FROM THE TRAPPED FUNDS ACCOUNT
----------------------------------------------------
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF PRINCIPAL AND INTEREST
---------------------------------
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY
-------------------------------
SECTION 4.03. OFFICERS' AND ACCOUNTANTS' CERTIFICATES AS TO COMPLIANCE
--------------------------------------------------------
SECTION 4.04. CONDUCT OF BUSINESS; COMPLIANCE WITH LAWS, ETC.
-----------------------------------------------
SECTION 4.05. PAYMENT OF TAXES, ETC.
----------------------
SECTION 4.06. MAINTENANCE OF INSURANCE AND INTEREST RATE PROTECTION AGREEMENT
---------------------------------------------------------------
SECTION 4.07. PRESERVATION OF EXISTENCE, ETC.
-------------------------------
SECTION 4.08. MAINTENANCE OF PROPERTIES, ETC.
-------------------------------
SECTION 4.09. FINANCIAL STATEMENTS; REPORTS
-----------------------------
SECTION 4.10. NEW REAL ESTATE, ETC.; INSPECTION AND AUDIT RIGHTS
--------------------------------------------------
SECTION 4.11. LIENS, ETC.
-----------
SECTION 4.12. INDEBTEDNESS
------------
SECTION 4.13. TRANSACTIONS WITH AFFILIATES
----------------------------
SECTION 4.14. NEW SUBSIDIARIES
----------------
SECTION 4.15. LIMITATION ON INVESTMENTS
-------------------------
SECTION 4.16. BUSINESS; AMENDMENT OF CERTIFICATE OF INCORPORATION
---------------------------------------------------
SECTION 4.17. ACQUISITIONS
------------
SECTION 4.18. MERGER, CONSOLIDATION, OR SALE OF ASSETS
----------------------------------------
SECTION 4.19. GUARANTEED INDEBTEDNESS
-----------------------
SECTION 4.20. LEASE OBLIGATIONS
-----------------
SECTION 4.21. LIMITATION ON ASSET SALES
-------------------------
ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.01. EVENTS OF DEFAULT
-----------------
SECTION 5.02. ACCELERATION
------------
SECTION 5.03. OTHER REMEDIES
--------------
SECTION 5.04. WAIVER OF PAST DEFAULTS
-----------------------
SECTION 5.05. DIRECTION BY REQUIRED HOLDERS
-----------------------------
SECTION 5.06. LIMITATION ON SUIITS
-------------------
SECTION 5.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT
---------------------------------------------
SECTION 5.08. COLLECTION SUIT
---------------
SECTION 5.09. PROOFS OF CLAIM
---------------
SECTION 5.10. PRIORITIES
----------
SECTION 5.11. UNDERTAKING FOR COSTS
---------------------
SECTION 5.12. RESTORATION OF RIGHTS AND REMEDIES
----------------------------------
ARTICLE 6
TRUSTEE
SECTION 6.01. DUTIES OF TRUSTEE
-----------------
SECTION 6.02. RIGHTS OF TRUSTEE
-----------------
SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE
----------------------------
SECTION 6.04. DISCLAIMER
----------
SECTION 6.05. NOTICE OF DEFAULTS
------------------
SECTION 6.06. COMPENSATION AND INDEMNITY
--------------------------
SECTION 6.07. REPLACEMENT OF TRUSTEE
----------------------
SECTION 6.08. SUCCESSOR TRUSTEE BY MERGER, ETC.
---------------------------------
SECTION 6.09. ELIGIBILITY; DISQUALIFICATION
-----------------------------
ARTICLE 7
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 7.01. WITHOUT CONSENT OF HOLDERS OF NOTES
-----------------------------------
SECTION 7.02. WITH CONSENT OF HOLDERS OF NOTES
--------------------------------
SECTION 7.03. REVOCATION AND EFFECT OF CONSENTS
---------------------------------
SECTION 7.04. NOTATION ON OR EXCHANGE OF NOTES
--------------------------------
SECTION 7.05. TRUSTEE TO SIGN AMENDMENTS, ETC.
--------------------------------
ARTICLE 8
COLLATERAL AND SECURITY
SECTION 8.01. COLLATERAL DOCUMENTS
--------------------
SECTION 8.02. RELEASE OF COLLATERAL
---------------------
SECTION 8.03. AUTHORIZATION OF ACTIONS TO BE TAKEN BY THE TRUSTEE UNDER
---------------------------------------------------------
THE COLLATERAL DOCUMENTS
------------------------
SECTION 8.04. AUTHORIZATION OF RECEIPT OF FUNDS BY THE TRUSTEE UNDER THE
----------------------------------------------------------
COLLATERAL DOCUMENTS
--------------------
SECTION 8.05. DEBT SERVICE RESERVE ACCOUNT
----------------------------
SECTION 8.06. LOCKBOX ARRANGEMENTS
--------------------
SECTION 5.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT
---------------------------------------------
SECTION 5.08. COLLECTION SUIT
---------------
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. NOTICES
-------
SECTION 9.02. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT
--------------------------------------------------
SECTION 9.03. RULES BY TRUSTEE AND AGENTS
---------------------------
SECTION 9.04. GOVERNING LAW
-------------
SECTION 9.05. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS
---------------------------------------------
SECTION 9.06. SUCCESSORS
----------
SECTION 9.07. SEVERABILITY
------------
SECTION 9.08. COUNTERPART ORIGINALS
---------------------
SECTION 9.09. TABLE OF CONTENTS, HEADINGS, ETC.
---------------------------------
SECTION 9.10. SATISFACTION AND DISCHARGE; RELEASE
-----------------------------------
SECTION 9.11. NO WAIVER; REMEDIES
-------------------
SECTION 9.12. STREIT ACT
----------
SECTION 9.13. SPECIAL MASSACHUSETTS PROVISIONS
--------------------------------
<PAGE>
INDENTURE, dated as of April 30, 1996, among VPT Real Estate
Corp. I, VPT Real Estate Corp. II, VPT Real Estate Corp. III, VPT Real Estate
Corp. IV and VPT Real Estate Corp. V (collectively, the "Issuers"), and LaSalle
National Bank, as trustee (the "Trustee").
RECITAL
The Issuers do hereby, jointly and severally, represent and
warrant, and covenant and agree, to and with the Trustee, for the equal and
ratable benefit and security of each Holder (as defined below) of the Issuers'
Floating Rate Senior Secured Notes due May 1, 1999, as follows:
ARTICLE 1
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person and includes each officer, director,
trustee or general partner of such Person, and each owner of 5% or more of any
class of voting stock or interests of such Person. For purposes of this
definition, "control" when used with respect to any specified Person means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Allocated Note Amount" means with respect to any Real Estate
existing on the Issue Date, the product of the initial aggregate principal
amount of the Notes and the percentage set forth with respect thereto on
Schedule 1 hereto.
"Asset Sale" means any sale or other disposition, or series of
sales or other dispositions, made on or after the Issue Date by any Issuer to
any Person of any Collateral.
"Asset Sale Proceeds" means payments in Cash or Cash
Equivalents received by any Issuer from any Asset Sale (after repayment of any
Indebtedness required to be paid by reason of such Asset Sale).
"Assignments of Leases" means each Assignment of Lease, in the
form attached hereto as Exhibit B made by an Issuer, executed heretofore,
concurrently herewith or hereafter in favor of the Trustee on behalf of the
Holders, assigning a Lease, as the same may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced in accordance with the
terms thereof.
"Bankruptcy Code" means the Bankruptcy Reform Act of 1978, as
amended, and as codified in title 11 of the United States Code.
"Bankruptcy Law" means the Bankruptcy Code or any similar
federal or state law for the relief of debtors.
"Business Day" means any day that is not a Saturday, a Sunday
or a day on which banks are required or permitted to be closed in New York City
or Chicago and, if the applicable Business Day relates to the LIBO Rate, a day
on which dealings are also carried on in the London interbank market.
"Capital Expenditures" means, for any Person for any period,
the aggregate of all expenditures by such Person (except interest capitalized
during construction) during such period for property, plant or equipment,
including, without limitation, renewals, improvements, replacements and
capitalized repairs, that would be reflected as additions to property, plant or
equipment on a consolidated balance sheet of such Person prepared in accordance
with GAAP and includes without limitation payments, other than those
attributable to interest, on capitalized leases and other Indebtedness incurred
to finance such additions to property, plant and equipment. For the purpose of
this definition, the purchase price of equipment which is acquired
simultaneously with the trade-in of existing equipment owned by such Person or
with insurance proceeds shall be included in Capital Expenditures only to the
extent of the gross amount of such purchase price less the credit granted by the
seller of such equipment being traded in at such time or the amount of such
proceeds, as the case may be.
"Cash" means legal tender accepted in the United States of
America for the payment of public and private debts currently United States
Dollars.
"Cash Equivalents" means, collectively, (a) securities with
maturities of 90 days or less from the date of acquisition issued or fully
guaranteed or insured by the United States government or any agency thereof, (b)
certificates of deposit, overnight bank deposits and banker acceptances of any
commercial bank having combined capital and surplus of at least $200,000,000, a
short term deposit rating of A1/P1 or better and organized under the laws of the
United States of America having maturities of 90 days or less from the date of
acquisition, (c) commercial paper with maturities of 90 days or less having a
rating of A1/P1 or better and (d) shares of money market funds rated "AAA" by
either Standard & Poor's Ratings Services or Fitch Investors Service, L.P.
"Cash Flow" means the aggregate of the Net Operating Income
minus all Capital Expenditures and Permitted Expenses for the related Interest
Period.
"Cash Flow Determination Date" means the Issue Date and the
Determination Date in each April, July, October and January.
"Casualty" means the damage or destruction, in whole or in
part, of any Real Estate, by fire or other casualty.
"Casualty Proceeds" means any insurance proceeds received by
the Issuers pursuant to the Mortgages as a result of a Casualty.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980," as amended, 42 U.S.C. ss. 9601, et seq.
"Change of Control" means (i) George R. Zoffinger and Paul
McArthur shall cease to be members of the Board of Directors of any Issuers,
(ii) an event or series of events (whether a stock purchase, merger,
consolidation or other business combination or otherwise) by which any Person or
group (as defined under Rule 13d-3 under the Exchange Act) (other than Value
Property Trust) is or becomes the owner directly of more than 50% of the
combined voting power of the then outstanding securities of any Issuer
ordinarily (and apart from rights accruing after the happening of a contingency)
having the right to vote in the election of directors or (iii) after the Issue
Date, the replacement of a majority of the Board of Directors of any Issuer over
a three-year period from the directors who constituted the Board of Directors at
the beginning of such period other than by (a) directors whose nomination for
election by the equityholders of such Issuer was approved by such Board of
Directors, (b) directors elected by such Board of Directors or (c) directors
nominated or elected by directors approved as set forth in (a) or (b) above.
"Collateral" means the assets of the Issuers defined as
"Collateral" in the Collateral Documents.
"Collateral Documents" mean the Mortgages, the Assignments of
Leases and the Security Agreement, as such agreements may from time to time be
amended, supplemented or otherwise modified in accordance with the terms hereof
and thereof.
"Company Request" or "Company Order" means a written request
or order signed in the name of any Issuer by its President, its Executive Vice
President, a Senior Vice President, a Vice President, its Treasurer or
Controller, or, if authorized by a power of attorney executed by any of such
officers, by such other person as may be authorized in such power of attorney,
and delivered to the Trustee.
"Condemnation" means any condemnation of any Real Estate.
"Condemnation Proceeds" means all awards and payments received
by an Issuer with respect to a taking referenced in Section 3.7 of the related
Mortgage.
"Consolidated Net Worth" means, with respect to any Person,
the sum of (i) the consolidated equity of the common equityholders of such
Person and its consolidated Subsidiaries plus (ii) the respective amounts
reported on such Person's most recent balance sheet with respect to any series
of preferred equity that by its terms is not entitled to the payment of
dividends unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and payment, but only to the
extent of any cash received by such Person upon issuance of such preferred
equity, after eliminating inter-company items, including appropriate deductions
for any minority interest in such Person's Subsidiaries, less (x) all write-ups
(other than write-ups of tangible assets of a going concern business made within
12 months after the acquisition of such business) subsequent to the Issue Date
in the book value of any asset owned by such Person or a consolidated Subsidiary
of such Person and (y) all unamortized debt discount and expense and unamortized
deferred charges, all of the foregoing determined in accordance with GAAP.
"Contingent Obligation" means with reference to any Person,
any direct or indirect liability, contingent or otherwise, of such Person with
respect to any Indebtedness or contractual obligation of another Person, if the
purpose or intent of such Person in incurring the Contingent Obligation is to
provide assurance to the obligee of such Indebtedness or contractual obligation
that such Indebtedness or contractual obligation will be paid or discharged, or
that any agreement relating thereto will be complied with, or that any holder of
such Indebtedness or contractual obligation will be protected (in whole or in
part) against loss in respect thereof.
"Corporate Trust Office of the Trustee" shall be at the
address of the Trustee specified in Section 9.01 hereof or such other address as
to which the Trustee may give notice to the Issuers.
"Custodian" means any receiver, trustee or similar official
under any Bankruptcy Law.
"Debt Service Coverage Ratio" means, for any Payment Date, the
ratio of (i) one-third of the aggregate DSCR Cash Flow from the Collateral as
determined on the immediately preceding Cash Flow Determination Date less the
aggregate Permitted Expenses and Trustee Expenses for the immediately preceding
Interest Period to (ii) interest payments calculated at a rate equal to 9-3/8%
per annum on the principal amount of the Notes during the immediately preceding
Interest Period.
"Debt Service Reserve Account" means that trust account
(account no. 67-7515-405) maintained at the Trustee in the name of the Trustee
as Trustee for the Noteholders, which shall be funded on the Issue Date by the
Issuers in an amount equal to the Debt Service Reserve Account Required Level
for the Issue Date.
"Debt Service Reserve Account Required Level" means (i) on the
Issue Date, an amount equal to three (3) months of interest on the initial
principal amount of the Notes calculated at an annual rate equal to 8%, or (ii)
on any Payment Date thereafter, an amount equal to three (3) months of interest
calculated at an annual rate equal to 8% on the then outstanding principal
amount of the Notes after giving effect to any reductions pursuant to Section
3.08(iv), (v) or (vii) hereof during the immediately preceding Interest Period,
as certified by an Officer of the Issuers.
"Default" means any event that is or with the passage of time
or the giving of notice or both would be an Event of Default.
"Determination Date" means the 25th calendar day of each month
or if such day is not a Business Day, the immediately preceding Business Day.
"DSCR Cash Flow" means, for the three-month period immediately
preceding a Cash Flow Determination Date, Net Operating Income on each parcel of
Real Estate for such three-month period.
"Environmental Indemnified Parties" means the Trustee, the
Holders, any person or entity who is or will have been involved in the
origination of the Notes, any person or entity who is or will have been involved
in the servicing of the Notes, any person or entity in whose name the
encumbrance created by the Trustee is or will have been recorded, persons and
entities who may hold or acquire or will have held a full or partial interest in
the Notes (custodians, trustees and other fiduciaries who hold or have held a
full or partial interest in the Notes for the benefit of third parties) as well
as the respective directors, officers, shareholders, partners, employees,
agents, servants, representatives, contractors, subcontractors, affiliates,
subsidiaries, participants, any successors and assigns of any and all of the
foregoing (including, but not limited to, any other person or entity who holds
or acquires or will have held a participation or other full or partial interest
in the Notes or any Real Estate, whether during the term of the Notes or as part
of or following a foreclosure of the Notes and including, but not limited to,
any successors by merger, consolidation or acquisition of all or a substantial
portion of the Trustee's assets and business).
"Environmental Laws" means any present and future federal,
state and local laws, statutes, ordinances, rules, regulations, any judicial or
administrative interpretations thereof (including any judicial or administrative
order, consent, decree or judgment), and common law, relating to protection of
human health or the environment, relating to Hazardous Substances, relating to
liability for or costs of Remediation or prevention of Releases of Hazardous
Substances or relating to liability for or costs of other actual or threatened
danger to the environment, and includes, but is not limited to, the following
statutes, as amended, and any regulations promulgated pursuant thereto, and any
state or local statutes, ordinances, rules, regulations addressing similar
issues: the Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA"); the Emergency Planning and Community Right-to-Know Act; the
Hazardous Substances Transportation Act; the Resource Conservation and Recovery
Act (including, but not limited to, Subtitle I relating to underground storage
tanks); the Solid Waste Disposal Act; the Clean Water Act; the Clean Air Act;
the Toxic Substances Control Act; the Safe Drinking Water Act; the Occupational
Safety and Health Act; the Federal Water Pollution Control Act; the Federal
Insecticide, Fungicide and Rodenticide Act; the Endangered Species Act; the
National Environmental Policy Act; and the River and Harbors Appropriation Act;
any law conditioning transfer of property upon a negative declaration or other
approval of a governmental authority of the environmental condition of the
property; any law requiring notification or disclosure of Releases of Hazardous
Substances or other environmental condition of any Real Estate to any
governmental authority or other person or entity, whether or not in connection
with transfer of title to or interest in property; and any law relating to
nuisance, trespass or other causes of action related to any Real Estate.
"Environmental Losses" means any losses, damages, costs, fees,
expenses, claims, suits, judgments, awards, liabilities (including, but not
limited to, strict liabilities), obligations, debts, diminutions in value,
fines, penalties, charges, costs of Remediation (whether or not performed
voluntarily), amounts paid in settlement, consequential damages, litigation
costs, reasonable attorneys' fees, reasonable engineers' fees, reasonable
environmental consultants' fees, and reasonable investigation costs (including,
but not limited to, costs for sampling, testing and analysis of soil, water,
air, building materials, and other materials and substances whether solid,
liquid, or gas), of whatever kind or nature, and whether or not incurred in
connection with any judicial or administrative proceedings, actions, claims,
suits, judgments, or awards. The term "reasonable", as used in this definition,
shall only be construed to determine whether the costs incurred are reasonable
given the particular scope of work required by Environmental Indemnified
Parties.
"Environmental Lien" means any Lien in favor of any
Governmental Authority for Environmental Losses.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Fair Market Value" means with respect to any asset at any
date, the value of the consideration obtainable in a sale of such asset at such
date assuming a sale by a willing seller to a willing purchaser dealing at arm's
length and arranged in an orderly manner over a reasonable period of time having
regard to the nature and characteristics of such asset, as reasonably determined
by the Issuers, or, if such asset shall have been the subject of a relatively
contemporaneous appraisal by an independent third party appraiser who is an MAI
appraiser with at least three years' experience with respect to the related
property type in the related geographic area, the basic assumptions underlying
which have not materially changed since its date, as set forth in such
appraisal.
"Fiscal Quarter" means each of the four consecutive
three-month periods during any Fiscal Year, which begin October 1, January 1,
April 1 and July 1, respectively.
"Fiscal Year" means the Issuers' fiscal year ending September
30.
"GAAP" means generally accepted accounting principles in the
United States of America as in effect from time to time set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board, or in such other statements by such
other Person as may be in general use by significant segments of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Governmental Authority" means any nation or government, any
state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guaranteed Indebtedness" means, as to any Person, any
obligation of such Person guaranteeing any indebtedness, lease, dividend, or
other obligation ("primary obligations") of any other Person (the "primary
obligor") in any manner including, without limitation, any obligation or
arrangement of such Person (i) to purchase or repurchase any such primary
obligation, (ii) to advance or supply funds (a) for the purchase or payment of
any such primary obligation or (b) to maintain working capital or equity capital
of the primary obligor or otherwise to maintain the net worth or solvency or any
balance sheet condition of the primary obligor, (iii) to purchase property,
securities or services primarily for the purpose of assuring the owner of any
such primary obligation of the ability of the primary obligor to make payment of
such primary obligation, or (iv) to indemnify the owner of such primary
obligation against loss in respect thereof.
"Hazardous Substances" means, but is not limited to, any and
all substances (whether solid, liquid, or gas) defined, listed, or otherwise
regulated under the Environmental Laws, or for which liability may be incurred
under the Environmental Laws, including, but not limited to, hazardous wastes,
hazardous substances, hazardous materials, toxic substances, pollutants,
contaminants, petroleum and petroleum products, asbestos and asbestos-containing
materials, polychlorinated biphenyls, lead, radon, radioactive materials,
flammables, and explosives.
"Indebtedness" means with reference to any Person (a) all
indebtedness of such Person for borrowed money (including, without limitation,
reimbursement and all other obligations with respect to surety bonds, letter of
credit and bankers' acceptances, whether or not matured) or for the deferred
purchase price of property or services (other than normal trade accounts payable
incurred in the ordinary course of business), (b) all obligations of such Person
evidenced by notes, bonds, debentures or similar instruments, (c) all
indebtedness of such Person created or arising under any conditional sale or
other title retention agreement with respect to property acquired by such Person
(even though the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession or sale of such
property), provided that the amount of any such indebtedness included in this
clause (c) shall not exceed the Fair Market Value of such property, (d) all
capitalized lease obligations of such Person, (e) all Contingent Obligations of
such Person, (f) all obligations of such Person under interest rate contracts,
(g) all indebtedness of the type referred to in clause (a), (b), (c), (d), (e)
or (f) above secured by (or for which the holder of such indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien against
property or an interest in property owned by such Person, even though such
Person has not assumed or become liable for the payment of such indebtedness,
provided that the amount of any such indebtedness included in this clause (g)
shall not exceed the Fair Market Value of such property, and (h) in the case of
the Issuers, the Notes.
"Indenture" means this Indenture, as amended or supplemented
from time to time.
"Independent" means when used with respect to any specified
Person, any such Person who (i) does not have any direct financial interest, or
any material indirect financial interest, in any Issuer or any Affiliate
thereof, and (ii) is not connected with any Issuer or any Affiliate thereof as
an officer, employee, promoter, underwriter, trustee, partner, director or
Person performing similar functions.
"Interest Period" means (i) for the first Payment Date, the
period commencing on (and including) April 30, 1996 and ending on (but
excluding) the first Payment Date and (ii) for any other Payment Date, the
period beginning on (and including) the immediately preceding Payment Date and
ending on (but excluding) such Payment Date.
"Interest Rate Protection Agreement" means the interest rate
protection agreement entered into by the Issuers pursuant to Section 7(n) of the
Note Purchase Agreement.
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended.
"Investment" means any advance, loan, extension of credit or
capital contribution to, or purchase of any stocks, bonds, notes, debentures or
other securities of, or interest in, any Person, any purchase of any interest in
Real Estate (other than by foreclosure, deed in lieu of foreclosure or other
method of realizing on security), any commitment or other obligation, whether
contingent or absolute, to do any of the foregoing, which commitment or other
obligation does not constitute a Contingent Obligation, and any Capital
Expenditures.
"Issue Date" means the date of first issuance of the Notes
hereunder.
"Lease" means each underlying lease of Real Estate.
"Legal Action" means any claim, action, suit, proceeding or
investigation, whether administrative or judicial in nature.
"LIBO Rate" means, for any Interest Period, the average of the
four rates reported from time to time by Telerate News Service on page 3750
thereof (or such other number of rates as such service may from time to time
report), at which foreign branches of major United States banks offer United
States dollar deposits to other banks for such Interest Period in the London
interbank market at approximately 11:00 a.m., London time, on the second full
Business Day next preceding such Interest Period. If such interest rates shall
cease to be available from Telerate News Service, the LIBO Rate shall be
determined on the basis of the rates at which United States dollar deposits are
offered by the Reference Banks at approximately 11:00 a.m., London time, on the
second full Business Day next preceding such Interest Period to prime banks in
the London interbank market for such Interest Period. The Trustee will request
the principal London office of each of the Reference Banks to provide a
quotation of its rate. If at least two such quotations are provided, the rate
for such Interest Period will be the arithmetic mean of the quotations. If fewer
than two quotations are provided as requested, the rate for such Interest Period
will be the arithmetic mean of the rates quoted by major banks in New York City,
selected by the Trustee, at approximately 11:00 a.m., New York City time, on the
second full Business Day next preceding such Interest Period for loans in United
States dollars to leading European banks for such Interest Period.
"Liens" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever, including, without
limitation, any conditional sale or other title retention agreement, the
interest of a lessor under a capitalized lease obligation, any financing lease
having substantially the same economic effect as any of the foregoing, the
filing, under the Uniform Commercial Code or comparable law of any jurisdiction,
of any financing statement naming the owner of the assets to which such Lien
relates as debtor, and any agreement to grant a Lien.
"Liquidation Expenses" means the following expenses paid to
Persons who are generally in the business of providing goods and services of the
type provided and who are not Affiliates of the Issuers (other than any
Affiliate who is reimbursing a non-Affiliate):
(a) sales brokerage expenses;
(b) in the case of a sale of any Real Estate, other costs of
conveyance customarily paid by a seller of commercial properties of the
type sold in the geographic area in which such Real Estate is located;
(c) in the case of an insured complete or partial destruction
of any Real Estate, the fees of an independent insurance adjustor and
of legal counsel in collecting amounts owed by an insurance company in
connection with such destruction; and
(d) in the case of a condemnation of any Real Estate, legal
and other expenses reasonably necessary in order to maximize net
condemnation proceeds from such Real Estate.
"Liquidation Proceeds" means the amount (i) of Condemnation
Proceeds received in connection with the taking of any Real Estate by exercise
of the power of eminent domain or condemnation and not applied to a Restoration,
(ii) of any Asset Sale Proceeds received in connection with a sale of any Real
Estate, or (iii) received in any other manner with respect to the liquidation of
any Real Estate, including, without limitation, any Casualty Proceeds not
applied to a Restoration.
"Loan-to-Value Ratio" means the ratio, as of any Determination
Date, of (i) the then outstanding principal amount of the Notes to (ii) the
valuation of the Real Estate constituting Collateral as of such date set forth
on Annex 1 hereto.
"Material Adverse Change" means a material adverse change in
any of (a) the financial condition, business, performance, operations, results
of operations or the aggregate net book value of the properties of the Issuers
taken as a whole, (b) the legality, validity or enforceability of this
Indenture, (c) the perfection or priority of the Liens granted pursuant to this
Indenture or the Collateral Documents, (d) the ability of the Issuers to pay any
installment due under the Notes or to perform their obligations under this
Indenture or the ability of the Issuers to perform their respective obligations
under the Collateral Documents, or (e) the rights and remedies of the Holders or
the Trustee under this Indenture.
"Material Adverse Effect" means an effect that would result in
a Material Adverse Change.
"Mortgages" means each Mortgage, Security Agreement and
Financing Statement or Deed of Trust, Security Agreement and Financing
Statement, substantially in the form attached hereto as Exhibit C, in each case
made by an Issuer, executed concurrently herewith or hereafter in favor of the
Trustee on behalf of the Holders, encumbering the Real Estate, as the same may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced in accordance with the terms thereof. Each Mortgage shall be
cross-defaulted (to the extent permitted under local law) to the other
Mortgages.
"Net Liquidation Proceeds" means Liquidation Proceeds minus
Liquidation Expenses.
"Net Operating Income" means, for any period, the excess of
(a) the Issuers' total revenues (other than any Liquidation Proceeds) for such
period, including all investment earnings accrued on funds held under this
Indenture during such period, less (b) Operating Expenses for such period;
provided, however, that for purposes of calculating the Debt Service Coverage
Ratio only, (i) Net Operating Income shall mean the excess of clause (a) less
Property Protection Expenses, and (ii) with respect to any Real Estate comprised
of a commercial office building, Net Operating Income shall mean the amount set
forth in clause (i) multiplied by .85.
"Net Proceeds" means (i) the net amount of all insurance
proceeds received by an Issuer pursuant to Subsections 3.3(a)(i), (iv)(B), and
(vi) of the related Mortgage as a result of such damage or destruction, after
deduction of its reasonable costs and expenses (including, but not limited to,
reasonable counsel fees), if any, in collecting same ("Insurance Proceeds"), or
(ii) the net amount of all awards and payments received by an Issuer with
respect to a taking referenced in Section 3.7 of the related Mortgage, after
deduction of its reasonable costs and expenses (including, but not limited to,
reasonable counsel fees), if any, in collecting the same ("Condemnation
Proceeds"), whichever the case may be.
"Note Purchase Agreement" means the Note Purchase Agreement,
dated March 28, 1996, between Value Property Trust and BlackRock Capital Finance
L.P., as amended, supplemented or otherwise modified from time to time in
accordance with the terms thereof.
"Notes" means the notes described in the Recital hereto.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of
the Board, the Chief Executive Officer, the President, the Chief Operating
Officer, the Chief Financial Officer, the Treasurer, any Assistant Treasurer,
Controller, Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf
of an Issuer by two Officers of such Issuer, one of whom must be the President
or any Vice President, and the other must be the Treasurer, an Assistant
Treasurer, the Controller, the Secretary, an Assistant Secretary, a Senior Vice
President or a Vice President of such Issuer.
"Operating Expenses" means for any period, all Property
Improvement Expenses and Property Protection Expenses for such period.
"Opinion of Counsel" means an opinion from legal counsel
(including, if reasonable, at the option of the Trustee, local legal counsel in
each state where the relevant Collateral is located) who is reasonably
acceptable to the Trustee.
"Payment Date" means the first day of each calendar month (or,
if such day is not a Business Day, the next following Business Day); provided,
however, that the first Payment Date shall be June 3, 1996.
"Permitted Exceptions" shall have the meaning assigned thereto
in the Mortgages.
"Permitted Expenses" means (i) accounting fees for audit and
tax purposes; (ii) state franchise taxes that the Issuers are required to deduct
or withhold; and (iii), to the extent no Event of Default has occurred, general
and administrative expenses of the Issuers in an aggregate amount not to exceed
$2,000,000 during any Fiscal Year.
"Person" means any individual, corporation, partnership, joint
venture, entity, association, joint-stock company, trust or unincorporated
organization (including any subdivision or ongoing business of any such entity
or substantially all of the assets of any such entity, subdivision or business).
"Projected Debt Service Coverage Ratio" means for any Payment
Date as to which an Asset Sale has occurred during the immediately preceding
Interest Period, the ratio of (i) 1/3 of the aggregate DSCR Cash Flow from the
Collateral (other than any Collateral sold in connection with such Asset Sale)
as determined on the immediately preceding Cash Flow Determination Date less
Permitted Expenses and Trustee Expenses to (ii) interest payments calculated at
a rate equal to 9-3/8% per annum on the outstanding principal amount of the
Notes (other than the principal attributable to any Collateral sold in
connection with such Asset Sale) for the immediately preceding Interest Period,
as such principal amount has been reduced pursuant to clauses (iv), (v) and
(vii) of Section 3.08 hereof.
"Property Improvement Expenses" means any costs and expenses,
but only to the extent that they are paid to Persons who are generally in the
business of providing such goods and services and who are not Affiliates of the
Issuers and that such expenses are reasonable for the types of goods or services
provided in the geographical area in which such goods or services are provided,
designed to maintain or improve the value of the Real Estate but not immediately
necessary to operate it that are incurred in connection with the sale of Real
Estate for the purpose of facilitating such sale and maximizing the proceeds
thereof by engaging in such maintenance or improvement of the Real Estate as the
Issuers deem advisable under the circumstances, including but not limited to the
following (to the extent not included in Capital Expenditures):
(a) cosmetic improvements such as painting and landscaping
intended to improve the salability of the property;
(b) build-out or modification to suit a particular prospective
or actual tenant or buyer;
(c) replacement of items which are obsolete or wearing out but
which are not dysfunctional; and
(d) moneys advanced to a tenant or buyer for a purpose similar
to a Property Improvement Expense or Property Protection Expense.
"Property Protection Expenses" means the following costs and
expenses (but only to the extent that (i) they are paid to Persons who are
generally in the business of providing such goods and services and who are not
Affiliates of the Issuers and (ii) that such expenses are reasonable for the
types of goods or services provided in the geographical area in which such goods
or services are provided) with respect to the Real Estate (to the extent not
included in Capital Expenditures):
(a) real estate taxes, assessments and similar charges;
(b) premiums for casualty insurance as required by the
property deed of trust and other insurance, the cost of which is
designated herein as a Property Protection Expense;
(c) utility costs;
(d) payments required under contracts for services to be
provided with respect to the Real Estate, including but not limited to
service contracts for heating, ventilation and air conditioning
systems, elevators, landscape maintenance, pest extermination,
security, model furniture, swimming pool service, trash removal,
answering service and credit checks;
(e) payroll costs and benefits for on-site maintenance
personnel, including but not limited to housekeeping employees, porters
and general maintenance and security employees;
(f) costs required in connection with the enforcement of any
lease, including but not limited to reasonable attorney's fees, charges
for lock changes and storage and moving expenses for furniture,
fixtures and equipment;
(g) advertising and rent-up expenses, including tenant rent
concessions, promotions and existing and prospective tenants, banners
and signs;
(h) third-party out-of-pocket maintenance and repair expenses;
(i) a third-party property management fee payable monthly in
arrears;
(j) any expense, the total cost of which is passed through to
tenants pursuant to executed leases, so long as the tenants are
currently paying each month a good faith estimate of such costs
incurred to date and are obligated to pay any shortfall within one
hundred and twenty (120) days after the end of each Fiscal Year;
(k) usual and customary leasing and sales brokerage expenses
and commissions and the additional payroll and benefit costs of on-site
and temporary leasing employees;
(l) permits, licenses and registration fees and costs;
(m) any expense necessary in order to prevent or cure a
material violation of any applicable law, regulation, code or
ordinance;
(n) any expenses associated with the appeal of real estate
values as it relates to the amount of real estate taxes assessed on the
Real Estate; and
(o) costs and expenses associated with accounting services and
reporting specific to each parcel of Real Estate to the extent not
included as Permitted Expenses.
"Real Estate" means the interest in the parcels of land owned
by the Issuers and listed on Schedule 2 hereto and described in the Mortgages,
together with all of the buildings and other improvements now or hereafter
erected on the Real Estate, and any fixtures appurtenant thereto.
"Reduction Factor" means, with respect to the Notes, as of any
date, a fraction (i) the numerator of which is the aggregate Stated Principal
Balance of the Notes minus the aggregate amount of principal payments sent to
the Trustee, any Paying Agent or any co-paying agent for distribution hereunder
with respect thereto on or prior to such date and (ii) the denominator of which
is the aggregate Stated Principal Balance of the Notes.
"Reference Banks" means Bankers Trust Company, Barclays Bank
plc, The Bank of Tokyo, Ltd and National Westminster Bank plc.
"REIT" means a Person satisfying the conditions of being a
"real estate investment trust" under Sections 856 through 860 of the Internal
Revenue Code and under other applicable law.
"Release" with respect to any Hazardous Substance means, but
is not limited to, any release, deposit, discharge, emission, leaking, leaching,
spilling, seeping, migrating, injecting, pumping, pouring, emptying, escaping,
dumping, disposing, or other movement of Hazardous Substances.
"Release Conditions" for any Payment Date shall be the
following: (i) there shall be no existing Event of Default; (ii) the Debt
Service Reserve Account shall not be underfunded and, since the Issue Date,
shall not have been underfunded for more than one Interest Period; and (iii) the
Projected Debt Service Coverage Ratio for such Payment Date shall exceed the
highest of (a) the Debt Service Coverage Ratio as of the Issue Date, (b) the
Debt Service Coverage Ratio for such Payment Date without giving effect to any
Asset Sales occurring during the immediately preceding Interest Period, and (c)
in the event that the Loan-to-Value Ratio exceeds 50% on such Payment Date, the
Debt Service Coverage Ratio for each prior Payment Date.
"Remediation" means but, is not limited to, any response,
remedial, removal, or corrective action; any activity to clean up, detoxify,
decontaminate, contain or otherwise remediate any Hazardous Substance; any
actions to prevent, cure or mitigate any Release of any Hazardous Substance; any
action to comply with any Environmental Laws or with any permits issued pursuant
thereto; any inspection, investigation, study, monitoring, assessment, audit,
sampling and testing, laboratory or other analysis, or evaluation relating to
any Hazardous Substances or to anything referred to in Article 12 of the
Mortgages.
"Required Holders" means the Holders of a majority in
principal amount of the Notes outstanding on the date of determination.
"Requirement of Law" means with reference to any Person, the
charter and bylaws or other organizational or governing documents or such Person
(including, with particular reference to any Issuer, its declaration of trust or
certificate of incorporation) and all federal, state and local laws, rules and
regulations, including, without limitation, Environmental Laws, and all orders,
judgments, decrees or other determinations of any Governmental Authority or
arbitrator, applicable to or binding upon such Person or any of its property or
to which such Person or any of its property is subject.
"Responsible Officer," when used with respect to the Trustee,
means any trust officer, financial services officer, vice president or assistant
vice president within the Asset Backed Securities Trust Group of the Trustee (or
any successor group of the Trustee) or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his or her
knowledge of and familiarity with the particular subject.
"Restoration" shall have the meaning assigned to it in the
Mortgages.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means that certain Security Agreement,
dated as of the date hereof, in the form attached hereto as Exhibit D, made by
the Issuers, executed concurrently herewith in favor of the Trustee on behalf of
the Holders, as the same may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced in accordance with the terms thereof.
"Stated Maturity Date" means May 1, 1999.
"Stated Principal Balance" means, with respect to a Note, the
denomination of such Note.
"Stock" means shares of capital stock, beneficial or
partnership interests, participations or other equivalents (regardless of how
designated) of or in any Person, whether voting or non-voting.
"Subsidiary" means with respect to any Person, any
corporation, partnership or other business entity of which an aggregate of 50%
or more of the outstanding Stock having ordinary voting power to elect a
majority of the board of directors, managers, trustees or other controlling
Persons is, at the time, directly or indirectly, owned by such Person and/or one
or more Subsidiaries of such Person (irrespective of whether, at the time, Stock
of any other class or classes of such entity shall have or might have voting
power by reason of the happening of any contingency).
"Termination Date" means that date on which all amounts due on
the Notes are paid in full to the Trustee and all amounts due and owing under
this Indenture are paid in full to the Trustee.
"Trapped Funds Account" means that trust account (account no.
67- 7515-413) maintained at the Trustee in the name of the Trustee, under the
sole dominion and control of the Trustee.
"Trustee" means the party named as such above until a
successor replaces it in accordance with the applicable provisions of this
Indenture and thereafter means the successor serving hereunder.
"Trustee Expenses" means, with respect to any Interest Period,
all fees and expenses of the Trustee incurred in connection with the performance
by the Trustee of its duties under this Indenture and the Collateral Documents
(including, without limitation, the reasonable fees and expenses of counsel to
the Trustee).
"UCC" means the Uniform Commercial Code.
"Value Property Trust" means Value Property Trust, a real
estate investment trust formed under the laws of Maryland.
SECTION 1.02. OTHER DEFINITIONS.
<TABLE>
<CAPTION>
Defined in
Term Section
---- -------
<S> <C>
"Event of Default"........................................................ 5.01
"Foreclosure Action"...................................................... 6.02
"Initial Deposit.......................................................... 8.05
"Lockbox"................................................................. 8.06
"Note Register"........................................................... 2.03
"Paying Agent"............................................................ 2.03
"QIB"..................................................................... 2.06
"Registrar"............................................................... 2.03
</TABLE>
SECTION 1.03. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular; and
(5) provisions apply to successive events and transactions.
ARTICLE 2
THE NOTES
SECTION 2.01. FORM AND DATING.
The Notes and the Trustee's certificate of authentication
shall be substantially in the form of Exhibit A-1 hereto, the terms of which are
incorporated in and made a part of this Indenture. The Notes may have notations,
legends or endorsements approved as to form by the Issuers and required by law,
stock exchange rule, agreements to which the Issuers are subject or usage. Each
Note shall be dated the date of its authentication. The Notes shall be issuable
only in minimum denominations of $100,000 and integral multiples of $1,000
thereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
An Officer of each Issuer shall sign the Notes for such Issuer
by manual or facsimile signature. Each Issuer's seal shall be reproduced on the
Notes and may be in facsimile form.
If an Officer whose signature is on a Note no longer holds
that office at the time the Note is authenticated, the Note shall nevertheless
be valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature of the Trustee shall be conclusive
evidence that the Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Issuers signed
by two Officers of each Issuer, authenticate Notes for original issue of up to
the aggregate principal amount of the Notes which in the case of original
issuance shall be $67,379,000. The aggregate principal amount of Notes
outstanding at any time shall not exceed the amount set forth herein.
The Trustee may appoint an authenticating agent acceptable to
the Issuers to authenticate Notes. Unless limited by the terms of such
appointment, an authenticating agent may authenticate Notes whenever the Trustee
may do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has the same
rights as an Agent to deal with the Issuers or an Affiliate of the Issuers.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Issuers shall maintain (i) an office or agency where Notes
may be presented for registration of transfer or for exchange (including any
co-registrar, the "Registrar") and (ii) an office or agency where Notes may be
presented for payment ("Paying Agent"). The Registrar shall keep a register of
the Notes and of their transfer and exchange (the "Note Register"). Each Note
will be registered as to both principal and interest in the Note Register in
which the record of ownership identifying the owners of an interest in the Notes
will be maintained at all times. The transfer of a Note may be effected only (i)
through the surrender of the old Note and its reissuance by the Issuers of the
old Note to the transferee or the issuance by the Issuers of a new Note to the
transferee or (ii) through a book entry in the Note Register. The registration
requirements contained in this Section 2.03 are intended to comply with the
registration requirements of Internal Revenue Code Section 163(f) and Treasury
Regulation ss. 5f.163-1. The Issuers at their expense may appoint one or more
co-registrars and one or more additional paying agents and shall notify the
Registrar, Paying Agent and Trustee promptly thereof. The term "Paying Agent"
includes any additional paying agent. The Issuers may change any Paying Agent,
Registrar or co-registrar without prior notice to any Holder of a Note. The
Issuers shall notify the Trustee and the Trustee shall notify the Holders of the
Notes of the name and address of any Agent not a party to this Indenture. An
Issuer may not act as Registrar, co-registrar or Paying Agent. The Issuers shall
enter into an appropriate agency agreement with any Agent not a party to this
Indenture. The agreement shall implement the provisions of this Indenture that
relate to such Agent. The Issuers shall notify the Trustee of the name and
address of any such Agent. If the Issuers fail to maintain a Registrar or Paying
Agent, or fail to give the foregoing notice, the Trustee shall act as such, and
shall be entitled to appropriate compensation in accordance with Section 6.06
hereof.
The Issuers initially appoint the Trustee as Registrar, Paying
Agent and agent for service of notices and demands in connection with the Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Issuers shall require each Paying Agent other than the
Trustee to agree in writing that the Paying Agent shall hold in trust for the
benefit of the Holders of the Notes or the Trustee all money held by the Paying
Agent for the payment of principal of and interest on the Notes, and shall
notify the Trustee of any Default by the Issuers in making any such payment.
While any such Default continues, the Trustee may require a Paying Agent to pay
all money held by it to the Trustee and to account to the Trustee for any funds
disbursed. The Issuers at any time may require a Paying Agent to pay all money
held by it to the Trustee and to account to the Trustee for any funds disbursed.
Upon payment over to the Trustee, the Paying Agent shall have no further
liability for the funds disbursed to the Trustee.
SECTION 2.05. LISTS OF HOLDERS OF THE NOTES.
The Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of Holders of the Notes. If the Trustee is not the Registrar, the
Issuers shall furnish to the Trustee at least ten Business Days before each
Payment Date and at such other times as the Trustee may request in writing a
list in such form and as of such date as the Trustee may reasonably require of
the names and addresses of Holders of the Notes, including the aggregate
principal amount of the Notes held by each thereof.
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) (i) Subject to Section 2.06(b) hereof, when Notes are
presented to the Registrar with a request to register the transfer or to
exchange them for an equal principal amount of Notes of other denominations, the
Registrar shall register the transfer or make the exchange if its requirements
for such transactions are met; provided, however, that any Note presented or
surrendered for registration of transfer or exchange shall be duly endorsed or
accompanied by a written instruction of transfer in form satisfactory to the
Registrar and the Trustee duly executed by the Holder thereof or by his attorney
duly authorized in writing. To permit registrations of transfer and exchanges,
the Issuers shall issue and the Trustee shall authenticate Notes at the
Registrar's request, subject to such rules as the Trustee may reasonably
require.
(ii) No service charge shall be made to any Holder of a Note
for any registration of transfer or exchange (except as otherwise expressly
permitted herein), but the Issuers may require payment of a sum sufficient to
cover any transfer tax or similar governmental charge payable in connection
therewith (other than such transfer tax or similar governmental charge payable
upon exchanges pursuant to Section 2.10 or 7.04 hereof, which shall be paid by
the Issuers).
(iii) Prior to due presentment to the Trustee for registration
of the transfer of any Note, the Trustee, any Agent and the Issuers may deem and
treat the Person in whose name any Note is registered as the absolute owner of
such Note for the purpose of receiving payment of principal of, premium, if any,
and interest on such Note and for all other purposes whatsoever, whether or not
such Note is overdue, and neither the Trustee, any Agent nor the Issuers shall
be affected by notice to the contrary.
(b) The initial transfer of the Notes shall not be effective
until the purchaser thereof shall have delivered an initial transferee
certificate to the Trustee substantially in the form of Exhibit B to the Note
Purchase Agreement. Any subsequent transferee of a Note shall represent to the
Trustee in a transferee certificate substantially in the form set forth as
Exhibit A-2 which provides, among other things, that such transferee (i) is
either a "qualified institutional buyer" ("QIB") as defined in the Securities
Act or an institutional accredited investor within the meaning of Rule 501 under
the Securities Act, (ii) is aware that the sale of the Notes to it is being made
in reliance on Rule 144A or another exemption under the Securities Act, and
(iii) is acquiring such Notes for its own account or for the account of a QIB.
Any attempted or purported transfer of a Note in violation of this Section
2.06(b) shall be absolutely null and void and shall vest no rights in the
purported transferee. Each Holder of a Note desiring to effect a subsequent
transfer or assignment of a Note shall, and does hereby agree to, indemnify the
Trustee and the Issuers, and their respective Affiliates, against any liability
that may result if the transfer is not exempt from the Securities Act or is not
made in accordance with this Section 2.06(b) or such federal and state
securities laws.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee, or the
Issuers and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of any Note, the Issuers shall issue and the Trustee,
upon the written order of the Issuers signed by two Officers of each Issuer,
shall authenticate a replacement Note if the Trustee's requirements for
replacements of Notes are met. If required by the Trustee or the Issuers in
connection with any loss, theft or destruction of a Note, an indemnity bond must
be supplied by the Holder that is sufficient in the sole and absolute judgment
of the Trustee and the Issuers to protect the Issuers, the Trustee, any Agent or
any authenticating agent from any loss which any of them may suffer if a Note is
replaced. Each Issuer and the Trustee may charge the Holder for its expenses in
replacing a Note.
SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes
authenticated by the Trustee except for those cancelled by it, those delivered
to it for cancellation and those described in this Section 2.08 as not
outstanding.
If a Note is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless the Trustee receives proof satisfactory to it
that the replaced Note is held by a bona fide purchaser.
Subject to Section 2.09 hereof, a Note does not cease to be
outstanding because any Issuer, a Subsidiary of an Issuer or an Affiliate of an
Issuer holds the Note.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal
amount of Notes have concurred in any direction, waiver or consent, Notes owned
by any Issuer, any Subsidiary of an Issuer or any Affiliate of an Issuer shall
be considered as though not outstanding, except that for purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Notes which a Responsible Officer knows to be so owned shall be
so considered. Notwithstanding the foregoing, Notes that are to be acquired by
any Issuer, any Subsidiary of an Issuer or an Affiliate of an Issuer pursuant to
an exchange offer, tender offer or other agreement shall not be deemed to be
owned by such Issuer, such Subsidiary or such Affiliate, until legal title to
such Notes passes to such Issuer, such Subsidiary or such Affiliate, as the case
may be.
SECTION 2.10. TEMPORARY NOTES.
Until definitive Notes are ready for delivery, the Issuers may
prepare and the Trustee shall authenticate temporary Notes. Temporary Notes
shall be substantially in the form of definitive Notes but may have variations
that the Issuers and the Trustee consider appropriate for temporary Notes.
Without unreasonable delay, the Issuers shall prepare and the Trustee, upon
receipt of the written order of the Issuers signed by two Officers of each
Issuer, shall authenticate definitive Notes in exchange for temporary Notes.
Until such exchange, temporary Notes shall be entitled to the same rights,
benefits and privileges as definitive Notes.
SECTION 2.11. CANCELLATION.
The Issuers at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee shall cancel all Notes surrendered for registration of transfer,
exchange, payment, replacement or cancellation and shall destroy cancelled Notes
(subject to the record retention requirement of the Exchange Act), unless the
Issuers direct cancelled Notes to be returned to them. The Issuers may not issue
new Notes to replace Notes that they have redeemed or paid or that have been
delivered to the Trustee for cancellation. All cancelled Notes held by the
Trustee shall be destroyed and certification of their destruction delivered to
the Issuers, unless by a written order, signed by two Officers of each Issuer,
the Issuers shall direct that cancelled Notes be returned to them.
SECTION 2.12. DEFAULTED INTEREST.
If the Issuers default in a payment of interest on the Notes,
they shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders of the Notes on a subsequent special record date, which date shall be at
the earliest practicable date but in all events at least five Business Days
prior to the next payment date, in each case at the rate provided in the Notes.
The Issuers shall fix or cause to be fixed each such special record date and
payment date, and shall, promptly thereafter, notify the Trustee of any such
date. At least 15 days before the special record date, the Issuers (or the
Trustee, at the written instruction of, and in the name of and at the expense of
the Issuers) shall mail to Holders of the Notes a notice that states the special
record date, the related payment date and the amount of such interest to be
paid.
SECTION 2.13. RECORD DATE.
The record date for purposes of determining the identity of
Holders of the Notes entitled to vote or consent to any action by vote or
consent authorized or permitted under this Indenture shall be determined by the
Trustee and shall initially be the Determination Date immediately preceding any
such vote or consent.
SECTION 2.14. CUSIP NUMBER.
The Issuers in issuing the Notes may use a "CUSIP" number and,
if they do so, shall promptly notify the Trustee thereof and the Trustee shall
use the CUSIP number in notices of redemption or exchange as a convenience to
Holders; provided, however, that any such notice may state that no
representation is made as to the correctness or accuracy of the CUSIP number
printed in the notice or on the Notes and that reliance may be placed only on
the other identification numbers printed on the Notes. The Issuers will promptly
notify the Trustee of any change in the CUSIP number.
ARTICLE 3
APPLICATION OF MONIES AND REDEMPTIONS
SECTION 3.01. NOTICES TO TRUSTEE.
If the Issuers elect to redeem Notes pursuant to the optional
redemption provisions of Section 3.06 hereof, they shall furnish to the Trustee,
at least 45 days but not more than 75 days before a redemption date, written
notice setting forth (i) the Payment Date on which the Notes are to be redeemed,
(ii) the principal amount of Notes to be redeemed and (iii) the redemption
price.
SECTION 3.02. PRO RATA REDEMPTION.
Whenever the Notes at any time outstanding are to be redeemed
in part and not in full, the outstanding balance of the Notes shall be reduced
on a pro rata basis based on the Stated Principal Balance of each such Note. The
Trustee is authorized to round to the nearest $1,000 the amount to be redeemed
from each Holder.
For purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Notes shall relate, in
the case of any Notes redeemed or to be redeemed only in part, to the portion of
the principal amount of such Notes which has been or is to be redeemed.
SECTION 3.03. NOTICE OF COMPLETE REDEMPTION.
At least 30 days but not more than 60 days before a redemption
of all outstanding Notes, the Issuers shall mail or cause to be mailed, by first
class mail, a notice of redemption to all Holders at their registered addresses.
The notice shall state:
(a) the name and address of the Paying Agent;
(b) the Payment Date on which the Notes are to be redeemed;
(c) that Notes called for redemption must be surrendered to
the Paying Agent to collect the redemption price;
(d) that, unless the Issuers default in making such redemption
payment, interest on Notes called for redemption ceases to accrue on
and after the Payment Date on which the Notes are to be redeemed;
(e) the aggregate principal amount of the Notes that are being
redeemed; and
(f) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed
on the Notes.
At the Issuers' written request and upon delivery of all of
the items identified in Section 3.03 hereof, the Trustee shall give the notice
of redemption in the Issuers' name and at their expense.
SECTION 3.04. EFFECT OF NOTICE OF COMPLETE REDEMPTION OF ALL
OUTSTANDING NOTES, ETC.
(a) Once notice of redemption is mailed in accordance with
Section 3.03 hereof, Notes called for redemption become due and payable
on the Payment Date on which the Notes are to be redeemed at the
redemption price.
(b) On and after the Payment Date on which the Notes are to be
redeemed, interest shall cease to accrue on the Notes. If any Note
called for redemption shall not be so paid upon surrender for
redemption, interest shall be paid on the unpaid principal, from such
Payment Date until such principal is paid, and to the extent lawful on
any interest not paid on such unpaid principal, in each case at the
rate provided in the Notes.
SECTION 3.05. DEPOSITS INTO THE TRAPPED FUNDS ACCOUNT.
(a) On each Determination Date, the Issuers shall deposit in
the Trapped Funds Account (i) all Cash Flow, (ii) all Asset Sale
Proceeds (less Liquidation Expenses) and, after the occurrence of any
event following which the Trustee has the right under the related
Mortgage to apply Net Proceeds to the then outstanding Notes, all Net
Liquidation Proceeds and (iii) all payments under the Interest Rate
Protection Agreement. Amounts on deposit in the Trapped Funds Account
shall be applied in accordance with Section 3.08 hereof.
(b) So long as no Event of Default shall have occurred and be
continuing, all or a portion of any moneys deposited in the Trapped
Funds Account after a Determination Date and prior to the next Payment
Date shall be invested and reinvested by the Trustee at the Issuers'
direction in writing in one or more Cash Equivalents bearing interest
and which mature on the Business Day preceding the next Payment Date;
provided, however, that any Asset Sale Proceeds shall mature on such
Payment Date. All income or other gain from investments of money held
in the Trapped Funds Account shall be deposited by the Trustee in the
Trapped Funds Account immediately upon receipt, and any loss resulting
from such investments shall be charged to the Trapped Funds Account.
(c) The Issuers hereby grant, assign and transfer to the
Trustee, as security for the Obligations, a lien and security interest
in the Trapped Funds Account and all funds on deposit in such account
until such funds are released in accordance with Section 3.08(vi)
hereof.
SECTION 3.06. OPTIONAL REDEMPTION.
The Issuers shall have the option to redeem the Notes on any
Payment Date, in whole or in part (on a pro rata basis), upon not less than 30
nor more than 60 days' notice, at a redemption price equal to 100% of the
principal amount plus accrued and unpaid interest, if any, thereon to the
applicable Payment Date.
SECTION 3.07. MANDATORY REDEMPTION.
The Issuers shall not be required to make mandatory redemption
payments or sinking fund payments with respect to the Notes, except (i) as set
forth under Sections 3.08(iv), (v) and (vii) hereof, (ii) in connection with the
Notes becoming due and payable pursuant to Section 5.02 hereof, (iii) in
connection with any Casualty or Condemnation in accordance with the terms of the
Mortgages and (iv) to the extent the principal amount of the Notes has not been
fully retired by the Stated Maturity Date.
SECTION 3.08. APPLICATION OF MONIES FROM THE TRAPPED FUNDS ACCOUNT.
Monies from the Trapped Funds Account, other than any monies
received after the Determination Date during the related Interest
Period, shall be distributed by the Trustee on each Payment Date in the
following priority and amounts:
(i) to the Trustee to pay all Trustee Expenses;
(ii) to the Noteholders on a pro rata basis to
pay all accrued but unpaid interest on the
Notes;
(iii) to the Debt Service Reserve Account to
restore it to the Debt Service Reserve
Account Required Level for such Payment
Date;
(iv) in the event of an Asset Sale or, after the
occurrence of any event following which the
Trustee has the right under the related
Mortgage to apply Net Proceeds to the then
outstanding Notes, in the related Interest
Period which occurs on or before the related
Determination Date, or after the
Determination Date of the immediately
preceding Interest Period, to the
Noteholders on a pro rata basis to retire
the principal amount of the Notes (including
any Notes called for redemption pursuant to
Section 3.03 hereof), in an amount equal to
the lesser of (a) 125% of the applicable
Allocated Note Amount and (b) the Net
Liquidation Proceeds;
(v) with respect to any Asset Sale or, after the
occurrence of any event following which the
Trustee has the right under the related
Mortgage to apply Net Proceeds to the then
outstanding Notes, which occurred during a
prior Interest Period, from any amounts
remaining on deposit in the Trapped Funds
Account after giving effect to all
applications pursuant to clauses (i) through
(iv) above, to the Noteholders to retire the
principal amount of the Notes, in an amount
equal to the excess of (a) 125% of the
applicable Allocated Note Amount over (b)
the Net Liquidation Proceeds, to the extent
previously unpaid for such Asset Sale,
Casualty or Condemnation;
(vi) if the Release Conditions have been
satisfied, to the Issuers in an amount equal
to (a) the excess of Cash Flow received
since the immediately preceding Payment Date
over the sum of the amounts described in
clauses (i) through (iii) and (v) above and
(b) the excess of Net Liquidation Proceeds
of each Asset Sale during the immediately
preceding Interest Period over 125% of the
applicable Allocated Note Amount (net of the
amount of Net Liquidation Proceeds applied
to satisfy the requirements of clause (iii)
of the definition of Release Conditions);
and
(vii) to the Noteholders to the extent there are
any remaining monies, to retire the
principal amount of the Notes and all other
Obligations then due and payable.
Any funds deposited in error shall be disbursed to the
rightful owner.
ARTICLE 4
COVENANTS
SECTION 4.01. PAYMENT OF PRINCIPAL AND INTEREST.
The Issuers shall pay the principal of and interest on the
Notes in accordance with the terms, and on the dates set forth in, this
Indenture and the Notes.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Issuers shall maintain in the City of New York, New York
an office or agency where Notes may be presented for registration of transfer or
exchange of Notes and where notices and demands to or upon the Issuers in
respect of the Notes and this Indenture may be served. The Issuers will give
prompt written notice to the Trustee of any change in the location of such
office or agency. If at any time the Issuers shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and, in such event, the Trustee shall act
as the Issuers' agent to receive all such presentations, notices and demands.
The Issuers may also from time to time designate one or more
other offices or agencies (in or outside the City of New York, New York) where
the Notes may be presented for any or all such purposes and may from time to
time rescind such designations; provided, however, that no such designation or
rescission shall in any manner relieve the Issuers of their obligation to
maintain an office or agency in the City of New York, New York for the purposes
set forth in Section 2.03 and for such other purposes. The Issuers will give
prompt written notice to the Trustee of any such designation or rescission and
of any change in the location of any such other office or agency.
SECTION 4.03. OFFICERS' AND ACCOUNTANTS' CERTIFICATES AS TO COMPLIANCE.
To the extent not otherwise required pursuant to Section 4.09,
each Issuer shall deliver to the Trustee, within 90 days after the end of each
Fiscal Year commencing with the 1996 Fiscal Year an Officers' Certificate
stating that in the course of the performance by each signer of such signer's
duties as an Officer of such Issuer such signer would normally have knowledge of
such Issuer's compliance with the covenants contained in Sections 4.01 and 4.02
and 4.04 to 4.21 and the other covenants and conditions applicable to such
Issuer set forth in this Indenture, stating whether or not such signer has
knowledge of any Default in such compliance (such compliance having been
determined without regard to any period of grace or requirement of notice
provided under this Indenture) and, if so, specifying each such Default of which
such signer has knowledge and the nature thereof and what action such Issuer
proposes to take in connection thereto. For purposes of this Section 4.03, one
of the signatories of such Officers' Certificate shall be one of the principal
executive officer, the principal financial officer or the principal accounting
officer of such Issuer.
The Issuers will also deliver to the Trustee the certificates
of accountants required pursuant to Section 4.09.
SECTION 4.04. CONDUCT OF BUSINESS; COMPLIANCE WITH LAWS, ETC.
(a) Subject to the terms and conditions hereof, each Issuer
shall conduct its business in a manner consistent with the terms and
provisions of this Indenture.
(b) Each Issuer shall comply with all Requirements of Law,
contractual obligations, commitments, instruments, licenses, permits
and franchises to the extent required under the terms of the related
Mortgage.
SECTION 4.05. PAYMENT OF TAXES, ETC.
(a) Each Issuer shall pay and discharge before the same shall
become delinquent, all lawful claims, taxes, assessments and
governmental charges or levies in accordance with the terms of the
related Mortgage.
(b) In connection with this Indenture, each Issuer shall
comply with all withholding and reporting requirements imposed by
federal, state and local tax authorities and all distributions under
this Indenture shall be subject to such withholding and reporting
requirements.
(c) The Issuers shall provide the Trustee with an Officers'
Certificate, along with copies of the related cancelled checks,
certifying each tax payment made by the Issuers in accordance with
Section 4.05(a) hereof.
SECTION 4.06. MAINTENANCE OF INSURANCE AND INTEREST RATE
PROTECTION AGREEMENT.
(a) The Issuers shall maintain insurance with responsible and
reputable insurance companies or associations in such amounts and
covering such risks as are required under the Mortgages. If requested
by the Required Holders or the Trustee, the Issuers shall have all such
insurance policies name the Trustee as additional insured or loss
payee. The Issuers will furnish to the Trustee from time to time such
information as may be reasonably requested as to such insurance by the
Trustee.
(b) The Issuers shall maintain the Interest Rate Protection
Agreement in full force and effect.
SECTION 4.07. PRESERVATION OF EXISTENCE, ETC.
Each Issuer shall preserve and maintain its existence, rights
and franchises if the failure to so preserve or maintain, either individually or
in the aggregate, would cause a Material Adverse Effect.
SECTION 4.08. MAINTENANCE OF PROPERTIES, ETC.
Each Issuer shall maintain and preserve (i) in good working
order and condition all of its properties which are used or useful or necessary
in the conduct of its business, and (ii) all rights, remedies, permits,
licenses, guaranties, collateral, insurance, approvals and privileges which are
used or useful or necessary in the conduct of its business to the extent
required under the terms of the related Mortgage.
SECTION 4.09. FINANCIAL STATEMENTS; REPORTS.
To the extent not otherwise required by Section 4.03, the
Issuers shall furnish to the Trustee (for further distribution to the Holders if
requested) in the case of clauses (a) through (d) below, and to any prospective
purchaser of the Notes if requested in the case of clause (e) below:
(a) as soon as available and in any event within 45 days after
the end of each of the first three Fiscal Quarters in each Fiscal Year,
an income statement of the Issuers, a statement of shareholders' equity
of the Issuers, a statement of cash flows of the Issuers, a statement
of deferred and capitalized interest of the Issuers for the period from
the beginning of the current Fiscal Year to the end of such Fiscal
Quarter, and a balance sheet of the Issuers as at the end of such
Fiscal Quarter of the Issuers, setting forth in each case in
comparative form figures for the corresponding period in the preceding
Fiscal Year, certified by the chief financial officer of any Issuer,
together with (i) a certificate of said officer stating that no Default
or Event of Default has occurred and is continuing or, if a Default or
an Event of Default has occurred and is continuing, a statement as to
the nature thereof and the action which the Issuers propose to take
with respect thereto, and (ii) a written discussion and analysis by the
management of the Issuers of the financial statements furnished in
respect of such Fiscal Quarter;
(b) as soon as available and in any event within 90 days after
the end of each Fiscal Year, a balance sheet of the Issuers as of the
end of such year and a statement of income, retained earnings and cash
flows of the Issuers all of which are prepared in accordance with GAAP
and certified without qualifications as to the scope of the audit or
otherwise and without any disclaimer by Ernst & Young or other
independent certified public accountants of recognized national
standing acceptable to the Trustee, together with (i) a certificate of
such accounting firm stating that in the course of the regular audit of
the business of the Issuers, which audit was conducted by such
accounting firm in accordance with generally accepted auditing
standards, such accounting firm has obtained no knowledge that a
Default or Event of Default has occurred and is continuing, or, if in
the opinion of such accounting firm a Default or Event of Default has
occurred and is continuing, a statement as to the nature thereof, and
(ii) a written discussion and analysis by the management of such Issuer
of the financial statements furnished in respect of such Fiscal Year;
(c) as soon as available and, in any event, within 120 days
from and after the end of a Fiscal Year, a copy of the management
letter required to be provided to the Issuers by their independent
certified public accountants which refers in whole or in part to any
inadequacy, defect, problem, qualification or other lack of fully
satisfactory accounting controls utilized by any Issuer; (d) (i) within
5 days after the end of each month, a monthly report substantially in
the form of Annex 2 hereto with respect to each parcel of Real Estate
for such month and on or prior to the Determination Date in the month
immediately following an Asset Sale, an itemized list of all
Liquidation Proceeds received and Liquidation Expenses paid or
reimbursed in connection with such Asset Sale and (ii) on each
Determination Date, an Officers' Certificate certifying the Cash Flow
for the immediately preceding Interest Period; and
(e) upon the request of the Required Holders, to any
prospective purchaser of any Notes, all information that may be
required to be delivered to such purchaser to enable any Holder to sell
to such purchaser its Notes without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144A
under the Securities Act, as such Rule may be amended from time to
time, or (b) any similar rule or regulation hereafter adopted by the
SEC subject to receipt of an appropriate confidentiality agreement from
such prospective purchasers in form and substance reasonably
satisfactory to the Issuers (with appropriate exceptions to permit
resale).
SECTION 4.10. NEW REAL ESTATE, ETC.; INSPECTION AND AUDIT RIGHTS.
(a) Except as provided in Section 4.17 hereof, no Issuer will
acquire any new real estate without the prior written consent of the
Trustee. If any Issuer acquires any Real Estate not subject to a Lien
in favor of the Trustee, such Issuer shall execute, deliver and record
a first priority or the next highest available priority Mortgage or
equivalent security instrument, in favor of the Trustee on behalf and
for the ratable benefit of the Holders, covering such Real Estate, in
form and substance satisfactory to the Trustee, and provide the Trustee
with financing statements, and, upon the acquisition of Real Estate, a
title insurance policy in an amount equal to the acquisition price of
such Real Estate insuring the Trustee's lien on such Real Estate with
only such exceptions as are acceptable to Trustee and such Issuer's fee
title to such Real Estate and including a current ALTA survey thereof,
if required, with a surveyor's certificate in form and substance
satisfactory to the Trustee. Notwithstanding the foregoing, prior to
the acquisition or obtaining control of any Real Estate, such Issuer
shall obtain an appropriate environmental audit or environmental
survey. The Trustee shall not be required to conduct any due diligence
with respect to any Real Estate acquired by the Issuers pursuant to
this Section 4.10(a) and shall be directed by the Required Holders
prior to approving or disapproving any such acquisition.
(b) The Issuers agree that, on reasonable prior notice, they
will permit any representative of the Trustee, during the Issuers'
normal business hours, to examine all the books of account, records,
reports and other papers of the Issuers relating to the Collateral, to
make copies and extracts therefrom, to cause such books to be audited
by Independent accountants selected by the Trustee, and to discuss
their affairs, finances and accounts relating to the Collateral with
their officers, employees and Independent accountants (and by this
provision the Issuers hereby authorize such Independent accountants to
discuss with such representatives such affairs, finances and accounts),
all at such reasonable times and as often as may be reasonably
requested. Any expense incident to the exercise by the Trustee of any
right under this Section 4.10 shall be borne by the Trustee, provided
that if an audit is made during the continuance of an Event of Default,
the expense incident to such audit shall in all cases be borne by the
Issuers.
SECTION 4.11. LIENS, ETC.
None of the Issuers shall create or suffer to exist any Lien
upon or with respect to any of its properties, whether owned by an Issuer as at
the Issue Date or thereafter acquired, or assign any right to receive income,
except:
(a) Liens directly or indirectly created in favor of the
Holders pursuant to this Indenture and the Collateral Documents;
(b) [intentionally omitted];
(c) Liens arising by operation of law in favor of materialmen,
mechanics, warehousemen, carriers, lessors or other similar Persons
incurred by an Issuer in the ordinary course of business which secure
its obligations to such Person; provided, however, that such Issuer (i)
is not in default in respect of such payment obligation to such Person
or (ii) is in default with respect to such payment obligation but is,
in good faith and by appropriate proceedings, diligently contesting
such obligation and adequate provision is made for the payment thereof
in accordance with Sections 3.5(i)-(ix) of the related Mortgage and
such default, either individually or in the aggregate, would not cause
a Material Adverse Effect;
(d) Liens (excluding Environmental Liens) securing taxes,
assessments or governmental charges or levies; provided, however, that
no Issuer is in default in respect of any payment obligation with
respect thereto;
(e) Liens incurred or pledges and deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance, old- age pensions and other social security
benefits; and
(f) Permitted Exceptions.
SECTION 4.12. INDEBTEDNESS.
None of the Issuers shall, directly or indirectly, incur,
create or assume any Indebtedness, except:
(a) Indebtedness represented by the Notes, the Collateral
Documents and the Indenture;
(b) Contingent Obligations constituting endorsements for
collection or deposit in the ordinary course of business;
(c) current liabilities in respect of taxes, assessments and
governmental charges or levies incurred, or claims for labor,
materials, inventory, services, supplies and rentals incurred, or for
goods or services purchased, in the ordinary course of business of the
Issuers;
(d) indemnification claims under the declaration of trust or
certificate of incorporation of any Issuer;
(e) other Indebtedness (x) in an aggregate principal amount
not to exceed $1,000,000 for all of the Issuers in the aggregate at any
time, (y) as to which the payment of principal of (and premium, if any)
and interest and other payment obligations in respect of such
Indebtedness shall be subordinate to the prior payment in full of the
Notes and shall not occur prior to the Termination Date, and (z) as to
which the holder or holders thereof cannot compel the acceleration of
the Notes; and
(f) Indebtedness disclosed in the schedules to the Mortgages.
SECTION 4.13. TRANSACTIONS WITH AFFILIATES.
None of the Issuers shall: (a) make any Investment in an
Affiliate; (b) transfer, sell, lease, assign or otherwise dispose of any assets
to any such Affiliate (except for distributions and dividends of amounts not
otherwise prohibited by this Indenture); (c) merge into or consolidate with or
purchase or acquire assets from any Affiliate; (d) repay any Indebtedness to any
Affiliate (except under existing retirement or deferred compensation plans or
Indebtedness incurred in a transaction meeting the requirements set forth in
clauses (i) and (iv) below); or (e) enter into any other transaction directly or
indirectly with or for the benefit of any such Affiliate (including, without
limitation, guaranties and assumptions of obligations of any such Affiliate)
except for (i) transactions in the ordinary course of business on a basis no
less favorable to any Issuer as would be obtained in a comparable arm's length
transaction with a Person which is not an Affiliate, (ii) compensation to
directors and trustees commensurate with current compensation levels, (iii)
salaries and other employee compensation and benefits to officers of any Issuer
commensurate with the compensation levels in effect as of the date hereof as may
reasonably be adjusted over time but in no event to increase by more than 10%
annually in the aggregate, (iv) any transaction required or otherwise permitted
by this Indenture, and (v) the reimbursement of Affiliates for Permitted
Expenses, Property Protection Expenses and Property Improvement Expenses
otherwise permitted to be paid by the Issuers under this Indenture.
SECTION 4.14. NEW SUBSIDIARIES.
None of the Issuers shall incorporate or otherwise organize
any Subsidiary after the date hereof.
SECTION 4.15. LIMITATION ON INVESTMENTS.
None of the Issuers shall, directly or indirectly, make any
Investment from and after the Issue Date except Investments approved by the
Board of Trustees of any Issuer in Cash Equivalents.
SECTION 4.16. BUSINESS; AMENDMENT OF CERTIFICATE OF INCORPORATION.
None of the Issuers shall (i) make any changes in its business
objectives, purposes, or operations as in effect on the date hereof or engage in
any business other than the operation and liquidation of the Real Estate, or
(ii) amend Article III, IV, VII or VIII of its certificate of incorporation
other than in accordance with Section 3.19 of the related Mortgage.
SECTION 4.17. ACQUISITIONS.
None of the Issuers shall acquire any of the assets or capital
Stock of any Person without the prior written consent of the Trustee, except for
the acquisition of land for purchase price not to exceed $400,000 to be
developed into a parking lot for the Real Estate known as Paseo Padre and
located in Freemont, California.
SECTION 4.18. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
None of the Issuers shall consolidate or merge with or into
(whether or not an Issuer is the surviving entity), or sell, assign, transfer,
lease, convey or otherwise dispose of all or substantially all of its properties
or assets in one or more related transactions to, another Person.
SECTION 4.19. GUARANTEED INDEBTEDNESS.
None of the Issuers shall incur any Guaranteed Indebtedness
except (i) by endorsement of instruments or items of payment for collection or
deposit to the general account of such Person, and (ii) for Guaranteed
Indebtedness incurred for the benefit of an Issuer if the primary obligation is
permitted by this Indenture for such Issuer to incur (and such Guaranteed
Indebtedness shall be treated as a primary obligation for all purposes hereof).
SECTION 4.20. LEASE OBLIGATIONS.
(a) None of the Issuers shall create or suffer to exist any
obligations as lessee (i) for the rental or hire of real or personal
property in connection with any sale and leaseback transaction, or (ii)
for the rental or hire of real or personal property of any kind under
other leases or agreements to lease.
(b) None of the Issuers shall become or remain liable as
lessee or guarantor or other surety with respect to any lease, whether
an operating lease or a capitalized lease, of any property (whether
real or personal or mixed), whether owned as at the Issue Date or
acquired thereafter, which an Issuer has sold or transferred as of the
Issue Date or thereafter.
SECTION 4.21. LIMITATION ON ASSET SALES.
None of the Issuers shall complete any Asset Sale unless 100%
of the consideration for such disposition consists of Cash or Cash Equivalents.
ARTICLE 5
DEFAULTS AND REMEDIES
SECTION 5.01. EVENTS OF DEFAULT.
Each of the following events (whatever the reason for such
event) constitutes an "Event of Default":
(a) The Issuers shall fail to make any payment in respect of
principal of the Notes at their Stated Maturity Date or on the Payment
Date after notice of redemption of the Notes has been given by the
Trustee in accordance with Section 3.03 hereof or under Section
3.08(iv), (v) or (vii) of this Indenture when the same becomes due and
payable, or the Issuers shall fail to make any payment when due of
interest on the Notes and such failure to pay interest shall continue
unremedied for more than one Business Day; or
(b) Any representation or warranty made or deemed made by any
Issuer (or any of its officers) under the Note Purchase Agreement or
any of the Collateral Documents shall prove to have been untrue or
incorrect in any material respect when made or deemed made and such
breach of a representation or warranty shall not have been cured within
30 days after any Issuer has knowledge thereof such that it remains
untrue or incorrect in any material respect as of such later date; or
(c) Any Issuer shall fail to perform or observe in any
material respect any term, covenant or agreement contained in (i)
Article 4 or any other term, covenant or agreement contained in this
Indenture or (ii) the Collateral Documents, if such failure shall
remain unremedied for 30 days after the earlier of the date on which
(A) an Officer of such Issuer becomes aware of such failure or (B)
written notice thereof shall have been given to such Issuer by the
Trustee or the Holders; provided that, if such non-monetary Default is
susceptible of cure but cannot reasonably be cured within such 30 day
period and if the Issuers shall have in good faith commenced to cure
such Default within such 30 day period and thereafter diligently and
expeditiously proceed to cure the same, such 30 day period shall be
extended for such time as is reasonably necessary for the Issuers in
the exercise of due diligence to cure such Default, but in no event
shall such period, in the case of clause (i) above, exceed 90 days
after any Issuer first obtains actual knowledge of such default unless
a longer period for such default is permitted in any Collateral
Document; or
(d) Any Issuer shall fail, after any applicable grace period,
to pay any principal of or premium, if any, or interest on any of its
Indebtedness in an amount exceeding $250,000 (excluding the Notes),
when the same becomes due and payable (whether by scheduled maturity,
required prepayment, acceleration, demand or otherwise); or any other
event shall occur or condition shall exist under any agreement or
instrument relating to any such Indebtedness, if the effect of such
event or condition is to accelerate, or to permit the acceleration of,
the maturity of such Indebtedness; or any such Indebtedness shall be
declared to be due and payable, or required to be prepaid (other than
by a regularly scheduled required prepayment), prior to the stated
maturity thereof; provided, however, that in each such case if any such
Issuer is contesting its obligation to pay any such Indebtedness in
accordance with the standards set forth in Sections 3.5 (i) - (ix) of
the related Mortgage, it shall not constitute an Event of Default
hereunder; or
(e) Any Issuer shall generally not pay its debts as such debts
become due except such debts that are the subject of a good faith
dispute, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of
creditors, or any proceeding shall be instituted by or against such
Issuer seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law
relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment
of a receiver, trustee or other similar official for it or for any
substantial part of its property and, in the case of any such
proceedings instituted against such Issuer (but not instituted by it),
either such proceedings shall remain undismissed or unstayed for a
period of 60 days or any of the actions sought in such proceedings
shall occur; or any Issuer shall take any action to authorize any of
the actions set forth above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess
of $250,000 shall be rendered against any Issuer and either (i)
enforcement proceedings shall have been commenced by any creditor upon
such judgment or order, or (ii) there shall be any period of ten
consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in
effect, provided that in the case of either circumstance described in
(i) or (ii) above, it shall not constitute an Event of Default
hereunder if such Issuer shall have posted security in the amount of
any such judgment to insure the payment thereof; or
(g) Except for releases of Collateral pursuant to Section 8.02
hereof, the Collateral Documents shall, for any reason, cease to create
a valid Lien on Collateral having a value of $250,000 or more purported
to be covered thereby, or such Lien shall cease to have the priority
Lien status initially granted and be a perfected Lien as to Collateral
having a value of $250,000 or more; or
(h) The occurrence of a Change of Control.
SECTION 5.02. ACCELERATION.
If an Event of Default (other than an Event of Default
specified in clause (e) of Section 5.01 hereof) occurs and is continuing, the
Trustee by notice to the Issuers may, or upon written notice from the Required
Holders shall, or the Required Holders by written notice to the Issuers and the
Trustee may, declare all the Notes to be due and payable immediately. Upon such
declaration, the principal of and interest on the Notes shall be due and payable
immediately. If an Event of Default specified in clause (e) of Section 5.01
hereof occurs, such an amount shall ipso facto become and be immediately due and
payable without any declaration or other act on the part of the Trustee or any
Holder. The Required Holders by written notice to the Trustee may on behalf of
all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived.
SECTION 5.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee
shall pursue any available remedy (under this Indenture, the Collateral
Documents or otherwise) to collect the payment of principal and interest on the
Notes or to enforce the performance of any provision of the Notes, this
Indenture or the Collateral Documents.
The Trustee may maintain a proceeding even if it does not
possess any of the Notes or does not produce any of them in the proceeding. A
delay or omission by the Trustee or any Holder of a Note in exercising any right
or remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. All remedies
are cumulative to the extent permitted by law.
SECTION 5.04. WAIVER OF PAST DEFAULTS.
The Required Holders by notice to the Trustee may on behalf of
the Holders of all of the Notes waive an existing Default or Event of Default
and its consequences under this Indenture, except a continuing Default or Event
of Default in the payment of the principal of or interest on the Notes. Upon any
such waiver, such Default shall cease to exist, and any Event of Default arising
therefrom shall be deemed to have been cured for every purpose of this Indenture
and the Collateral Documents; but no such waiver shall extend to any subsequent
or other Default or Event of Default.
SECTION 5.05. DIRECTION BY REQUIRED HOLDERS.
The Required Holders shall direct the time, method and place
of conducting any proceeding for exercising any remedy available to the Trustee
or exercising any trust or power conferred on it or them. However, the Trustee
may refuse to follow any direction that conflicts with the law, this Indenture
or the Collateral Documents, that the Trustee determines (in its sole and
absolute discretion) may be unduly prejudicial to the rights of other Holders of
Notes or that may involve the Trustee in personal liability.
SECTION 5.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice
of a continuing Event of Default;
(b) the Required Holders make a written request to the Trustee
to pursue the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if
requested, provide to the Trustee indemnity satisfactory to the Trustee
against any loss, liability or expense;
(d) the Trustee does not comply with the request within 30
days after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 30-day period the Required Holders do not give
the Trustee a direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the rights of another
Holder of a Note or to obtain a preference or priority over another Holder of a
Note.
SECTION 5.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the
right of any Holder of a Note to receive payment of principal and interest on
the Note, on or after the respective due dates expressed in the Note, or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of the Holder,
except that no Holder shall have the right to institute any such suit if and to
the extent that the institution or prosecution thereof or the entry of judgment
therein would under applicable law result in the surrender, impairment, waiver
or loss of the Liens pursuant to the Collateral Documents upon any property
subject to such Liens.
SECTION 5.08. COLLECTION SUIT.
If an Event of Default specified in Section 5.01(a) hereof
occurs and is continuing, the Trustee is authorized to recover judgment in its
own name and as trustee of an express trust against the Issuers for the whole
amount of principal of and interest remaining unpaid on the Notes and interest
on overdue principal and, to the extent lawful, interest and such further amount
as shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the Trustee
and its agents and counsel.
SECTION 5.09. PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Trustee (including any claim for the reasonable compensation,
expenses, disbursements and advances of the Trustee and its agents and counsel)
and the Holders of the Notes allowed in any judicial proceedings relative to the
Issuers (or any other obligor upon the Notes), the Issuers' creditors or the
Issuers' property and shall be entitled and empowered to collect, receive and
distribute any money or other property payable or deliverable on any such claims
and any custodian in any such judicial proceeding is hereby authorized by each
Holder of a Note to make such payments to the Trustee, and in the event that the
Trustee shall consent to the making of such payments directly to the Holders of
the Notes, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee and its agents
and counsel, and any other amounts due the Trustee under Section 6.06 hereof. To
the extent that the payment of any such compensation, expenses, disbursements
and advances of the Trustee or its agents and counsel, and any other amounts due
the Trustee under Section 6.06 hereof out of the estate in any such proceeding,
shall be denied for any reason, payment of the same shall be secured by a Lien
on, and shall be paid out of, any and all distributions, dividends, money,
securities and other properties which the Holders of the Notes may be entitled
to receive in such proceeding whether in liquidation or under any plan of
reorganization or arrangement or otherwise. Nothing herein contained shall be
deemed to authorize the Trustee to authorize or consent to or accept or adopt on
behalf of any Holder of a Note any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder of a
Note thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder of a Note in any such proceeding.
SECTION 5.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it
shall pay out the money in the following order:
First: to the Trustee and its agents and attorneys for amounts
due under Section 6.06 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Trustee and the costs
and expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the
Notes for interest and, to the extent all due and unpaid interest has been paid,
principal, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for interest and principal, respectively;
Third: without duplication, to Holders for any other
Obligations owing to the Holders under this Indenture, the Notes or the
Collateral Documents; and
Fourth: to the Issuers or their successors or assigns or as a
court of competent jurisdiction may direct.
Any funds collected pursuant to this Section 5.10 shall be
disbursed on the next Payment Date to Holders of the Notes of record on the 15th
day of the calendar month immediately preceding such Payment Date.
SECTION 5.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under
this Indenture or in any suit against the Trustee for any action taken or
omitted by it as a Trustee, a court in its discretion may require the filing by
any party litigant in the suit of an undertaking to pay the costs of the suit,
and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 5.06 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
SECTION 5.12. RESTORATION OF RIGHTS AND REMEDIES.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case the Issuers, the
Trustee and the Holders will, subject to any determination in such proceeding,
be restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Holder will continue
as though no such proceeding had been instituted.
ARTICLE 6
TRUSTEE
SECTION 6.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in their exercise, as a
prudent person would exercise or use under the circumstances in the conduct of
his or her own affairs. Any permissive right of the Trustee contained in this
Indenture shall not be construed as a duty.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined
solely by the express provisions of this Indenture and the Collateral
Documents and the Trustee undertakes to perform only those duties that
are specifically set forth in this Indenture and no others, and no
implied covenants or obligations shall be read into this Indenture
against the Trustee; and
(ii) in the absence of bad faith on its part, the
Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee, and conforming to the requirements
of this Indenture. However, the Trustee shall examine the certificates
and opinions to determine whether or not they conform to the
requirements of this Indenture, if any.
(c) The Trustee may not be relieved from liabilities for its
own grossly negligent action, its own grossly negligent failure to act,
or its own willful misconduct, except that:
(i) this paragraph does not limit the effect of
paragraph (b) of this Section 6.01;
(ii) the Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer, unless it is
proved that the Trustee was grossly negligent in ascertaining the
pertinent facts;
(iii) the Trustee shall not be liable with respect to
any action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 5.05 hereof;
(iv) for purposes of this Indenture, the Trustee
shall not be deemed to have notice of any Default, Event of Default or
any other fact, event or circumstance the occurrence or existence of
which may impose duties upon the Trustee hereunder unless a Responsible
Officer of the Trustee has actual knowledge thereof;
(v) the Trustee shall not be under any obligation to
appear in, prosecute or defend any legal action that is not incidental
to its duties as Trustee in accordance with this Indenture, and if it
does, then all legal expenses and costs of such action shall be
expenses and costs of the Issuers, and the Trustee shall be entitled to
be reimbursed therefor;
(vi) neither the Trustee nor any of its directors,
officers, employees, agents or control persons shall be responsible for
any act or omission of any custodian, Paying Agent or Registrar that is
not an Affiliate of the Trustee and that is selected other than by the
Trustee (unless such Person is an Affiliate of the Trustee), performed
or omitted in compliance with any custodial or other agreement, or any
act or omission of the Issuers, including without limitation, in
connection with actions taken pursuant to this Indenture; and
(vii) the Trustee shall not be charged with knowledge
of any act, failure to act or breach of any Person upon the occurrence
of which the Trustee may be required to act, unless a Responsible
Officer obtains actual knowledge of such failure or notice thereof is
provided in accordance with the terms of this Indenture.
(d) Whether or not therein expressly so provided, every
provision of this Indenture that in any way relates to the Trustee is
subject to paragraphs (a), (b) and (c) of this Section 6.01.
(e) No provision of this Indenture shall require the Trustee
to expend or risk its own funds or incur any liability. The Trustee
shall be under no obligation to exercise any of its rights and powers
under this Indenture at the request of any Holders of Notes, unless
such Holder shall have offered to the Trustee security and indemnity
satisfactory to it against any loss, liability or expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the
Issuers. Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by this Indenture or by law.
(g) Subject to Section 6.01(c)(ii) hereof, none of the Trustee
or any of its directors, officers, employees, agents, or "control
persons" (within the meanings of the Securities Act) shall be
personally liable for any action reasonably taken, suffered or omitted
by it in good faith and believed by it to be authorized or within the
discretion or rights or powers conferred upon it by this Indenture.
(h) Prior to the occurrence of an Event of Default hereunder
and after the curing of all Events of Default which may have occurred,
the Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, approval,
bond or other paper or document.
(i) Unless otherwise specifically required by law, the Trustee
shall not be required to post any surety bond of any kind in connection
with the execution or performance of its duties hereunder.
(j) The Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by through
agents or attorneys.
SECTION 6.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document
believed by it to be genuine and to have been signed or presented by
the proper Person. The Trustee need not investigate any fact or matter
stated in the document.
(b) Before the Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The
Trustee may consult with counsel, accountants and other experts and the
written advice of such counsel, accountants and other experts or any
Opinion of Counsel shall be full and complete authorization and
protection from liability in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(c) Unless otherwise specifically provided in this Indenture,
any demand, request, direction or notice from the Issuers shall be
sufficient if signed by an Officer of each Issuer.
(d) Without limitation and notwithstanding any other provision
herein, the Trustee (i) shall not be required to take any action
regarding any Real Estate, including, without limitation, foreclosure
or other action (collectively, a "Foreclosure Action"), which could
result in the Trustee being deemed to be an "operator" under CERCLA, if
in the reasonable judgment of the Trustee by taking such action it
would incur unacceptable environmental liability, and (ii) shall have
the right, prior to taking any Foreclosure Action with respect to any
Real Estate, to obtain a "Phase One" or other environmental report
concerning such Real Estate prepared by a consultant of its choice and
to be reimbursed for the reasonable cost thereof pursuant to Section
6.06 hereof, if, in its reasonable judgment, such report is necessary
in order to assess the matters described in clause (i) hereof. In
making an evaluation described under clause (i) of the preceding
sentence, the Trustee shall assess its potential liability as compared
to the indemnity available pursuant to Section 6.06 hereof, or from any
Holder pursuant to Section 6.01(e) hereof.
SECTION 6.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become
the owner or pledgee of Notes and may otherwise deal with the Issuers or any
Affiliate of the Issuers with the same rights it would have if it were not the
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days or resign. Any Agent may
do the same with like rights and duties. The Trustee is also subject to Section
6.09 hereof, as specified therein.
SECTION 6.04. DISCLAIMER.
The Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Indenture or of the Notes,
it shall not be accountable for the Issuers' use of the proceeds from the Notes
or any money paid to the Issuers or upon the Issuers' direction under any
provision of this Indenture, and it shall not be responsible for any statement
or recital herein or any statement in the Notes or any other document in
connection with the sale of the Notes or pursuant to this Indenture other than
its certificate of authentication. The Trustee makes no representation as to the
validity, value or condition of any property covered or intended to be covered
by the Lien of the Collateral Documents or any part thereof or as to the title
of the Issuers to such property or as to the security afforded by the Collateral
Documents or hereby.
SECTION 6.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and
if it is known to a Responsible Officer of the Trustee, the Trustee shall mail
to Holders of Notes a notice of the Default or Event of Default within 30 days
after the Trustee has actual knowledge thereof.
SECTION 6.06. COMPENSATION AND INDEMNITY.
The Issuers shall pay to the Trustee reasonable compensation
for its acceptance of this Indenture and services hereunder as set forth in the
letter agreement dated April 24, 1996. The Trustee's compensation shall not be
limited by any law on compensation of a trustee of an express trust. The Issuers
shall reimburse the Trustee promptly upon request for all reasonable
disbursements and expenses incurred or made by it in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation, disbursements and expenses of the Trustee's agents and counsel.
The Issuers and Value Property Trust shall indemnify and hold
harmless the Trustee against any and all losses, claims, damages, penalties,
fines, liabilities or expenses incurred by it arising out of or in connection
with the acceptance or administration of its duties under this Indenture and the
Collateral Documents or the enforcement of this Indenture or any of the
Collateral Documents without gross negligence or bad faith on its part,
including, but not limited to, all losses, claims, damages, penalties, fines,
liabilities or expenses arising in connection with the Trustee having to qualify
to do business or pay taxes, in each case in any State where the Real Estate is
located, any Foreclosure Action or the release or presence of any Hazardous
Substance at or from the Real Estate whether foreseeable or unforeseeable,
regardless of the source of such release or when such release occurred or such
presence is discovered (it being understood that Value Property Trust shall have
no liability or obligation with regard to the indebtedness represented by the
Notes). The foregoing indemnity includes, without limitation, all costs of
removal, remediation of any kind, and disposal of such Hazardous Substances
(whether or not such Hazardous Substances may be legally allowed to remain in
the Real Estate if removal or remediation is prudent), after a foreclosure, the
cost of determining whether the Real Estate that was the subject of the
foreclosure is in compliance and causing such Real Estate to be in compliance
with all applicable Environmental Laws, and the Trustee's reasonable attorneys'
and consultants' fees and court costs relating thereto. The Trustee shall notify
the Issuers and Value Property Trust promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Issuers and Value Property
Trust shall not relieve the Issuers or Value Property Trust of their respective
obligations hereunder. The Issuers shall defend the claim and the Trustee shall
cooperate in the defense. The Trustee may have separate counsel and the Issuers
shall pay the reasonable fees and expenses of such counsel. The Issuers and
Value Property Trust need not pay for any settlement made without their consent,
which consent shall not be unreasonably withheld.
The respective obligations of the Issuers and Value Property
Trust under this Section 6.06 shall survive the satisfaction and discharge of
this Indenture.
To secure the payment obligations of the Issuers and Value
Property Trust in this Section, the Trustee shall have a Lien prior to the Notes
on all money or property held or collected by the Trustee, except that held in
trust to pay principal and interest on particular Notes. Such Lien shall survive
the satisfaction and discharge of this Indenture.
When the Trustee incurs expenses or renders services after an
Event of Default specified in Section 5.01(e) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
SECTION 6.07. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Issuers. The
Required Holders may remove the Trustee by so notifying the Trustee and the
Issuers in writing. The Issuers may remove the Trustee if:
(a) the Trustee fails to comply with Section 6.09 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee
or its property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in
the office of Trustee for any reason, the Issuers shall promptly appoint a
successor Trustee with the consent of the Required Holders.
If a successor Trustee does not take office within 60 days
after the retiring Trustee resigns or is removed, the retiring Trustee, the
Issuers, or the Holders of at least 10% in principal amount of the then
outstanding Notes may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
If the Trustee after written request by any Holder of a Note
who has been a Holder of a Note for at least six months fails to comply with
Section 6.09 hereof, such Holder of a Note may petition any court of competent
jurisdiction for the removal of the Trustee and the appointment of a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Issuers. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of such
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee provided all sums
owing to the retiring Trustee hereunder have been paid and subject to the Lien
provided for in Section 6.06 hereof. Notwithstanding replacement of the Trustee
pursuant to this Section, the Issuers' obligations under Section 6.06 hereof
shall continue for the benefit of the retiring Trustee.
SECTION 6.08. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation or association without any further act
shall be the successor Trustee.
SECTION 6.09. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder which shall be
a corporation organized and doing business under the laws of the United States
of America or of any state thereof authorized under such laws to exercise
corporate trust powers, shall be subject to supervision or examination by
federal or state authority, shall have a combined capital and surplus of at
least $100 million as set forth in its most recent published annual report of
condition, and (i) shall have a long-term unsecured debt rating of one of the
two highest rating categories by Standard & Poor's Ratings Services, Moody's
Investor Services, Inc. and Fitch Investors Service, L.P. or (ii) in the event
that the condition set forth in clause (i) above is not satisfied, any rating
agency which has issued a rating of the Notes shall have confirmed that such
failure to satisfy such condition shall not adversely affect the then current
rating of the Notes by such rating agency.
ARTICLE 7
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 7.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 7.02 hereof, the Issuers and the
Trustee may amend or supplement this Indenture and the Notes without the consent
of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for certain amendments to the Collateral
Documents expressly called for therein pursuant to Section 8.01 hereof;
(c) to execute and deliver any documents necessary or
appropriate to release Liens on any Collateral as permitted by Section
8.03 or 8.04 hereof; or
(d) to make any change that would provide any additional
rights or benefits to the Holders of the Notes or that does not
materially adversely affect the legal rights hereunder of any Holder of
the Notes.
Upon the request of the Issuers accompanied by a resolution of
the Board of Directors or Trustees of each Issuer authorizing the execution of
any such amended or supplemental Indenture, and upon receipt by the Trustee of
the documents described in Section 7.05 hereof, the Trustee shall join with the
Issuers in the execution of any amended or supplemental Indenture authorized or
permitted by the terms of this Indenture and to make any further appropriate
agreements and stipulations which may be therein contained, but the Trustee
shall not be obligated to enter into any such amended or supplemental Indenture
which affects its own rights, duties or immunities under this Indenture, the
Collateral Documents or otherwise. The Issuers shall give the Holders of the
Notes notice of the effectiveness of any amendment under this Section 7.01.
SECTION 7.02. WITH CONSENT OF HOLDERS OF NOTES.
The Issuers and the Trustee may amend or supplement this
Indenture, the Notes, or any amended or supplemental Indenture with the written
consent of the Required Holders (including consents obtained in connection with
a tender offer or exchange offer for the Notes), and any existing Default or
Event of Default and its consequences or compliance with any provision of this
Indenture or the Notes may be waived with the consent of the Required Holders
(including consents obtained in connection with a tender offer or exchange offer
for the Notes).
Upon the request of the Issuers accompanied by a resolution
the Board of Directors or Trustees of each Issuer authorizing the execution of
any such amended or supplemental Indenture, and upon the filing with the Trustee
of evidence satisfactory to the Trustee of the consent of the Required Holders
as aforesaid, and upon receipt by the Trustee of the documents described in
Section 7.05 hereof, the Trustee shall join with the Issuers in the execution of
such amended or supplemental Indenture unless such amended or supplemental
Indenture affects the Trustee's own rights, duties or immunities under this
Indenture, or otherwise, in which case the Trustee may in its discretion, but
shall not be obligated to, enter into such amended or supplemental Indenture.
After an amendment, supplement or waiver under this Section
becomes effective, the Issuers shall mail to the Holders of Notes affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Issuers to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amended or
supplemental Indenture or waiver. Subject to Sections 5.04 and 5.07 hereof, the
Required Holders may waive compliance in a particular instance by the Issuers
with any provision of this Indenture or the Notes. However, without the consent
of each Holder affected, an amendment or waiver may not (with respect to any
Notes held by a nonconsenting Holder of Notes):
(a) reduce the principal amount of Notes whose Holders must
consent to an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of
any Note or reduce the redemption price of the Notes;
(c) reduce the rate of or change the time for payment of
interest on any Note;
(d) waive a Default or Event of Default in the payment of
principal of or interest on the Notes (except a rescission of
acceleration of the Notes by the Required Holders and a waiver of the
payment default that resulted from such acceleration);
(e) make any Note payable in money other than that stated in
the Notes;
(f) make any change in the provisions of this Indenture
relating to waivers of past Defaults or the rights of Holders of Notes
to receive payments of principal of or interest on the Notes;
(g) directly or indirectly release Liens on all or
substantially all of the Collateral except in connection with a merger,
consolidation or disposition of assets permitted under this Indenture;
(h) make any change in the foregoing amendment and waiver
provision; or
(i) waive a redemption payment with respect to any Note.
SECTION 7.03. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder of a Note.
The Issuers may fix a record date for determining which
Holders of the Notes must consent to such amendment, supplement or waiver. If
the Issuers fix a record date, the record date shall be fixed at (i) the later
of 30 days prior to the first solicitation of such consent or the date of the
most recent list of Holders of Notes furnished to the Trustee prior to such
solicitation pursuant to Section 2.05 hereof or (ii) such other date as the
Issuers shall designate.
SECTION 7.04. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Note thereafter authenticated. The
Issuers in exchange for all Notes may issue and the Trustee shall authenticate
new Notes that reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Note
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 7.05. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 7 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
An Issuer may not sign an amendment or supplemental Indenture until its Board of
Directors or Trustees approves it. In signing or refusing to sign such amendment
or supplemental Indenture, the Trustee shall be entitled to receive, if
requested, an indemnity reasonably satisfactory to it and to receive and,
subject to Section 6.01 hereof, shall be fully protected in relying upon, an
Officers' Certificate and an Opinion of Counsel as conclusive evidence that such
amendment or supplemental Indenture is authorized or permitted by this
Indenture, that it is not inconsistent herewith, and that it will be valid and
binding upon the Issuers in accordance with its terms.
ARTICLE 8
COLLATERAL AND SECURITY
SECTION 8.01. COLLATERAL DOCUMENTS.
The due and punctual payment of the principal of and interest
on the Notes when and as the same shall be due and payable, whether on an
interest payment date or a principal amortization date, at maturity, by
acceleration, repurchase, redemption or otherwise, and interest on the overdue
principal of and interest (to the extent permitted by law), if any, on the Notes
and performance of all other obligations of the Issuers to the Holders of Notes
or the Trustee under this Indenture, the Collateral Documents and the Notes,
according to the terms hereunder or thereunder, shall be secured as provided in
the Collateral Documents which the Issuers have entered into simultaneously with
the execution of this Indenture. Each Holder of Notes, by its acceptance
thereof, consents and agrees to the terms of the Collateral Documents
(including, without limitation, the provisions providing for foreclosure and
release of Collateral) as the same may be in effect or may be amended from time
to time in accordance with its terms and authorizes and directs the Trustee to
enter into the Collateral Documents and to perform its obligations and exercise
its rights thereunder in accordance therewith. The Issuers shall enter into and
deliver to the Trustee copies of all Collateral Documents, and, subject to the
provisions of the Collateral Documents, and upon the reasonable request of the
Trustee, shall do or cause to be done all such acts and things as may be
necessary or proper, or as may be required by the provisions of the Collateral
Documents, to assure and confirm to the Trustee the security interest in the
Collateral contemplated hereby, by the Collateral Documents or any part thereof,
as from time to time constituted, so as to render the same available for the
security and benefit of this Indenture and the Notes secured hereby, according
to the intent and purposes herein expressed. The Issuers shall take upon request
of the Trustee, any and all actions reasonably required to cause the Collateral
Documents to create and maintain, as security for the Obligations of the Issuers
hereunder, a valid and enforceable perfected first priority Lien in and on all
of the Collateral, in favor of the Trustee for the benefit of the Holders of
Notes, (a) superior to and prior to the rights of all third Persons except as
permitted under Section 4.11 hereof, and (b) subject to no Liens other than the
Liens permitted under Section 4.11 hereof.
SECTION 8.02. RELEASE OF COLLATERAL.
(a) Subject to subsections (b) and (d) of this Section 8.02,
Collateral may be released from the Lien and security interest created
by the Collateral Documents at any time or from time to time in
accordance with the provisions of the Collateral Documents.
(b) No Collateral shall be released from the Lien and security
interest created by the Collateral Documents pursuant to the provisions
of the Collateral Documents or hereof unless the Issuers shall have
complied with Sections 3.05 and 3.08 hereof and Article 14 of the
related Mortgage; provided, however, that with respect to any Real
Estate, upon the payment of 125% of the applicable Allocated Note
Amount and so long as no Event of Default has occurred and is
continuing (except an Event of Default relating solely to the Real
Estate which is the subject of such release), such Real Estate shall be
released from the Lien of the related Mortgage.
(c) Notwithstanding any of the terms hereof or of any of the
Collateral Documents, at any time when an Event of Default shall have
occurred and be continuing and the maturity of the Notes shall have
been accelerated (whether by declaration or otherwise), the Trustee
shall not, without the consent of the Required Holders, release any
Collateral pursuant to the provisions hereof or any of the Collateral
Documents.
(d) The release of any Collateral from the terms of this
Indenture and the Collateral Documents shall not be deemed to impair
the security under this Indenture in contravention of the provisions
hereof if and to the extent the Collateral is released pursuant to the
terms hereof.
SECTION 8.03. AUTHORIZATION OF ACTIONS TO BE TAKEN BY
THE TRUSTEE UNDER THE COLLATERAL DOCUMENTS.
Subject to the provisions of Sections 6.01 and 6.02 hereof,
the Trustee may, in its sole discretion and without the consent of the Holders
of Notes, on behalf of the Holders of Notes, take all actions it deems necessary
or appropriate in order to (a) enforce any of the terms of the Collateral
Documents and (b) collect and receive any and all amounts payable in respect of
the Obligations of the Issuers hereunder or under the Collateral Documents. The
Trustee shall have power to institute and maintain such suits and proceedings
and enter into such agreements as either may deem expedient to prevent any
impairment of the Collateral by any acts that may be unlawful or in violation of
the Collateral Documents or this Indenture, and such suits, proceedings and
agreements as the Trustee may deem expedient to preserve or protect its
interests and the interests of the Holders of Notes in the Collateral (including
power to institute and maintain suits or proceedings to restrain the enforcement
of or compliance with any legislative or other governmental enactment, rule or
order that may be unconstitutional or otherwise invalid if the enforcement of,
or compliance with, such enactment, rule or order would impair the security
interest hereunder or be prejudicial to the interests of the Trustee or the
Holders of Notes).
SECTION 8.04. AUTHORIZATION OF RECEIPT OF FUNDS BY THE
TRUSTEE UNDER THE COLLATERAL DOCUMENTS.
The Trustee is authorized to receive any funds for the benefit
of the Holders of Notes distributed under the Collateral Documents, and to make
further distributions of such funds to the Holders of Notes according to the
provisions of this Indenture and the Collateral Documents.
SECTION 8.05. DEBT SERVICE RESERVE ACCOUNT.
(a) On or before the Issue Date, the Issuers shall establish
the Debt Service Reserve Account and shall deposit $1,347,580 (the
"Initial Deposit") in the Debt Service Reserve Account; provided,
however, that such amount shall be reduced on each Payment Date to an
amount not less than the Debt Service Reserve Account Required Level.
Any and all moneys so received by the Trustee, together with any Cash
Equivalents in which such moneys are or will be invested or reinvested
during the term of this Indenture, shall be held by the Trustee in the
Debt Service Reserve Account as collateral security for the repayment
of the Notes, subject to withdrawal as herein provided.
(b) So long as no Default or Event of Default shall have
occurred and be continuing, all or a portion of any moneys in the Debt
Service Reserve Account shall be invested and reinvested by the Trustee
at the Issuers' direction in one or more Cash Equivalents bearing
interest. All income or other gain from investments of money held in
the Debt Service Reserve Account shall be deposited by the Trustee in
the Debt Service Reserve Account immediately upon receipt, and any loss
resulting from such investments shall be charged to the Debt Service
Reserve Account.
(c) Upon the occurrence of an Event of Default under Section
5.01(a) hereof, the Trustee shall withdraw from amounts on deposit in
the Debt Service Reserve Account on any Payment Date the lesser of (i)
the amount of any shortfall required to be paid by the Issuers on such
Payment Date, and (ii) the amount then on deposit in the Debt Service
Reserve Account, and transfer such amount to the Trapped Funds Account
to be applied in accordance with Section 3.08 hereof, other than
Section 3.08(vi) hereof.
SECTION 8.06. LOCKBOX ARRANGEMENTS.
(a) Upon the occurrence of more than one Event of Default
under Section 5.01(a) hereof and during the continuance of any such
Events of Default, the Issuers shall promptly direct all tenants of the
Issuers to remit all rent payments directly to a lockbox to be
established by the Trustee (the "Lockbox"). Collections in the Lockbox
shall be transferred on or prior to the Business Day immediately
preceding the next Payment Date to the Trapped Funds Account and shall
be applied in accordance with Section 3.08 hereof, other than Section
3.08(vi) hereof.
(b) Upon the establishment of the Lockbox and so long as the
Lockbox is in effect, on or prior to each Determination Date the
Issuers shall deliver to the Trustee invoices relating to Property
Improvement Expenses and Property Protection Expenses of the Issuers
for the preceding Interest Period which have been incurred in the
ordinary course of the Issuers' business, accompanied by an Officers'
Certificate of the Issuers certifying such invoices, and, so long as
the Notes have not become due and payable pursuant to Section 5.02
hereof, the Trustee shall release funds from the Lockbox to the Issuers
for the payment of such invoices. Upon the establishment of the
Lockbox, all deposits to the Trapped Funds Account shall be net of
Property Improvement Expenses (including Capital Expenditures) and
Property Protection Expenses (including Capital Expenditures).
SECTION 8.07. TERMINATION OF SECURITY INTEREST.
Upon the full and final and indefeasible payment of all
Obligations of the Issuers under this Indenture, the Notes and the Collateral
Documents, the Trustee shall, at the request of the Issuers, release the Liens
pursuant to this Indenture.
SECTION 8.08. FURTHER DOCUMENTATION.
(a) At any time and from time to time, upon the written
request of the Trustee, and at the sole expense of the Issuers, the
Issuers will promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as the
Trustee may reasonably deem desirable to obtain the full benefits of
the Collateral Documents and of the rights and powers herein granted,
including, without limitation, the filing of any financing or
continuation statements under the UCC with respect to the liens and
security interests granted hereby, and transferring Collateral to the
Trustee's possession (if a security interest in such Collateral can be
perfected by possession). The Issuers also hereby authorize the Trustee
to file any such financing or continuation statement without the
signature of the Issuers to the extent permitted by applicable law. If
any of the Collateral shall be or become evidenced by any instrument,
the Issuers agree to pledge such instrument to the Trustee and shall
duly endorse such instrument in a manner satisfactory to the Trustee
and deliver the same to the Trustee.
(b) The Issuers will, if so requested by the Trustee, furnish
to the Trustee, as often as the Trustee reasonably requests, statements
and schedules further identifying and describing the Collateral and
such other reports in connection with the Collateral as the Trustee may
reasonably request, all in reasonable detail.
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. NOTICES.
Any notice or communication by the Issuers or the Trustee to
any other party hereto is duly given if in writing and delivered in person or
mailed by first class mail (registered or certified, return receipt requested),
telex, telecopier or overnight air courier guaranteeing next day delivery, to
the party's address:
If to any Issuer:
120 Albany Street, 8th Floor
New Brunswick, NJ 08901
Telecopier No.: (908) 296-3090
Attention: George R. Zoffinger
If to the Trustee:
135 South LaSalle Street
Suite 1740
Chicago, Illinois 60674-4107
Telecopier No: (312) 904-2084
Attention: Asset Backed Securities Trust Group
- VPT Trust
The Issuers or the Trustee, by notice to the other may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to
Holders of Notes) shall be deemed to have been duly given: at the time delivered
by hand, if personally delivered; five Business Days after being deposited in
the mail, postage prepaid, if mailed; when answered back, if telexed; when
receipt acknowledged, if telecopied; and the next Business Day after timely
delivery to the courier, if sent by overnight air courier guaranteeing next day
delivery.
Any notice or communication to a Holder of a Note shall be
mailed by first class mail, certified or registered, return receipt requested,
or by overnight air courier guaranteeing next day delivery to its address shown
on the register kept by the Registrar. Failure to mail a notice or communication
to a Holder of a Note or any defect in it shall not affect its sufficiency with
respect to other Holders of Notes.
If a notice or communication is mailed in the manner provided
above within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Issuers mail a notice or communication to Holders of
Notes, they shall mail a copy to the Trustee and each Agent at the same time.
SECTION 9.02. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Issuers to the Trustee
to take any action under this Indenture, the Issuers shall furnish to the
Trustee:
(a) an Officers' Certificate of each Issuer in form and
substance reasonably satisfactory to the Trustee stating that, in the
opinion of the signers, all conditions precedent and covenants, if any,
provided for in this Indenture relating to the proposed action have
been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such
counsel, all such conditions precedent and covenants provided for in
this Indenture relating to the proposed action have been satisfied.
SECTION 9.03. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a
meeting of Holders of Notes. The Registrar or Paying Agent may make reasonable
rules and set reasonable requirements for its functions.
SECTION 9.04. GOVERNING LAW.
The internal law of the State of New York shall govern and be
used to construe this Indenture and the Notes without regard to the conflict of
law principles thereof.
SECTION 9.05. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture and the Notes may not be used to interpret
another indenture, loan or debt agreement of the Issuers. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture. This writing
constitutes the entire agreement of the parties with respect to the subject
matter hereof. Unless expressly otherwise indicated herein, an action or
transaction permitted by one provision hereof must nonetheless comply with all
other applicable provisions hereof; and any action or transaction not permitted
by any provision of this Indenture will not be permitted regardless of whether
any other provisions hereof might permit such action or transaction.
SECTION 9.06. SUCCESSORS.
All agreements of the Issuers in this Indenture and the Notes
shall bind its successors. All agreements of the Trustee in this Indenture shall
bind its successors.
SECTION 9.07. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
SECTION 9.08. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 9.09. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of
the Articles and Sections of this Indenture have been inserted for convenience
of reference only, are not to be considered a part of this Indenture and shall
in no way modify or restrict any of the terms or provisions hereof.
SECTION 9.10. SATISFACTION AND DISCHARGE; RELEASE.
(a) Upon the indefeasible payment in full of all Obligations
of the Issuers hereunder and under the Notes, the Issuers shall be released from
all their obligations hereunder and under the Notes and this Indenture shall
cease to be of further effect.
(b) An Issuer shall cease to be an "Issuer" under this
Indenture in the event that the Real Estate owned by such Issuer no longer
constitutes Collateral under the Collateral Documents; provided, however, that
any such Issuer shall remain liable for any indemnities made by such Issuer
hereunder or under the Collateral Documents which expressly survive any such
release.
SECTION 9.11. NO WAIVER; REMEDIES.
No failure on the part of the Trustee or any Noteholder to
exercise, and no delay in exercising, any right hereunder, under any of the
Collateral Documents or under any Note shall operate as a waiver thereof; nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
SECTION 9.12. STREIT ACT.
Any provisions required to be contained in this Indenture by
Section 126 of Article 4-A of the New York Real Property Law are hereby
incorporated, and such provisions shall be in addition to those conferred or
imposed by this Indenture; provided, however, that to the extent that such
Section 126 shall not apply to this Indenture, said Section 126 shall not have
any effect, and if said Section 126 should at any time be repealed or cease to
apply to this Indenture, or be construed by judicial decision to be
inapplicable, said Section 126 shall cease to have any further effect upon the
provisions of this Indenture. In case of a conflict between the provisions of
this Indenture and any mandatory provisions of Article A-4 of the New York Real
Property Law, such mandatory provisions of said Article 4-A shall prevail,
provided that if said Article 4-A shall not apply to this Indenture, should at
any time be repealed, or cease to apply to this Indenture, or be construed by
judicial decision to be inapplicable, such mandatory provisions of such Article
4-A shall cease to have any further effect upon the provisions of this
Indenture.
SECTION 9.13. SPECIAL MASSACHUSETTS PROVISIONS.
The following provisions shall only be applicable to (i) the
Collateral located in the Commonwealth of Massachusetts and (ii) the original
versions of this Indenture which are recorded in the Commonwealth of
Massachusetts with the Bristol South District Registry of Deeds, the Norfolk
County Registry of Deeds and the Suffolk County Registry of Deeds:
(A) the following language hereby is inserted at the end of
Section 6.01 of this Indenture:
"(k) Every agreement, lease, deed, mortgage, note or
other instrument or document executed or action taken by any
Person appearing from the records of the Registry of Deeds
wherein this Indenture is recorded, to be a Trustee (including
without limitation any document executed pursuant to Article 7
or Article 8) shall be conclusive evidence in favor of every
person relying thereon or claiming thereunder that at the time
of delivery thereof or of the taking of such action the trust
established by this Indenture was in full force and effect,
and that the execution and delivery thereof or taking of such
action by the Trustee was duly authorized, empowered, and
directed as required by this Indenture.
(l) Any person dealing with the trust established by
this Indenture or the Trustee always may rely without further
inquiry on a certificate signed by any Person appearing from
the records of the Registry of Deeds wherein this Indenture is
recorded to be a Trustee as to who are the Trustees or the
Holders hereunder, or as to whether or not the trust
established by this Indenture has been terminated, or as to
the authority of the Trustee to act as to the existence or
non-existence of any fact or facts which constitute conditions
precedent to action by the Trustee or which are in any other
manner germane to the affairs of the trust established by this
Indenture. Execution, delivery or recording of such
certificate shall not be a condition precedent to the validity
of any transaction of the trust established by this
Indenture."
(B) Section 6.07 of this Indenture set forth above hereby is amended to
read as follows:
"(a) The Trustee may resign in writing and be
discharged from the Trust created hereby by written notice to
the Issuers, signed and acknowledged by the Trustee. Such
resignation shall be effective upon the later of (i) the
recording of such notice of resignation with the Registry of
Deeds wherein this Indenture is recorded; and (ii) the
recording of the items set forth in Section 6.07(c) with the
Registry of Deeds wherein this Indenture is recorded.
(b) The Required Holders may remove the Trustee by an
instrument or instruments in writing, signed by the Required
Holders and acknowledged by one or more of them, and delivered
to the Trustee and the Issuers; provided that such removal
shall not be effective until the later of (i) the recording of
such instrument or instruments with the Registry of Deeds
wherein this Indenture is recorded; and (ii) the recording of
the items set forth in Section 6.07(c) with the Registry of
Deeds wherein this Indenture is recorded. The Issuers may
remove the Trustee if:
(i) the Trustee fails to comply with Section 6.09
hereof;
(ii) the Trustee is adjudged a bankrupt or an
insolvent or an order for relief is entered with
respect to the Trustee under any Bankruptcy Law;
(iii) a custodian or public officer takes charge of
the Trustee or its property; or
(iv) the Trustee becomes incapable of acting.
Such removal shall be by an instrument or instruments in
writing, signed by the Issuers and acknowledged by one or more
of them, and delivered to the Trustee and the Holders;
provided that such removal shall not be effective until the
later of (i) the recording of such instrument or instruments
with the Registry of Deeds wherein this Indenture is recorded;
and (ii) the recording of the items set forth in Section
6.07(c) with the Registry of Deeds wherein this Indenture is
recorded.
(c) If the Trustee resigns or is removed or if a
vacancy exists in the office of Trustee for any reason, the
Issuers shall promptly appoint a successor Trustee with the
consent of the Required Holders, by an instrument or
instruments in writing signed by the Issuers and the Required
Holders and acknowledged by one or more of them; provided that
in each case (i) either (A) such instrument or instruments, or
(B) a certificate signed and acknowledged by the resigning or
removed Trustee, or (C) the documents referred to in Section
6.07(f) shall be recorded with the Registry of Deeds wherein
this Indenture is recorded; and (ii) the acceptance shall be
recorded with the Registry of Deeds wherein this Indenture is
recorded. Thereupon the successor Trustee shall have all the
rights, powers and duties of the Trustee under this Agreement
and the retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, provided all
sums owing to the retiring Trustee hereunder have been paid
and subject to the Lien provided for in Section 6.06 hereof.
Notwithstanding replacement of the Trustee pursuant to this
Section, the Issuers' obligations under Section 6.06 hereof
shall continue for the benefit of the retiring Trustee.
(d) A successor Trustee shall deliver a copy of the
written acceptance of its appointment to the retiring Trustee,
to the Issuers and to the Holders of the Notes.
(e) If a successor Trustee does not take office in
accordance with Section 6.07(c) within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee,
the Issuers, or the Holders of at least 10% in principal
amount of the then outstanding Notes may petition any court of
competent jurisdiction for the appointment of a successor
Trustee.
(ii) If the Trustee after written request by
any Holder of a Note who has been a Holder for at
least six months fails to comply with Section 6.09
hereof, such holder of a Note may petition any court
of competent jurisdiction for the removal of the
Trustee and the appointment of a successor Trustee.
(iii) Any removal of a Trustee pursuant to
this Section 6.07(e) and any appointment of a Trustee
pursuant to this Section 6.07(e) shall be effective
upon the recording of (A) the order of such court and
(B) the acceptance in writing by the successor
Trustee so appointed, with the Registry of Deeds
wherein this Indenture is recorded.
(f) In the event that there is no Trustee for any
cause, a Person purporting to be a successor Trustee hereunder
may record in the Registry of Deeds wherein this Indenture is
recorded an affidavit, under pains and penalties of perjury,
stating that it has been appointed pursuant to Section
6.07(c), as a successor Trustee. Such affidavit, when recorded
together with an attorney's certificate under M.G.L. c. 183,
Section 5B, stating that such attorney has knowledge of the
affairs of the trust established by this Indenture and that
the Person signing the affidavit has been so appointed, shall
have the same force and effect as if the certificate of a
Trustee required or permitted hereunder had been recorded and
Persons dealing with the trust established by this Indenture
always may rely without further inquiry upon such an affidavit
as so executed and recorded as to the matters stated therein."
(C) The following language hereby is inserted at the end of
Section 6.08 of this Indenture: "A certificate evidencing such consolidation,
merger, conversion or transfer shall be recorded with the Registry of Deeds
wherein this Indenture is recorded."
(D) The following language hereby is inserted at the end of
Section 6.09 of this Indenture: "The provisions of this Section 6.09 shall not
affect the validity of any document or certificate executed by a Person who is a
Trustee according to the records of the Registry of Deeds wherein this Indenture
is recorded, or the recording of any such document or certificate."
(E) The following language hereby is inserted at the end of
Section 7.01 of this Indenture: "In each case, any amendment or supplement of
this Indenture shall not become effective until the instrument of amendment or
supplement or a certificate setting forth the terms of such amendment or
supplement, signed by the Trustee, is recorded with the Registry of Deeds
wherein this Indenture is recorded."
(F) The following language hereby is inserted at the end of
the second paragraph of Section 7.02 of this Indenture: "In each case, any
amendment or supplement of this Indenture shall not become effective until the
instrument of amendment or supplement or a certificate setting forth the terms
of such amendment or supplement, signed by the Trustee, is recorded with the
Registry of Deeds wherein this Indenture is recorded."
(G) The following language hereby is inserted at the end of
Section 9.10 of this Indenture:
"(c) Notwithstanding any other provision of this
Indenture, and consistent with the intention of the
undersigned that the trust established by this Indenture not
violate the Rule Against Perpetuities, the trust established
by this Agreement shall terminate in any event fifty (50)
years from the date hereof.
(d) In the case of any termination of the trust
established by this Indenture, the Trustee shall transfer and
convey the specific assets constituting the estate of the
trust established by this Indenture to the Holders as tenants
in common in proportion to their respective interests
hereunder, or as otherwise directed by all of the Holders;
provided, however, that the Trustee may retain such portion
thereof as is in the Trustee's opinion necessary to discharge
any expense or liability, determined or contingent, of the
trust established by this Indenture."
[Signatures on following page]
<PAGE>
SIGNATURES
Dated as of April 30, 1996 VPT REAL ESTATE CORP. I
VPT REAL ESTATE CORP. II
VPT REAL ESTATE CORP. III
VPT REAL ESTATE CORP. IV
VPT REAL ESTATE CORP. V,
as Issuers
By:_______________________
Name:
Title:
Attest:
- ----------------------------
Name:
Title:
Dated as of April 30, 1996 For purposes solely of Section 6.06
hereof:
VALUE PROPERTY TRUST
By:_________________________
Name:
Title:
Attest:
- ----------------------------
Name:
Title:
Dated as of April 30, 1996 LASALLE NATIONAL BANK,
as Trustee
By:____________________
Name:
Title:
Attest:
- ----------------------------
Name:
Title:
WG&M DRAFT
05/14/96
EXHIBIT D
___________________,
Mortgagor
to
___________________,
as Trustee,
Mortgagee
MORTGAGE, ASSIGNMENT OF RENTS AND LEASES AND
SECURITY AGREEMENT
---------------------------------------------
Dated as of _________ __, 1996
County & State: ______________________
PREPARED BY AND UPON
RECORDATION RETURN TO:
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Barry D. Lites, Esq.
<PAGE>
TABLE OF CONTENTS
Article 1- GRANTS OF SECURITY
Section 1.1 Property Mortgaged
Section 1.2 Assignment of Leases and Rents
Section 1.3 Security Agreement
Section 1.4 Pledge of Monies Held
Article 2 - DEBT AND OBLIGATIONS SECURED
Section 2.1 Debt
Section 2.2 Other Obligations
Section 2.3 Debt and Other Obligations
Article 3 - MORTGAGOR COVENANTS
Section 3.1 Payment of Debt
Section 3.2 Incorporation by Reference
Section 3.3 Insurance
Section 3.4 Payment of Taxes, etc.
Section 3.5 Permitted Contests
Section 3.6 Escrow Fund
Section 3.7 Condemnation
Section 3.8 Leases and Rents
Section 3.9 Maintenance of Property/Alterations
Section 3.10 Restoration
Section 3.11 Waste
Section 3.12 Compliance with Laws
Section 3.13 Books and Records
Section 3.14 Management Agreements
Section 3.15 Performance of Other Agreements
Section 3.16 [Intentionally Omitted]
Section 3.17 [Intentionally Omitted]
Section 3.18 [Intentionally Omitted]
Section 3.19 Existence
Section 3.20 Payment for Labor and Materials
Article 4 - REPRESENTATIONS AND WARRANTIES
Section 4.1 Warranty of Title
Section 4.2 [Intentionally Omitted]
Section 4.3 Legal Status and Authority
Section 4.4 [Intentionally Omitted]
Section 4.5 Litigation
Section 4.6 Status of Property
Section 4.7 No Foreign Person
Section 4.8 Separate Tax Lot
Section 4.9 ERISA Compliance
Section 4.10 Leases
Section 4.11 [Intentionally Omitted]
Section 4.12 Business Purposes
Section 4.13 Taxes
Section 4.14 Mailing Address
Section 4.15 [Intentionally Omitted]
Section 4.16 [Intentionally Omitted]
Section 4.17 Illegal Activity
Section 4.18 Trade Names
Section 4.19 Contracts
Section 4.20 [Intentionally Omitted]
Section 4.21 Contingent Liabilities
Section 4.22 No Other Obligations
Section 4.23 No Other Debt
Section 4.24 Special Assessments
Section 4.25 [Intentionally Omitted]
Section 4.26 Title Insurance
Section 4.27 Survival
Article 5 - OBLIGATIONS AND RELIANCE
Section 5.1 Relationship of Mortgagor and Mortgagee
Section 5.2 No Reliance on Mortgagee
Section 5.3 No Mortgagee Obligations
Section 5.4 Reliance
Article 6 - FURTHER ASSURANCES
Section 6.1 Recording of Mortgage, etc
Section 6.2 Further Acts, etc
Section 6.3 Changes in Tax, Debt, Credit and Documentary Stamp
Laws
Section 6.4 Estoppel Certificates
Section 6.5 Flood Insurance
Section 6.6 Splitting of Mortgage
Section 6.7 Replacement Documents
Article 7 - DUE ON SALE/ENCUMBRANCE
Section 7.1 Mortgagee Reliance
Section 7.2 No Sale/Encumbrance
Section 7.3 Sale/Encumbrance Defined
Section 7.4 Mortgagee's Rights
Article 8 - PREPAYMENT
Section 8.1 Prepayment
Article 9 - DEFAULT
Section 9.1 Events of Default
Section 9.2 Default Interest
Article 10 - RIGHTS AND REMEDIES
Section 10.1 Remedies
Section 10.2 Application of Proceeds
Section 10.3 Right to Cure Defaults
Section 10.4 Actions and Proceedings
Section 10.5 Recovery of Sums Required to Be Paid
Section 10.6 Examination of Books and Records
Section 10.7 Other Rights, etc
Section 10.8 Right to Release Any Portion of the Property
Section 10.9 Right of Entry
Article 11 - ENVIRONMENTAL HAZARDS
Section 11.1 Environmental Representations and Warranties
Section 11.2 Environmental Covenants
Section 11.3 Environmental Assessments
Article 12 - INDEMNIFICATION
Section 12.1 General Indemnification
Section 12.2 Mortgage and/or Intangible Tax
Section 12.3 ERISA Indemnification
Section 12.4 Environmental Indemnification
Section 12.5 Duty to Defend; Attorneys' Fees and Other Fees and
Expenses
Article 13 - WAIVERS
Section 13.1 Waiver of Counterclaim
Section 13.2 Marshalling and Other Matters
Section 13.3 Waiver of Notice
Section 13.4 Waiver of Statute of Limitations
Section 13.5 Discretion of Mortgagee
Section 13.6 Survival
Section 13.7 WAIVER OF TRIAL BY JURY
Article 14 - RELEASE
Section 14.1 Release of Property
Article 15 - NOTICES
Section 15.1 Notices
Article 16 - SERVICE OF PROCESS
Section 16.1 Consent to Service
Section 16.2 Submission to Jurisdiction
Section 16.3 Jurisdiction Not Exclusive
Article 17 - APPLICABLE LAW
Section 17.1 CHOICE OF LAW
Section 17.2 Usury Laws
Section 17.3 Provisions Subject to Applicable Law
Article 18 - COSTS
Section 18.1 Performance at Mortgagor's Expense
Section 18.2 Attorney's Fees for Enforcement
Article 19 - DEFINITIONS
Section 19.1 General Definitions
Article 20 - MISCELLANEOUS PROVISIONS
Section 20.1 No Oral Change
Section 20.2 Liability
Section 20.3 Inapplicable Provisions
Section 20.4 Headings, etc
Section 20.5 Duplicate Originals; Counterparts
Section 20.6 Number and Gender
Section 20.7 Subrogation
Section 20.8 No Joint Venture
Section 20.9 No Benefit to Third Parties
Section 20.10 Future Advances
Section 20.11 Cash and Cash Equivalents
Section 20.12 Entire Agreement
Section 20.13 Business Day
<PAGE>
THIS MORTGAGE, ASSIGNMENT OF RENTS AND LEASES AND SECURITY
AGREEMENT (the "Mortgage") is made as of the ___ day of ______, 1996 by [VPT
Financing Corp.-1, VPT Financing Corp.-2, VPT Financing Corp.-3, VPT Financing
Corp.-4 and VPT Financing Corp.-5], a Delaware corporation, having its principal
place of business at ("Mortgagor") to LaSalle National Bank, a nationally
chartered bank, having its principal place of business at 1355 LaSalle Street,
Chicago IL, as trustee for the benefit of the holders of the Notes under the
Indenture (each as defined herein) ("Mortgagee").
RECITALS:
WHEREAS, Mortgagor is the owner of the Property (hereinafter
defined);
WHEREAS, Mortgagor and __________ (collectively, the "Issuer")
have received the proceeds of the Notes (as hereinafter defined) in the original
principal amount of $ pursuant to the terms of that certain Note Purchase
Agreement dated March 28, 1996 (the "Note Purchase Agreement") and that certain
Indenture (the "Indenture"), dated as of the date hereof, between Issuer and
Mortgagee, as trustee for the equal and ratable benefit of the Holders (as
defined in the Indenture) of mortgage collateralized Floating Rate Senior
Secured Notes (together with all renewals, replacements, substitutions,
modifications and amendments thereto (the "Notes") dated as of the date hereof
from Issuer to the Holders; and
WHEREAS, this Mortgage secures the repayment of the Debt and
performance of the Other Obligations (each as defined in Article 2 hereof).
NOW THEREFORE, in consideration of the premises herein and for
other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, Mortgagor hereby agrees as follows:
Article 1- GRANTS OF SECURITY
Section 1.1 Property Mortgaged. To secure the timely payment
and performance of the Debt and the Other Obligations (each as defined in
Article 2), Mortgagor does hereby irrevocably mortgage, grant, bargain, sell,
pledge, assign, warrant, transfer and convey to Mortgagee, and grant a security
interest to Mortgagee in and to the following property, rights, interests and
estates now owned, or hereafter acquired by Mortgagor (collectively, the
"Property," it being understood and agreed that the words "each Property" or
"any Property," as and when used in this Mortgage, shall mean and refer to each
parcel, or any parcel, as the case may be, of Land (as hereinafter defined)
together with the related Improvements (as hereinafter defined) and all of the
other real, personal, tangible and intangible property rights and interests
described in (d)-(n) below):
(a) Land. Each parcel of real property described in
Exhibit A and Exhibits A-1 through A-___ attached hereto and made a
part hereof (each such parcel hereinafter referred to as the "Land");
(b) Additional Land. All additional lands, estates
and development rights hereafter acquired by Mortgagor for use in
connection with any parcel of Land and the development of any parcel of
Land and all additional lands and estates therein which may, from time
to time, by supplemental mortgage or otherwise be expressly made
subject to the lien of this Mortgage;
(c) Improvements. The buildings, structures,
fixtures, additions, enlargements, extensions, modifications, repairs,
replacements and improvements now or hereafter erected or located on
each parcel of Land (the "Improvements");
(d) Easements. All easements, rights-of-way or use,
rights, strips and gores of land, streets, ways, alleys, passages,
sewer rights, water, water courses, water rights and powers, air rights
and development rights, and all estates, rights, titles, interests,
privileges, liberties, servitudes, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way now or hereafter
belonging, relating or pertaining to each parcel of Land and the
related Improvements and the reversion and reversions, remainder and
remainders, and all land lying in the bed of any street, road or
avenue, opened or proposed, in front of or adjoining each parcel of
Land, to the center line thereof and all the estates, rights, titles,
interests, dower and rights of dower, curtesy and rights of curtesy,
property, possession, claim and demand whatsoever, both at law and in
equity, of Mortgagor of, in and to each parcel of Land and the related
Improvements and every part and parcel thereof, with the appurtenances
thereto;
(e) Fixtures and Personal Property. All machinery,
equipment, fixtures (including, but not limited to, all heating, air
conditioning, plumbing, lighting, communications and elevator
fixtures), inventory, goods and other property of every kind and nature
whatsoever owned by Mortgagor, or in which Mortgagor has or shall have
an interest, now or hereafter located upon each parcel of Land and the
related Improvements, or appurtenant thereto, and usable in connection
with the present or future operation and occupancy of each parcel of
Land and the related Improvements and all building equipment, materials
and supplies of any nature whatsoever owned by Mortgagor, or in which
Mortgagor has or shall have an interest, now or hereafter located upon
each parcel of Land and the related Improvements, or appurtenant
thereto, or usable in connection with the present or future operation
and occupancy of each parcel of Land and the related Improvements
(collectively, the "Personal Property"), and the right, title and
interest of Mortgagor in and to any of the Personal Property which may
be subject to any security interests, as defined in the Uniform
Commercial Code, as adopted and enacted by the state or states where
any of the Property is located (the "Uniform Commercial Code"),
superior in lien to the lien of this Mortgage and proceeds and products
of the above; and all accounts and chattel paper now owned or hereafter
created or acquired relating to any parcel of Land or related
Improvements, including, without limitation, all of the following now
owned or hereafter created or acquired by Mortgagor: (i) accounts
receivable, contract rights, book debts, notes, arising from the sale,
lease or exchange of goods or other property and/or the performance of
services, (ii) Mortgagor's rights in, to and under all purchase orders
for goods, services or other property, (iii) Mortgagor's rights to any
goods, services or other property represented by any of the foregoing,
(iv) monies due to or to become due to Mortgagor under all contracts
for the sale, lease or exchange of goods or other property and/or the
performance of services including the right to payment of any interest
or finance charges in respect thereto (whether or not yet earned by
performance on the part of Mortgagor) and (v) all collateral security
and guaranties of any kind given by any person or entity with respect
to any of the foregoing;
(f) Leases and Rents. All leases and other agreements
affecting the use, enjoyment or occupancy of parcel of Land and/or any
portion of the related Improvements heretofore or hereafter entered
into (the "Leases") and all right, title and interest of Mortgagor, its
successors and assigns therein and thereunder, including, without
limitation, cash or securities, if any, and other cash equivalents, if
any, letters of credit, lease guaranties or other security deposited
thereunder to secure the performance by the lessees of their
obligations thereunder, subject to the rights of tenants under such
Leases with respect to such sums, and all rents, income, additional
rents, revenues, issues and profits (including all oil and gas or other
mineral royalties and bonuses) and all pass-through expenses and
lessees' required contributions for taxes, maintenance costs, tenant
improvements and concessions, leasing commissions, capital expenditures
and other cash items from each parcel of Land and the related
Improvements and all proceeds from the sale or other disposition of the
Leases or from any award, judgment or payment which may heretofore and
hereafter be made with respect to any action or proceeding brought with
respect to the Leases (collectively, the "Rents") and the right to
receive and apply the Rents to the payment of the Debt; and all
deposits made by Mortgagor pursuant to this Mortgage or other agreement
with Mortgagee regarding any Property and any accounts in which such
deposits are held;
(g) Condemnation Awards. All awards or payments,
including interest thereon, which may heretofore and hereafter be made
with respect to any Property, whether from the exercise of the right of
eminent domain (including but not limited to any transfer made in lieu
of or in anticipation of the exercise of the right), or for a change of
grade, or for any other injury to or decrease in the value of any
Property;
(h) Insurance Proceeds. All proceeds of and any
unearned premiums on any insurance policies covering each Property,
including, without limitation, the right to receive and apply the
proceeds of any insurance, judgments, or settlements made in lieu
thereof, for damage to any Property;
(i) Tax Certiorari. All refunds, rebates or credits
in connection with a reduction in real estate taxes and assessments
charged against any Property as a result of tax certiorari or any
applications or proceedings for reduction;
(j) Conversion. All proceeds of the conversion,
voluntary or involuntary, or any of the foregoing including, without
limitation, proceeds of insurance and condemnation awards, into cash or
liquidation claims;
(k) Rights. The right, in the name and on behalf of
Mortgagor, to appear in and defend any action or proceeding brought
with respect to any Property and to commence any action or proceeding
to protect the interest of Mortgagee in each Property, subject to the
terms of this Mortgage;
(l) Agreements. All agreements, contracts,
certificates, instruments, franchises, permits, licenses, plans,
specifications and other documents, now or hereafter entered into, and
all rights therein and thereto to the extent the same may be pledged,
respecting or pertaining to the use, occupation, construction,
management or operation of the Land and any part thereof and any
Improvements or respecting any business or activity conducted on the
Land and any part thereof and all right, title and interest of
Mortgagor therein and thereunder, including, without limitation, the
right, upon the happening of any default hereunder, to receive and
collect any sums payable to Mortgagor thereunder;
(m) Trademarks. All tradenames, trademarks,
servicemarks, logos, copyrights, goodwill, books and records and all
other general intangibles relating to or used in connection with the
operation of any Property; and
(n) Other Rights. Any and all other rights of
Mortgagor in and to the items set forth in Subsections (a) through (m)
above and all proceeds and products of any of the foregoing and all
rights and privileges pertaining thereto.
Section 1.2 Assignment of Leases and Rents. (a) The Leases and
all of the Rents, whether now due, past due, or to become due, and including all
prepaid rents and security deposits, subject to the rights of tenants under such
Leases with respect to such sums, are hereby absolutely, presently and
unconditionally assigned, transferred, conveyed and set over by Mortgagor to
Mortgagee, such Rents to be applied by Mortgagee to the Debt in the event (i) a
lockbox has been established pursuant to the Indenture and (ii) the Debt has
been accelerated in accordance with the terms hereof. Mortgagor shall not
otherwise assign, transfer or encumber in any manner the Leases or the Rents
relating to the Property or any portion thereof except as may be otherwise
provided herein or in the Indenture. Mortgagor shall have a license to exercise
any and all rights under the Leases, subject to Section 3.8 hereof and 8.06 of
the Indenture, and to collect and receive all Rents which license shall be
terminable at the sole option of Mortgagee, without regard to the adequacy of
its security hereunder, upon the occurrence and continuance of any Event of
Default and upon notice to Mortgagor. The assignment in this Section 1.2 shall
constitute an absolute and present assignment of the Leases and Rents, and not
an assignment for security, and the existence or exercise of Mortgagor's
conditional license as provided in the immediately foregoing sentence shall not
operate to subordinate this assignment to any subsequent assignment. It is
understood and agreed that neither the foregoing assignment of Leases and Rents
to Mortgagee nor the exercise by Mortgagee of any of its rights or remedies
hereunder including, without limitation, the appointment of a receiver for the
Property by any court at the request of Mortgagee or by agreement with
Mortgagor, or the entering into possession of the Property or any part thereof
by such receiver shall be deemed to make Mortgagee a "mortgagee-in-possession"
or otherwise responsible or liable in any manner with respect to the Property,
or the use, occupancy, enjoyment or operation of all or any portion thereof,
unless and until Mortgagee, in person or by agent, assumes actual possession
thereof.
(b) If the license granted in Section 1.2(a) hereof shall have
been revoked in accordance with the terms hereof, Mortgagee or an agent
appointed by Mortgagee may, to the fullest extent permitted by the Leases, do
any or all of the following:
(i) exercise any of Mortgagor's rights under the
Leases, including notifying tenants of the Improvements to pay rent to
an account or location selected by Mortgagee in accordance with this
Mortgage;
(ii) enforce the Leases;
(iii) demand, collect, sue for, attach, levy,
recover, receive, compromise and adjust, and make, execute and deliver
receipts and releases for all Rents or other payments that may then be
or may thereafter become due, owing or payable with respect to the
Leases;
(iv) demand that any sums held by Mortgagor with
respect to any Lease (including, but not limited to, any security
deposits, other deposits or prepayments) be immediately remitted to
Mortgagee to the extent permitted by applicable law;
(v) generally do, execute and perform any other act,
deed, matter or thing whatsoever that ought to be done, executed and
performed in and about or with respect to the Leases, as fully as
allowed or authorized hereunder, at law or in equity; and
(vi) exercise any and all of Mortgagee's rights and
remedies as set forth in Article 10 hereof.
(c) Neither the execution and delivery of this Mortgage nor
any action or inaction on the part of Mortgagee shall release (i) any tenant
from its Lease, (ii) any guarantor of any Lease or (iii) Mortgagor from any of
its obligations under the Leases or constitute an assumption of any such
obligation under the Leases or constitute an assumption of any such obligation
on the part of Mortgagee. No action or failure to act on the part of Mortgagee
shall adversely affect or limit the rights of Mortgagee under this Mortgage or,
through this Mortgage, under any Lease.
Section 1.3 Security Agreement. This Mortgage is both a real
property mortgage and a "security agreement" within the meaning of the Uniform
Commercial Code. The Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
Mortgagor in the Property. By executing and delivering this Mortgage, Mortgagor
hereby grants to Mortgagee, as security for the Obligations (defined in Section
2.3), a security interest in the Personal Property to the full extent that the
Personal Property may be subject to the Uniform Commercial Code.
Section 1.4 Pledge of Monies Held. Mortgagor hereby pledges to
Mortgagee any and all monies now or hereafter held by Mortgagee, including,
without limitation, any sums deposited in the Escrow Fund (as defined in Section
3.6), Net Proceeds (as defined in Section 3.10) and condemnation awards or
payments described in Section 3.7 hereof, as additional security for the
Obligations until expended or applied as provided in this Mortgage.
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property
with all privileges and appurtenances thereunto belonging unto and to the use
and benefit of Mortgagee, and the heirs, successors and assigns of Mortgagee,
forever;
PROVIDED, HOWEVER, these presents are upon the express
condition that, if Mortgagor shall well and truly pay to Mortgagee the Debt at
the time and in the manner provided in the Notes and this Mortgage, shall well
and truly perform the Other Obligations as set forth in this Mortgage and shall
well and truly abide by and comply with each and every covenant and condition
set forth herein and in the Notes, these presents and the estate hereby granted
shall cease, terminate and be void and Mortgagee shall deliver recordable
releases in form and substance necessary to release the lien of this Mortgage.
Article 2 - DEBT AND OBLIGATIONS SECURED
Section 2.1 Debt. This Mortgage and the grants, assignments
and transfers made in Article 1 are given for the purpose of securing the
following, in such order of priority as Mortgagee may determine in its sole
discretion (the "Debt"):
(a) the payment of the indebtedness evidenced by the
Notes in lawful money of the United States of America;
(b) the payment of interest, default interest, late
charges and other sums, as provided in the Notes, this Mortgage and the
Other Security Documents (defined below);
(c) the payment of all other moneys agreed or
provided to be paid by Mortgagor in the Notes, this Mortgage and the
Other Security Documents;
(d) the payment of all sums advanced pursuant to
either this Mortgage or the Indenture to protect and preserve the
Property and the lien and the security interest created hereby and the
payment of all expenses incurred to enforce Mortgagee's rights
hereunder, under the Notes or under the Other Security Documents; and
(e) the payment of all sums advanced and costs and
expenses incurred by Mortgagee in connection with the Debt or any part
thereof, any renewal, extension, or change of or substitution for the
Debt or any part thereof, or the acquisition or perfection of the
security therefor, whether made or incurred at the request of Mortgagor
or Mortgagee.
Section 2.2 Other Obligations. This Mortgage and the grants,
assignments and transfers made in Article 1 are also given for the purpose of
securing the following (the "Other Obligations"):
(a) the performance of all other obligations of
Mortgagor contained herein and under each Other Security Document;
(b) the performance of each obligation of Mortgagor
contained in any other agreement given by Mortgagor to Mortgagee which
is for the purpose of evidencing or further securing any portion of the
Debt and any amendments, modifications and changes thereto; and
(c) the performance of each obligation of Mortgagor
contained in any renewal, extension, amendment, modification,
consolidation, change of, or substitution or replacement for, all or
any part of the Notes, this Mortgage and the Other Security Documents.
Section 2.3 Debt and Other Obligations. Mortgagor's
obligations for the payment of the Debt and the performance of the Other
Obligations shall be referred to collectively below as the "Obligations."
Article 3 - MORTGAGOR COVENANTS
Mortgagor covenants and agrees that:
Section 3.1 Payment of Debt. Mortgagor will pay the Debt at
the time and in the manner provided in the Notes and in this Mortgage.
Section 3.2 Incorporation by Reference. All the covenants,
conditions and agreements contained in (a) the Notes, (b) the Indenture and (c)
all and any of the documents other than the Notes or this Mortgage now or
hereafter executed by Mortgagor and/or others by or in favor of Mortgagee, which
wholly or partially secure or guaranty payment of the Notes (the "Other Security
Documents"), are hereby made a part of this Mortgage to the same extent and with
the same force as if fully set forth herein.
Section 3.3 Insurance.
(a) Mortgagor shall obtain and maintain, or cause to
be maintained, insurance for Mortgagor and each Property and shall pay
in a timely manner all premiums due in connection therewith, providing
at least the following coverages:
(i) comprehensive all risk insurance on
the Improvements and the Personal Property, including
contingent liability from Operation of Building Laws,
Demolition Costs and Increased Cost of Construction
Endorsements, in each case (A) in an amount equal to 100% of
the "Full Replacement Cost," which for purposes of this
Mortgage shall mean actual replacement value (exclusive of
costs of excavations, foundations, underground utilities and
footings) with a waiver of depreciation as confirmed by a
replacement value endorsement to each such casualty insurance
policy, but the amount of such coverage shall in no event be
less than the Allocated Note Amount allocated to the
applicable Property; (B) containing an agreed amount
endorsement with respect to the related Improvements and
Personal Property waiving all co-insurance provisions; (C)
providing for no deductible in excess of $20,000; and (D)
containing an "Ordinance or Law Coverage" or "Enforcement"
endorsement if any of the Improvements or the use of any
Property shall at any time constitute legal non-conforming
structures or uses. In addition, Mortgagor shall obtain flood
hazard insurance if any portion of the Improvements is
currently or at any time in the future located in federally
designated "special flood hazard area," provided that such
insurance shall be on terms consistent with the comprehensive
all risk insurance policy required under this Subsection
3.3(a)(i) and that the deductible on such insurance shall not
be in excess of $20,000;
(ii) commercial general liability insurance
against claims for personal injury, bodily injury, death or
property damage occurring upon, in or about each Property,
such insurance (A) to be on the so-called "occurrence" form
with a combined single limit of not less than $1,000,000
(except with respect to the Properties known as the Paseo
Padre retail facility in Fremont, CA, the Villa Del Cresta
apartments in Florissant, MO and The Junipers apartments in
Yarmouth, ME, the combined single limit shall be not less than
$2,000,000 with respect to each Property); (B) to continue at
not less than the aforesaid limit until required to be changed
by Mortgagee in writing (in its reasonable judgment) by reason
of changed economic conditions making such protection
inadequate; and (C) to cover at least the following hazards:
(1) premises and operations; (2) products and completed
operations on an "if any" basis; (3) independent contractors;
(4) blanket contractual liability for all written and oral
contracts; and (5) contractual liability covering the
indemnities contained in Article 12 hereof to the extent the
same is available;
(iii) business income and rent loss
insurance (A) with loss payable to Mortgagee; (B) covering all
risks required to be covered by the insurance provided for in
Subsection 3.3(a)(i); (C) containing an extended period of
indemnity endorsement in the amount of 100% of the projected
net income from each Property which provides that after the
physical loss to the related Improvements and Personal
Property, the continued loss of income will be insured for a
period of twelve (12) months. The amount of such business
income insurance shall be determined prior to the date hereof
and at least once each year thereafter based on Mortgagor's
reasonable estimate of the gross income from each Property.
All insurance proceeds payable to Mortgagee pursuant to this
Subsection shall be held by Mortgagee and shall be applied
first, to those Operating Expenses of the Property which
generated such proceeds which are approved by Mortgagee (in
its reasonable judgment) and, thereafter, to the Obligations
in accordance with the terms of Section 3.08 of the Indenture
(it being understood that any application in accordance with
Section 3.08(iv) of the Indenture shall be deemed a reduction
of the Allocated Note Amount for the Property from which such
proceeds were derived); provided, however, that nothing herein
contained shall be deemed to relieve Mortgagor of its
obligations to pay the Obligations secured hereunder on the
respective dates of payment provided for in the Notes except
to the extent such amounts are actually paid out of the
proceeds of such business income insurance;
(iv) at all times during which structural
construction, repairs or alterations are being made with
respect to the Improvements (A) owner's contingent or
protective liability insurance covering claims not covered by
or under the terms or provisions of the above mentioned
commercial general liability insurance policy; and (B) the
insurance provided for in Subsection 3.3(a)(i) written in a
so-called builder's risk completed value form (1) on a
non-reporting basis, (2) against all risks insured against
pursuant to Subsection 3.3(a)(i), and (3) including permission
to occupy the applicable Property;
(v) to the extent Mortgagor has any
employees at any Property or is otherwise required under
applicable law, workers' compensation, subject to the
statutory limits of the state in which such Property is
located, and employer's liability insurance (A) with a limit
per accident and per disease per employee, and (B) in an
amount for disease aggregate in respect of any work or
operations on or about such Property, or in connection with
such Property or its operation (if applicable);
(vi) comprehensive boiler and machinery
insurance (without exclusion for explosion) covering all
boilers or other pressure vessels, machinery and equipment
located in, on or about each Property and insurance against
loss of occupancy or use arising from any such breakdown in
such amounts as are generally available at commercially
reasonable premiums and are generally required by
institutional lenders for properties comparable to such
Property;
(vii) umbrella liability insurance in an
amount not less than $10,000,000 per occurrence on terms
consistent with the commercial general liability insurance
policy required under Subsection 3.3(a)(ii);
(viii) motor vehicle liability coverage
for all owned and non-owned vehicles, including rented and
leased vehicles containing commercially reasonable limits; and
(ix) such other insurance and in such
amounts as Mortgagee from time to time may reasonably request
against such other insurable hazards which are generally
required by institutional lenders for properties comparable to
any Property and at the time are commonly insured against for
property similar to such Property located in or around the
region in which such Property is located.
(b) All insurance provided for in Subsection 3.3(a)
hereof shall be obtained under valid and enforceable policies (the
"Policies or in the singular, the "Policy"), and such Policies shall be
issued by financially sound and responsible insurance companies
authorized to do business in the state in which the subject Property is
located and approved by Mortgagee. Each insurance company must have a
rating of A+/X or better for claims paying ability assigned by Bests
Insurance Reports (or any successor publication of comparable standing)
(each such insurer shall be referred to as "Qualified Insurer"). If,
during the term of the Notes, any insurer providing insurance coverage
required under this Mortgage becomes insolvent or is downgraded to a
rating of less than "A+" the Mortgagor agrees to use commercially
reasonable efforts to replace the insurance provided by any such
insurer within sixty (60) days after the Mortgagor first receives
written notice of such insolvency or downgrade. The Policies described
in Subsections 3.3(a)(i), (iii), (iv)(B) and (vi) shall designate
Mortgagee as loss payee. Not less than thirty (30) days prior to the
expiration dates of the Policies theretofore furnished to Mortgagee
pursuant to Subsection 3.3(a), certified copies of the Policies marked
"premium paid" or accompanied by evidence satisfactory to Mortgagee of
payment of the premiums due thereunder (the "Insurance Premiums"),
shall be delivered by Mortgagor to Mortgagee; provided, however, that
in the case of renewal Policies, Mortgagor may furnish Mortgagee with
binders therefor to be followed by the original Policies when issued.
(c) Mortgagor shall not obtain (i) any umbrella or
blanket liability or casualty Policy unless, in each case, such Policy
is approved in advance in writing by Mortgagee and Mortgagee's interest
is included therein as provided in this Mortgage and such Policy is
issued by a Qualified Insurer, or (ii) separate insurance concurrent in
form or contributing in the event of loss with that required in
Subsection 3.3(a) to be furnished by, or which may be reasonably
required to be furnished by, Mortgagor. In the event Mortgagor obtains
separate insurance or an umbrella or a blanket Policy, Mortgagor shall
notify Mortgagee of the same and shall cause certified copies of each
Policy to be delivered as required in Subsection 3.3(a). Any blanket
insurance Policy shall (a) specifically allocate to the Property, on an
individual basis, the amount of coverage from time to time required
hereunder or (b) be written on an occurrence basis for the coverages
required hereunder with a limit per occurrence in an amount equal to
the amount of coverage required hereunder and shall otherwise provide
the same protection as would a separate Policy insuring each Property,
on an individual basis, in compliance with the provisions of Subsection
3.3(a).
(d) All Policies of insurance provided for or
contemplated by Subsection 3.3(a), except for the Policy referenced in
Subsection 3.3(a)(v), shall name Mortgagor as the insured and Mortgagee
as additional insured or as loss payee as provided above and in the
case of property damage, boiler and machinery and flood insurance,
shall contain a so-called New York standard non-contributing mortgagee
clause in favor of Mortgagee providing that the loss thereunder shall
be payable to Mortgagee.
(e) All Policies of insurance provided for in
Subsection 3.3(a) shall contain clauses or endorsements to the effect
that:
(i) no act or negligence of Mortgagor, or
anyone acting for Mortgagor, or of any tenant under any Lease
or other occupant, or failure to comply with the provisions of
any Policy which might otherwise result in a forfeiture of the
insurance or any part thereof, shall in any way affect the
validity or enforceability of the insurance insofar as
Mortgagee is concerned;
(ii) the Policy shall not be materially
changed (other than to increase the coverage provided thereby)
or cancelled without at least thirty (30) days' written notice
to Mortgagee and any other party named therein as an insured;
and
(iii) each Policy shall provide that the
issuers thereof shall give written notice to Mortgagee if the
Policy has not been renewed thirty (30) days prior to its
expiration; and
(iv) Mortgagee shall not be liable for any
Insurance Premiums thereon or subject to any assessments
thereunder.
(f) Mortgagor shall furnish to Mortgagee, on or
before thirty (30) days after the close of each of Mortgagor's fiscal
years, a statement certified by Mortgagor or a duly authorized officer
of Mortgagor of the amounts of insurance maintained in compliance
herewith, of the risks covered by such insurance, that such insurance
complies with all requirements of this subsection and of the insurance
company or companies which carry such insurance and, if requested by
Mortgagee, verification of the adequacy of such insurance by an
independent insurance broker or appraiser acceptable to Mortgagee.
Notwithstanding the foregoing, Mortgagor's delivery of Policies
insuring each Property, as such delivery is required in Section 3.3(b)
hereof, shall be deemed satisfaction of the foregoing certification
requirement.
(g) If at any time Mortgagor has failed to deliver,
in accordance with the terms of Section 3.3(b), any of the Policies
required under this Section 3.3, Mortgagee shall have the right, but
shall not be obligated, to take such action as Mortgagee deems
necessary as a result of Mortgagor's failure to insure any Property to
protect its interest in any Property, including, without limitation,
the obtaining of such insurance coverage as Mortgagee in its sole
discretion deems appropriate, and all expenses incurred by Mortgagee in
connection with such action or in obtaining such insurance and keeping
it in effect shall be paid by Mortgagor to Mortgagee within ten (10)
days of demand and until paid shall be secured by this Mortgage and
shall bear interest in accordance with Section 9.2 hereof. Mortgagee
shall deliver notice to Mortgagor that it has taken or will take such
action.
(h) If any Property shall be damaged or destroyed, in
whole or in part, by fire or other casualty, Mortgagor shall give
prompt notice of such damage to Mortgagee and shall promptly commence
and diligently prosecute the completion of the repair and restoration
of the Property as nearly as possible to the condition the Property was
in immediately prior to such fire or other casualty, with such
alterations as may reasonably be approved by Mortgagee (the
"Restoration") and otherwise in accordance with Section 3.10, hereof.
Mortgagor shall pay all costs of such Restoration whether or not such
costs are covered by insurance. Mortgagee may, but shall not be
obligated to make proof of loss if not made promptly by Mortgagor. The
Mortgagor hereby irrevocably authorizes and empowers the Mortgagee, in
the name of the Mortgagor as its true and lawful attorney-in-fact, to
file and prosecute such claim (with counsel satisfactory to it at the
reasonable expense of the Mortgagor and to collect and to make receipt
for any such payment, in the event the Mortgagor fails so to act or if
an Event of Default shall have occurred and be continuing. The
Mortgagee shall have the right to approve, such approval not to be
unreasonably withheld or delayed, any settlement which might, in
conjunction with any other pending settlements related to any Property,
result in any Net Proceeds in excess of the Casualty Threshold Amount
(hereinafter defined), and the Mortgagor will deliver or cause to be
delivered to the Mortgagee all instruments reasonably requested by the
Mortgagee to permit such approval. In addition, Mortgagee, at its
election, shall have the right to participate in any or all settlement
negotiations with respect to insurers of any Property with respect to
any claim which exceeds the Casualty Threshold Amount. The Mortgagor
will pay all costs, fees and expenses reasonably incurred by the
Mortgagee (including all reasonable attorneys' fees and expenses, the
fees of insurance experts and adjusters and the reasonable costs
incurred in any litigation or arbitration) in connection with any
damage or destruction to any Property and seeking and obtaining any
payment on account thereof.
(i) In the event of foreclosure of this Mortgage, or
other transfer of title to any Property in extinguishment in whole or
in part of the Debt, all right, title and interest of Mortgagor in and
to such policies then in force concerning such Property and all
proceeds payable thereunder shall thereupon be assigned to and shall
vest in the purchaser at such foreclosure or Mortgagee or other
transferee in the event of such other transfer of title.
Section 3.4 Payment of Taxes, etc. Mortgagor shall pay at
least ten (10) days prior to the date such amounts become delinquent all taxes,
assessments, water rates, sewer rents, governmental impositions, and other
charges, including without limitation vault charges and license fees for the use
of vaults, chutes and similar areas adjoining each parcel of Land, now or
hereafter levied or assessed or imposed against any Property or any part thereof
(the "Taxes"), all ground rents, maintenance charges and similar charges, now or
hereafter levied or assessed or imposed against any Property or any part thereof
(the "Other Charges"), and all charges for utility services provided to any
Property as same become due and payable. Subject to the provisions of Section
3.5 hereof, Mortgagor shall not suffer and shall promptly cause to be paid and
discharged any lien or charge whatsoever which may be or become a lien or charge
against the Property. Except to the extent sums sufficient to pay all Taxes have
been deposited with Mortgagee in accordance with the terms of this Mortgage,
Mortgagor shall furnish to Mortgagee, within ten (10) days after payment, paid
receipts evidencing the payment of the Taxes prior to the date the same become
delinquent.
Section 3.5 Permitted Contests. After prior written notice to
Mortgagee, Mortgagor, at its own expense, may contest by appropriate legal
proceeding, promptly initiated and conducted in good faith and with due
diligence, the amount or validity or application in whole or in part of any of
the Taxes (or the assessments with respect thereto) or Other Charges or any
Applicable Laws or other amounts required to be paid pursuant to the provisions
of Sections 3.3, 3.9, 3.10, 3.20, 6.1 or any other similar provision hereof
(collectively "Charges") provided that (i) Mortgagor is permitted to do so under
the provisions of any other mortgage, deed of trust or deed to secure debt
affecting the Property, (ii) such proceeding shall suspend the collection of the
Charges from Mortgagor and from the Property or Mortgagor shall have paid all of
the Charges under protest, (iii) such proceeding shall be permitted under and be
conducted in accordance with the provisions of any other instrument to which
Mortgagor is subject and shall not constitute a default thereunder, (iv) as a
result of Mortgagor's failure to pay or perform any such obligation, neither the
Property nor any part thereof or interest therein will be in danger of being
sold, forfeited, terminated, cancelled or lost, (v) in the case of an insurance
charge per Section 3.3, the failure of the Mortgagor to comply therewith shall
not impair the validity of any insurance required to be maintained by the
Mortgagor per Section 3.3 or the right to full payment of any claims thereunder,
(vi) in the case of any instrument of record affecting the Property or any part
thereof, the contest or failure to perform under any such instrument shall not
result in the placing of any lien on the Property or any part thereof, unless
such lien is bonded or otherwise insured over, and (vii) unless (x) Mortgagor
has paid in full to the Governmental Authority (as hereinafter defined) to which
all of the amounts under protest are due and payable or (y) the amount
contested, together with interest and/or penalties (as estimated by Mortgagee,
in its reasonable judgment) is less than $100,000, all such contested Charges
(together with any penalties and interest), Mortgagor shall have furnished to
Mortgagee security in the amount of 110% of the amount contested in any such
proceeding to insure the payment of any contested Charges, together with all
interest and penalties thereon and (ix) neither the failure to pay or perform
any obligation which the Mortgagor is permitted to contest under this Section
3.5 nor any adverse determination of such contest shall result in a material
adverse effect on the utility, value or operation of the Property taken as a
whole. For purposes hereof "Governmental Authority" shall mean any nation or
federal government, any state, regional, local or other political subdivision
thereof with jurisdiction and any Person with jurisdiction exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
Section 3.6 Escrow Fund. At any time upon the occurrence of
more than one (1) Event of Default under Section 5.01(a) of the Indenture,
Mortgagor shall pay to Mortgagee on the first day of each calendar month (a)
one-twelfth of an amount which would be sufficient to pay the Taxes payable, or
reasonably estimated by Mortgagee to be payable if the actual amount has not yet
been determined, during the next ensuing twelve (12) months and (b) one-twelfth
of an amount which would be sufficient to pay the Insurance Premiums due for the
renewal of the coverage afforded by the Policies upon the expiration thereof
(the amounts in (a) and (b) above shall be called the "Escrow Fund"). Mortgagor
agrees to notify Mortgagee immediately of any changes to the amounts, schedules
and instructions for payment of any Taxes and Insurance Premiums of which it has
obtained knowledge and authorizes Mortgagee or its agent to obtain the bills for
Taxes and Other Charges directly from the appropriate taxing authority. The
Escrow Fund and the payments of interest or principal or both, payable pursuant
to the Notes shall be added together and shall be paid as an aggregate sum by
Mortgagor to Mortgagee. Mortgagee will apply the Escrow Fund to payments of
Taxes and Insurance Premiums required to be made by Mortgagor pursuant to
Sections 3.3 and 3.4 hereof. In such event, Mortgagee shall provide Mortgagor
with reasonable evidence of the payment of such Taxes and Insurance Premiums. If
the amount of the Escrow Fund shall exceed the amounts due for Taxes and
Insurance Premiums pursuant to Sections 3.3 and 3.4 hereof, Mortgagee shall, in
its discretion, return any excess, together with interest thereon, if any, to
Mortgagor or credit such excess against future payments to be made to the Escrow
Fund. In allocating such excess, Mortgagee may deal with the person shown on the
records of Mortgagee to be the owner of the applicable Property. If the Escrow
Fund is not sufficient to pay the items set forth in (a) and (b) above,
Mortgagor shall promptly pay to Mortgagee, upon demand, an amount which
Mortgagee shall estimate as sufficient to make up the deficiency. The Escrow
Fund shall be held in a segregated interest bearing trust account in the sole
and exclusive control of the Mortgagee. The obligations contained in this
Section 3.6 shall be applicable only upon notification thereof by Mortgagee,
which notification shall only take place at any time an Event of Default has
occurred under the Indenture.
Section 3.7 Condemnation. Mortgagor shall promptly give
Mortgagee notice of the actual or any written threat of a commencement of any
condemnation or eminent domain proceeding generally describing the nature and
extent of such taking or proceeding affecting any portion of Property and shall
deliver to Mortgagee copies of any and all papers served in connection with such
proceedings. Mortgagee may participate in any such proceedings relating to any
condemnation of any such Property pursuant to the terms of this Section 3.7.
Mortgagor shall from time to time deliver to Mortgagee all instruments requested
by it to permit such participation. Any and all Condemnation Proceeds (as
hereinafter defined) applicable to any Property shall be paid directly to
Mortgagee and Mortgagor hereby irrevocably authorizes and empowers Mortgagee, in
the name of Mortgagor as its true and lawful attorney-in-fact, to collect and to
make receipt for any such award or payment. To the extent of a total
condemnation of any Property or a substantial condemnation of any Property
whereby, in Mortgagee's sole but reasonable judgment based upon evidence
provided by Mortgagor, the Property cannot be restored to substantially the same
quality, character and value as existed prior to such Condemnation ("Total
Condemnation"), the Condemnation Proceeds shall be applied first to the payment
of all Debt other than interest and principal under the Notes and, second, in
accordance with the terms of Section 3.08 of the Indenture (it being understood
that any application in accordance with Section 3.08(iv) of the Indenture shall
be deemed (i) an Application of Asset Sale proceeds and received in the related
Interest Period on or before the related Determination Date (as each such term
is defined in the Indenture) and (ii) reduction of the Allocated Note Amount for
the Property from which such Condemnation Proceeds were derived). To the extent
of a condemnation which is not a Total Condemnation, Mortgagee will make such
Condemnation Proceeds available to Mortgagor for such restoration in accordance
with the provisions of Section 3.10 hereof. Mortgagor shall, at its expense,
diligently prosecute any condemnation proceedings, and shall consult with
Mortgagee, its attorneys and experts, and cooperate with them in the carrying on
or defense of any such proceedings. The Mortgagor hereby irrevocably authorizes
and empowers the Mortgagee, in the name of the Mortgagor as its true and lawful
attorney-in-fact, to file and prosecute such claim (with counsel satisfactory to
it at the reasonable expense of the Mortgagor) in the event the Mortgagor fails
so to act or if an Event of Default shall have occurred and be continuing. The
Mortgagee shall have the right to approve, such approval not to be unreasonably
withheld or delayed, any settlement which may result in any taking which might
result in an award which, in combination with any other current condemnation
awards related to any other Property, are in excess of the Condemnation
Threshold Amount (as hereinafter defined), and the Mortgagor will deliver or
cause to be delivered to the Mortgagee all instruments reasonably requested by
the Mortgagee to permit such approval. The "Condemnation Threshold Amount" shall
mean the higher of 15% of the value of the affected Property as shown on Exhibit
B attached hereto and $250,000.00. The Mortgagor will pay all reasonable costs,
fees and expenses reasonably incurred by the Mortgagee (including all reasonable
attorneys' fees and expenses, the fees of insurance experts and adjusters and
the reasonable costs incurred in any litigation or arbitration) in connection
with any taking and seeking and obtaining any award or payment on account
thereof where the claim is in excess of the Condemnation Threshold Amount.
Notwithstanding any taking by any public or quasi-public authority through
eminent domain or otherwise (including but not limited to any transfer made in
lieu of or in anticipation of the exercise of such taking), Mortgagor shall
continue to pay the Debt at the time and in the manner provided for its payment
in the Notes and in this Mortgage and the Debt shall not be reduced until any
award or payment therefor shall have been actually received and applied by
Mortgagee, after the deduction of expenses of collection, to the reduction or
discharge of the Debt. Mortgagee shall not be limited to the interest paid on
the award by the condemning authority but shall be entitled to receive out of
the award interest at the rate or rates provided herein or in the Notes to the
extent the same shall be due and payable. If any Property or any portion thereof
is taken by a condemning authority, Mortgagor shall promptly commence and
diligently prosecute the Restoration of the Property and otherwise comply with
the provisions of Section 3.10 of this Mortgage whether or not the Net Proceeds
(as defined herein) shall be sufficient for such purpose. In the event Mortgagee
is not required to disburse Net Proceeds to Mortgagor in accordance with Section
3.10 of this Mortgage, Mortgagee may apply any award or payment to first the
payment of all outstanding Debt other than interest and principal under the
Notes and, second in accordance with the terms of Section 3.08 of the Indenture
(it being understood that all such amounts shall be deemed proceeds from an
Asset Sale (as defined in the Indenture) and applied pursuant to Section
3.08(iv) as opposed to Section 3.08(v) shall be returned to Mortgagor. If any
Property or any portion thereof is sold, through foreclosure or otherwise, prior
to the receipt by Mortgagee of the award or payment, Mortgagee shall have the
right, whether or not a deficiency judgment on the Notes shall have been sought,
recovered or denied, to receive the award or payment, or a portion thereof
sufficient to pay the Debt and the Other Obligations.
Section 3.8 Leases and Rents.
(a) So long as no Event of Default shall have
occurred and be continuing, Mortgagor shall have the right without
Mortgagee's consent to enter into renewals of existing Leases, proposed
new Leases and modifications or amendments of existing Leases for
residential or commercial space at each Property provided all of the
following conditions are satisfied:
(i) the Lease provides the rental rates and
rental terms substantially comparable to then existing local
market rates and rental terms, including renewal options;
(ii) the Lease is an arms-length transaction
with a bona fide, independent third party tenant; and
(iii) such lease shall not have a material
adverse effect on the ability of the Mortgagor to pay its
obligations with respect to the Notes, this Mortgage and the
Other Security Documents.
Mortgagor shall deliver to Mortgagee certified forms of all residential
Leases and certified copies of those commercial Leases demising over
10% of the gross leasable area of the Improvements which are entered
into pursuant to this Subsection 3.8(a) promptly upon the execution
thereof. In the event Mortgagor desires to enter into a lease which
does not satisfy the foregoing requirements and therefore the consent
of Mortgagee is required, such consent by Mortgagee shall not be
unreasonably withheld or delayed.
(b) Mortgagor shall use all commercially reasonable
efforts to provide in all commercial Leases executed after the date
hereof provision for automatic subordination of such Leases to this
Mortgage and the lessees' attornment to Mortgagee. To the extent any
such commercial leases are not, by their terms, self subordinating,
Mortgagor shall cause each such lessee to execute a form of
subordination, non-disturbance and attornment agreement in form and
substance substantially similar to the form attached hereto as Exhibit
C. Upon receipt by the Mortgagee of a written request from the
Mortgagor therefor, the Mortgagee shall execute and deliver to the
Tenant under any Lease (other than a Lease to an Affiliate of the
Mortgagor) existing on the date hereof or made in accordance with the
provisions hereof, such subordination, nondisturbance and attornment
agreement substantially similar in form as attached hereto as Exhibit
C. Mortgagor (i) shall observe and perform all the obligations imposed
upon the lessor under the Leases and shall not do or permit to be done
anything to impair the value of the Leases as security for the Debt:
(i) shall promptly send copies to Mortgagee of all notices of a
material default which Mortgagor shall send or receive under any
commercial Lease; (iii) shall enforce in the ordinary course of
business all of the terms, covenants and conditions contained in the
Leases upon the part of the lessee thereunder to be observed or
performed; (iv) shall not collect any of the Rents more than one (1)
month in advance (excluding security deposit, last month's rent and
escalation and percentage rent in accordance with each Lease); (v)
shall not execute any other assignment of the lessor's interest in the
Leases or the Rents; (vi) may alter, modify or change or waive the
terms of any Lease without the prior written consent of Mortgagee;
provided such action does not have a material adverse effect on the
ability of the Mortgagor to pay its obligations with respect to the
Notes, this Mortgage and the Other Security Documents and provided,
further that any such commercial Lease demising over 10% of the gross
leasable area of the Improvements which are entered into pursuant to
this Subsection 3.8(a), as amended, altered, modified, changed or
waived is otherwise in compliance with this Mortgage and a certified
copy is promptly delivered to Mortgagee.
(c) The Mortgagor may terminate or permit the
termination of any Lease of space or accept surrender of all or any
portion of the space demised under the Lease or acquire any Lease or
reduce the rentals reserved thereunder or shorten the term of any Lease
so long as such action (taking into account the planned alternative
uses of the spaces) does not materially adversely affect the ability of
the Mortgagor to pay its obligations in respect to the Notes, this
Mortgage and the Other Security Documents, it being agreed that
termination of the Lease of a Tenant that is in default, after any
applicable notice and cure periods, shall be considered to be for the
benefit of the Property and the ability of Mortgagor to pay its
obligations).
Section 3.9 Maintenance of Property/Alterations.
(a) Mortgagor shall cause each Property to be
maintained in a good and safe condition and repair. The Mortgagor will
keep, or use all reasonable efforts (consistent with standards that
would generally be employed by institutional owners) to cause Tenants
to keep, each Property and the parking areas, sidewalks, curbs, and
streets and ways located on the Land and all other means of access to
each Property in good and clean order and condition such that the
utility and operation of such Property will not be affected in any
material adverse respect, subject to ordinary wear and tear and the
temporary results of any alteration or expansion permitted hereunder
and the provisions set forth in this Mortgage with respect to damage or
destruction caused by fire or other casualty or by a taking. The
Mortgagor will promptly make or use all reasonable efforts to cause to
be made all necessary or appropriate repairs, replacements and renewals
thereof (which if not made would affect the utility or operation of the
affected Property in any material adverse respect), whether interior or
exterior, structural or nonstructural, ordinary or extraordinary. All
repairs and replacements shall consist of materials which are
compatible with the existing Improvements and installed in a good and
workmanlike manner. The Mortgagor will do or use all reasonable efforts
to cause others to do, to the extent permitted by applicable law, all
shoring of foundations and walls (i) of any Improvements or (ii) of the
ground adjacent thereto, and every other act necessary or appropriate
for the presentation and safety of the Property by reason of or in
connection with any excavation or other building operation upon the
Land or any adjoining property, whether or not the Mortgagor or any
other Person shall, by any Applicable Law or Environmental Law, be
required to take such action or be liable for failure to do so. Subject
(to the extent applicable) to the provisions hereof and the provisions
of Section 3.5 relating to permitted contests, Mortgagor will not do or
permit any act or thing which might affect the utility or operation of
any Property or any part thereof in any material adverse respect, or
commit or permit any waste of any Property or any part thereof. The
Improvements and the Personal Property shall not be removed, demolished
or materially altered (except for normal replacement of the Personal
Property and immaterial demolition of portions of a Property for the
purpose of constructing improvements to such Property) without the
consent of Mortgagee, which consent shall not be unreasonably withheld
or delayed. Notwithstanding the foregoing, no alterations of any
portion of the Property shall require the Mortgagee's consent provided
the cost of such alterations and any other then current alterations to
the Property are less than the Alteration Threshold Amount (as
hereinafter defined) and all of the following conditions are satisfied:
(i) no Event of Default shall have occurred
and be continuing or shall occur as a result of such
alteration;
(ii) such alteration is undertaken in
accordance with the applicable provisions of this Mortgage,
the Other Security Documents and the Leases; and
(iii) such alterations shall not result in a
decrease in the value of the Property or impair Mortgagor's
ability to pay the Debt in a timely manner.
The "Alteration Threshold Amount" shall mean the higher of 10%
of the value of the affected Property as shown on Exhibit B attached
hereto and $250,000.00. Any alterations relating to (x) a fire or other
casualty at any Property or (y) the occurrence of any other event which
creates the need for alterations to any Property or (z) any single
construction project or program at any Property, taken as a whole,
whose estimated or actual all-inclusive cost equals or exceeds the
Alteration Threshold Amount are herein referred to as a "Material
Alteration."
(b) Any Material Alteration shall be conducted under the
supervision of an independent architect (which architect is licensed to
practice in the state in which such Property is located and has not
less than five (5) years experience in the profession) or contractor
and no such alteration or improvement shall be undertaken until five
(5) Business Days (as defined in the Indenture) after there shall have
been delivered to Mortgagee, for informational purposes only, detailed
plans and specifications and cost estimates therefor, prepared and
approved in writing by such independent architect or contractor. Such
plans and specifications may be revised at any time and from time to
time provided that material revisions of such plans and specifications
are filed with the Mortgagee, for informational purposes only, together
with the written approval thereof by such independent architect or
contractor ("Independent Party").
(c) Mortgagor shall be permitted to undertake any Material
Alteration without Mortgagee's prior consent provided that the
conditions of this Section 3.9 are satisfied and such Material
Alteration, upon completion, shall not materially adversely affect the
value of the Property taken as a whole or materially adversely reduce
the Operating Revenue from the affected Property from the level
available immediately prior to commencement of such Material
Alteration. All work done in connection with any alteration or
improvement, whether a Material Alteration or otherwise, shall be
performed in a good and workmanlike manner, all materials used in
connection with any alteration or improvement shall not be less than
the standard or quality of the materials currently used at such
Property and all work performed and all materials used shall be in
accordance with all then applicable lead requirements and insurance
requirements and shall otherwise comply with the provisions hereof.
(d) If at any time during any alteration (including a Material
Alteration), the Mortgagor decides, in its sole discretion, not to
complete such alteration, Mortgagor agrees it will thereafter use
commercially reasonable efforts to restore the affected portion of such
Property to at least the level of utility and value that existed at the
date of the commencement of such alteration. The cost of any alteration
(including a Material Alteration) shall be promptly and fully paid by
Mortgagor or the tenant performing the alteration subject to the
Mortgagor's right to contest any amount claimed to be due as set forth
in this Mortgage. The Mortgagor shall not conduct any Material
Alteration unless the Mortgagor shall have delivered to the Mortgagee
Cash Equivalents in an amount not less than the amount by which the
total due and payable and unpaid costs of such Material Alteration
exceed the Alteration Threshold Amount, which Cash Equivalents shall be
held by the Mortgagee as security for the Obligations, subject to
release as described below. At the commencement of construction of any
Material Alteration, an Independent Party shall deliver to the
Mortgagee a schedule setting forth the projected stages of completion
of such Material Alteration and, in each case, the corresponding
amounts expected to be due and payable by or on behalf of the Mortgagor
in connection with such completion. Any Cash Equivalents that Mortgagor
delivers to the Mortgagee pursuant hereto shall be held by the
Mortgagee as specified in Section 3.10(b)(ii) hereof. At any time after
substantial completion of any stage of a Material Alteration in respect
of which Cash Equivalents were deposited pursuant hereto, the whole
balance of any cash so deposited with the Mortgagee and then remaining
on deposit may be withdrawn by the Mortgagor and shall be paid by the
Mortgagee to the Mortgagor, and any Cash Equivalents so deposited
shall, to the extent it has not been called upon, reduced or
theretofore released, be released by the Mortgagee to the Mortgagor,
within five (5) Business Days after receipt by the Mortgagee of an
application for such withdrawal and/or release together with an
Officers' Certificate, and signed also (as to the following clauses (1)
and (2) of this Section) by the Independent Party, setting forth in
substance as follows:
(1) that the Material Alteration in respect of which such Cash
Equivalents were deposited has been substantially completed in all
material respects in accordance with any plans and specifications
therefor previously filed with the Mortgagee;
(2) that to the knowledge of the certifying Person (x) such
Material Alteration has not been performed in violation of any
Applicable Law other than such violations as are not reasonably
expected to have a material adverse effect on the subject Property and
its value, (y) the Material Alteration will not result in the loss of
any certificate of occupancy needed by the Mortgagor to operate the
subject Property after the Material Alteration and (z) to the extent
required for the legal use or occupancy of the portion of the Property
affected by the Material Alteration, the Mortgagor has obtained a
temporary or permanent certificate of occupancy (or similar
certificate) or, if no such certificate is required, a statement to
that effect;
(3) that to the knowledge of the certifying Person (i) all
amounts that the Mortgagor is or may become liable to pay in respect of
such Material Alteration through the date of the certification have
been paid in full or adequately provided for or will be paid by
Mortgagee directly to the party entitled such funds using the amount
requested or are being contested in accordance with Section 3.5 hereof
and, (ii) (x) to the extent that such are customary and reasonably
obtainable by prudent managers in the metropolitan area where the
subject Property is located and the Mortgagor is not contesting payment
in accordance with Section 3.5 hereof, that lien waivers have been
obtained from the general contractor and major subcontractors
performing such Material Alteration or (y) at its sole cost and
expense, the Mortgagor shall cause First American Title Insurance
Company to deliver to the Mortgagee an endorsement to the lender's
title insurance policy delivered to the Mortgagee on the date hereof
("Closing Date") updating such policy and insuring over such liens
without further exceptions to such policy other than Permitted
Exceptions and such other exceptions which are acceptable to Mortgagee
in its reasonable judgment, or (z) shall, at its sole cost and expense,
cause a reputable title insurance company to deliver a lender's title
insurance policy to the Mortgagee, in such form, in such amounts and
with such endorsements as the lender's policy delivered to Mortgagee on
the Closing Date, which policy shall be dated the date of completion of
the Material Alteration and shall contain no exceptions other than
Permitted Exceptions; and
(4) that to the knowledge of the certifying Person, no Event
of Default has occurred and is continuing.
(e) Except to the extent Mortgagee applies Net Proceeds to the
Debt, Mortgagor shall promptly repair, replace or rebuild any part of
any Property which may be destroyed by any casualty, or become damaged
or dilapidated or which may be affected by any proceeding of the
character referred to in Section 3.7 hereof and shall complete and pay
for any structure at any time in the process of construction or repair
on the Land. Mortgagor shall not initiate, join in, acquiesce in, or
consent to any change in any private restrictive covenant, zoning law
or other public or private restriction, limiting or defining the uses
which may be made of the Property or any part thereof, without
Mortgagee's prior written consent, which consent shall not be
unreasonably withheld or delayed. If under applicable zoning provisions
the use of all or any portion of such Property is or shall become a
nonconforming use, Mortgagor will not cause or permit the nonconforming
use to be discontinued or abandoned without the express written consent
of Mortgagee.
Section 3.10 Restoration. The following provisions shall apply
in connection with the Restoration of any Property:
(a) Provided no Event of Default shall have occurred and be
continuing, if the Net Proceeds (as defined below related to such
casualty or condemnation), shall be less than either the Casualty
Threshold Amount (as hereinafter defined) or the Condemnation Threshold
Amount, as the case may be, and the costs of completing the
Restoration, in addition to the costs of completion of Restoration of
any other portion of the subject Property, shall be less than the
Casualty Threshold Amount or the Condemnation Threshold Amount, as the
case may be, then the Net Proceeds will be disbursed by Mortgagee to
Mortgagor upon receipt, provided that all of the conditions set forth
in Subsection 3.10(b)(i) are met and Mortgagor delivers to Mortgagee
(i) a written undertaking to expeditiously commence and to
satisfactorily complete with due diligence the Restoration in
accordance with the terms of this Mortgage and (ii) a monthly
accounting of all payments, costs and expenditures made by Mortgagor in
connection with the Restoration (all such Net Proceeds to be held by
Mortgagor in trust, to be applied first to the payment or reimbursement
of all costs incurred to affect the Restoration). The Casualty
Threshold Amount shall mean the higher of 10% of the value of the
applicable Property, as shown on Exhibit B attached hereto, and
$250,000.
(b) If the Net Proceeds, are equal to or greater than the
Casualty Threshold Amount or Condemnation Threshold Amount, as the case
may be, or the costs of completing the Restoration, in addition to the
costs of completion of Restoration of any other portion of the
Property, is equal to or greater than the Casualty Threshold Amount or
Condemnation Threshold Amount, as the case may be, Mortgagee shall make
the Net Proceeds available for the Restoration in accordance with the
provisions of this Subsection 3.10(b)(i)-(vii). The term "Net Proceeds"
for purposes of this Section 3.10 shall mean: (i) the net amount of all
insurance proceeds received by Mortgagee pursuant to Subsections
3.3(a)(i), (iv)(B), and (vi) of this Mortgage as a result of such
damage or destruction, after deduction of its reasonable costs and
expenses (including, but not limited to, reasonable counsel fees), if
any, in collecting same ("Insurance Proceeds"), or (ii) the net amount
of all awards and payments received by Mortgagee with respect to a
taking referenced in Section 3.7 of this Mortgage, after deduction of
its reasonable costs and expenses (including, but not limited to,
reasonable counsel fees), if any, in collecting the same ("Condemnation
Proceeds"), whichever the case may be.
(i) The Net Proceeds shall be made available to
Mortgagor for the Restoration of any Property provided that each of the
following conditions are met:
(A) no Event of Default shall have occurred
and be continuing under the Notes, this
Mortgage or any of the Other Security
Documents;
(B) Mortgagor shall commence the
Restoration of such Property as soon as
reasonably practicable (but in no event later
than sixty (60) days after the Net Proceeds
are made available subject to force majeure
delays) and shall diligently pursue the same
to satisfactory completion;
(C) Mortgagor shall provide Mortgagee with
satisfactory evidence (in Mortgagee's
reasonable judgment) that any operating
deficits, including all scheduled payments of
principal and interest under the Notes which
will be incurred with respect to the Property
as a result of the occurrence of any such fire
or other casualty or taking, whichever the
case may be, will be covered out of (1) the
insurance coverage referred to in Subsection
3.3(a)(iii), if applicable, or (2) by other
funds of Mortgagor;
(D) Mortgagor shall provide Mortgagee with
satisfactory evidence (in Mortgagee's
reasonable judgment) that the Restoration of
such Property will be completed, on or before
the earliest to occur of (1) eighteen (18)
months after the casualty or taking, whichever
the case may be, or (2) such time as may be
required under applicable zoning law,
ordinance, rule or regulation in order to
repair and restore the Property to the
condition it was in immediately prior to such
fire or other casualty or to as nearly as
possible the condition it was in immediately
prior to such taking, as applicable or (3)
within 6 months of the maturity date of the
Note;
(E) such Property and the use thereof after
the Restoration will be in compliance with and
permitted under all applicable zoning laws,
ordinances, rules and regulations or continue
as a legal non-conforming use, as the case may
be; and
(F) the Restoration of such Property shall
be done and completed by Mortgagor in an
expeditious and diligent fashion and in
compliance with all applicable governmental
laws, rules and regulations (including,
without limitation, all applicable
Environmental Laws as defined below).
(ii) The Net Proceeds shall be held by Mortgagee
in a segregated interest bearing account and, until disbursed in
accordance with the provisions of this Subsection 3.10(b), shall
constitute additional security for the Obligations. The Net Proceeds
shall be disbursed by Mortgagee to, or as directed by, Mortgagor from
time to time during the course of the Restoration of the Property, upon
receipt of evidence satisfactory to Mortgagee that (A) all materials
installed and work and labor performed (except to the extent that they
are to be paid for out of the requested disbursement) in connection
with the Restoration of the affected Property have been paid for in
full, (B) there exist no notices of pendency, stop orders, mechanic's
or materialman's liens or notices of intention to file same, or any
other liens or encumbrances of any nature whatsoever on the Property
arising out of the Restoration of the affected Property which have not
either been fully bonded to the satisfaction of Mortgagee and
discharged of record or in the alternative fully insured to the
satisfaction of Mortgagee by the title company insuring the lien of
this Mortgage, and (C) no Event of Default shall have occurred and be
continuing.
(iii) If the costs of completing the Restoration
of the affected Property are equal to or greater than the Casualty
Threshold Amount or the Condemnation Threshold Amount, as the case may
be, then all plans and specifications required in connection with the
Restoration of the affected Property shall be subject to reasonable
prior review and acceptance in all respects by Mortgagee and by an
independent consulting engineer selected by Mortgagee (the "Restoration
Consultant") and the provisions of subsections (iv), (v) and (vi) below
shall be applicable to such Restoration (the provisions of subsections
(iv), (v) and (vi) below not being applicable to any other
Restoration). Mortgagee shall have the use of the plans and
specifications and all permits, licenses and approvals required or
obtained in connection with the Restoration of the affected Property.
The identity of the contractors, subcontractors and materialmen engaged
in the Restoration of the affected Property, as well as the contracts
under which they have been engaged, shall be subject to reasonable
prior review and acceptance by Mortgagee and the Restoration
Consultant. All costs and expenses incurred by Mortgagee in connection
with making the Net Proceeds available for the Restoration of the
affected Property including, without limitation, reasonable counsel
fees and disbursements and the Restoration Consultant's fees, shall be
paid by Mortgagor.
(iv) in no event shall Mortgagee be obligated to
make disbursements of the Net Proceeds in excess of an amount equal to
the costs actually incurred from time to time for work in place as part
of the Restoration of the affected Property, as certified by the
Restoration Consultant, minus the Retainage. The term "Retainage" as
used in this Subsection 3.10(b) shall mean an amount equal to 10% of
the costs actually incurred for work in place as part of the
Restoration of the affected Property, as certified by the Restoration
Consultant, until the Restoration of the affected Property has been
completed. The Retainage shall in no event, and notwithstanding
anything to the contrary set forth above in this Subsection 3.10(b), be
less than the amount actually held back by Mortgagor from contractors,
subcontractors and materialmen engaged in the Restoration of the
affected Property. The Retainage shall not be released until the
Restoration Consultant certifies to Mortgagee that the Restoration of
the affected Property has been completed in accordance with the
provisions of this Subsection 3.10(b) and that all approvals necessary
for the re-occupancy and use of such Property have been obtained from
all appropriate governmental and quasi-governmental authorities, and
Mortgagee receives evidence satisfactory to Mortgagee that the costs of
the Restoration of the affected Property have been paid in full or will
be paid in full out of the Retainage, provided, however, that Mortgagee
will release the portion of the Retainage being held with respect to
any contractor, subcontractor or materialman engaged in the Restoration
of the affected Property as of the date upon which the Restoration
Consultant certifies to Mortgagee that the contractor, subcontractor or
materialman has satisfactorily completed all work and has supplied all
materials in accordance with the provisions of the contractor's,
subcontractor's or materialman's contract, and the contractor,
subcontractor or materialman delivers the lien waivers and evidence of
payment in full of all sums due to the contractor, subcontractor or
materialman as may be reasonably requested by Mortgagee or by the title
company insuring the lien of this Mortgage. If required by Mortgagee,
the release of any such portion of the Retainage shall be approved by
the surety company, if any, which has issued a payment or performance
bond with respect to the contractor, subcontractor or materialman.
(v) Mortgagee shall not be obligated to make
disbursements of the Net Proceeds more frequently than once every
calendar month.
(vi) If at any time the Net Proceeds or the
undisbursed balance thereof (including any interest earned thereon)
shall not, in the reasonable opinion of Mortgagee, be sufficient to pay
in full the balance of the costs which are estimated by the Restoration
Consultant to be incurred in connection with the completion of the
Restoration of the affected Property, Mortgagor shall deposit the
deficiency (the "Net Proceeds Deficiency") with Mortgagee before any
further disbursement of the Net Proceeds shall be made. The Net
Proceeds Deficiency deposited with Mortgagee shall be held by Mortgagee
in an interest bearing account and shall be disbursed for costs
actually incurred in connection with the Restoration of the affected
Property on the same conditions applicable to the disbursement of the
Net Proceeds, and until so disbursed pursuant to this Subsection
3.10(b) shall constitute additional security for the Obligations.
(vii) The excess, if any, of the Net Proceeds
(including any interest earned thereon) and the remaining balance, if
any, of the Net Proceeds Deficiency deposited with Mortgagee after the
Restoration Consultant certifies to Mortgagee that the Restoration of
the affected Property has been completed in accordance with the
provisions of this Subsection 3.10(b), and the receipt by Mortgagee of
evidence satisfactory to Mortgagee that all costs incurred in
connection with the Restoration of the affected Property have been paid
in full, shall be treated as proceeds from an Asset Sale and deposited
into the Trapped Funds Account (as defined in the Indenture).
(c) All Net Proceeds not required to be made available
for the Restoration of the affected Property shall be treated as
proceeds from an Asset Sale and applied by Mortgagee first to all
outstanding Debt other than interest and principal under the Notes and
second, in accordance with the terms of Section 3.08 of the Indenture
(it being understood that any application of Net Proceeds in accordance
with Section 3.08(iv) of the Indenture shall be deemed a reduction of
the Allocated Note Amount for the Property from which such Net Proceeds
were derived). Notwithstanding anything to the contrary contained in
this Section 3.10, in the event (i) Net Proceeds exceed the outstanding
principal balance due under the Notes, Mortgagee shall have the right
to use such Net Proceeds to pay off the Debt, and (ii) a casualty
results in a total loss to the affected Property, Mortgagee may elect
to use the Net Proceeds to pay down the Debt provided Holders of fifty
percent (50%) or more of the outstanding principal amount of the Notes
direct the Mortgagee to take such action and, subject to the provisions
of Section 8.02 of the Indenture, in the event the Allocated Note
Amount with respect to the Property from which the Net Proceeds have
been generated has been paid in full, the lien of the Mortgage
encumbering such Property shall be released. Any amount in excess of
the Allocated Note Amount shall be applied in accordance with the terms
of Section 3.08 of the Indenture.
Section 3.11 Waste. Mortgagor shall not commit or suffer any
waste of any Property or make any change in the use of any Property which will
in any way materially increase the risk of fire or other hazard arising out of
the operation of such Property, or take any action that might invalidate or give
cause for cancellation of any Policy, or do or permit to be done thereon
anything that may in any way impair the value of any Property or the security of
this Mortgage. Mortgagor will not permit any drilling or exploration for or
extraction, removal, or production of any minerals from the surface or the
subsurface of any parcel of Land, regardless of the depth thereof or the method
of mining or extraction thereof (other than for environmental testing).
Section 3.12 Compliance with Laws.
(a) Mortgagor shall promptly comply with all existing and
future federal, state and local laws, orders, ordinances, governmental
rules and regulations or court orders affecting or which may be
interpreted to affect any Property, or the use thereof including, but
not limited to, the Americans with Disabilities Act ("ADA") and all
Environmental Laws (as hereinafter defined) and insurance requirements
(collectively, the "Applicable Laws").
(b) Mortgagor shall give prompt notice to Mortgagee of the
receipt by Mortgagor of any notice related to a violation of any
Applicable Laws and of the commencement of any proceedings or
investigations which relate to compliance with Applicable Laws.
(c) Mortgagor will take appropriate measures to prevent and
will not engage in or knowingly permit any illegal activities at the
Property.
Section 3.13 Books and Records. Mortgagor will keep proper
books of record and account in accordance with generally accepted accounting
principles ("GAAP") and in accordance with the terms and conditions set forth in
the Indenture, in which accurate and complete entries shall be made of all
dealings or transactions of or in relation to the Property and the business and
affairs of Mortgagor relating to the Property. Mortgagee and its authorized
representatives may from time to time, designate an agent to examine, at
reasonable times and upon reasonable notice, the books and records of Mortgagor
relating to the operation of any Property. Mortgagee and its agents shall use
reasonable efforts to prevent any material interference with use of the subject
Property by Mortgagor and/or its Tenants as a result of such examination.
Section 3.14 Management Agreements.
(a) Mortgagor or an Affiliate thereof (as defined in
the Indenture) shall manage any Property or cause any Property to be
managed consistent with the current management practice applicable to
such Property and in a reasonably prudent manner and consistent with
the terms of this Mortgage and Other Security Documents.
(b) Mortgagor shall have the right, in its sole
discretion, to retain an independent manager (the "Manager") for any
Property provided the Manager and the terms and conditions of the
management agreement between Mortgagor and the Manager (hereinafter,
together with any renewals or replacements thereof, being referred to
as the "Management Agreement"), are in accordance with the provisions
of Section 3.14(c) hereof. In such case, Mortgagor shall diligently
perform and observe all of the terms, covenants and conditions of the
Management Agreement on the part of Mortgagor to be performed and
observed to the end that all things shall be done which are necessary
to keep unimpaired the rights of Mortgagor under the Management
Agreement. Solely in the event Mortgagor elects to retain such a
Manager, Mortgagor agrees to (i) assign to Mortgagee as further
security for the payment of the Debt and for the performance and
observance of the terms, covenants and conditions of this Mortgage, all
the rights, privileges and prerogatives of Mortgagor to surrender the
Management Agreement and (ii) notify Mortgagee if the Manager
subcontracts to a third party all or substantially all of its
management responsibilities under the Management Agreement, which third
party in order to be a permitted subcontractor must satisfy the
requirements set forth in Subsection 3.14(c)(i) below or be a Mortgagor
Affiliate (as hereinafter defined). Mortgagor shall, from time to time,
use reasonably commercial efforts to obtain from the Manager under the
Management Agreement such certificates of estoppel with respect to
compliance by Mortgagor with the terms of the Management Agreement as
may be reasonably requested by Mortgagee. Any Management Agreement
entered into by Mortgagor shall provide such manager shall not assign
or subcontract its management responsibilities without the prior
written consent of Mortgagee.
(c) In the event Mortgagor elects to retain a Manager
in accordance with Section 3.14(b) above, Mortgagor shall be permitted
to enter into a Management Agreement, for the management of any
Property without Mortgagee's prior written consent provided that (i)
the Manager shall be a reputable professional management corporation or
business entity which has substantial experience, at the time of its
engagement, in managing other properties similar in size and use as the
subject Property, and some of which properties are located in the
geographic locality in which the subject Property is situated and (ii)
the Management Agreement with such an independent Manager, shall at the
time of execution be on market terms (including, but not limited to,
fees and terminability), and (iii) the Management Agreement shall
obligate the Manager to operate the subject Property at all times in a
manner consistent with the manner with which properties of a similar
type and class are managed and otherwise consistent with prevailing
industry standards.
Section 3.15 Performance of Other Agreements. Mortgagor shall
observe and perform each and every term to be observed or performed by Mortgagor
pursuant to the terms of any agreement or recorded instrument affecting or
pertaining to each Property, or given by Mortgagor to Mortgagee for the purpose
of further securing an obligation secured hereby and any amendments,
modifications or changes thereto.
Section 3.16 [Intentionally Omitted].
Section 3.17 [Intentionally Omitted].
Section 3.18 [Intentionally Omitted].
Section 3.19 Existence. Until the date upon which all
Obligations have been satisfied in full (or waived in writing by Mortgagee),
Mortgagor shall continue to maintain its status as a Single-Purpose Entity in
all respects. For purposes hereof, "Single-Purpose Entity" shall mean the
attributes described in Sections __ of Mortgagor's [trust agreement] as of the
date hereof.
Section 3.20 Payment for Labor and Materials. Subject to the
terms of Section 3.5 hereof, Mortgagor will promptly pay when due all bills and
costs for labor, materials, and specifically fabricated materials incurred in
connection with each Property and never permit to exist beyond the due date
thereof in respect of any Property or any part thereof any lien or security
interest, even though inferior to the liens and the security interests hereof,
and in any event never permit to be created or exist in respect of any Property
or any part thereof any other or additional lien or security interest other than
the liens or security interests hereof, except for the Permitted Exceptions (as
defined below).
Article 4 - REPRESENTATIONS AND WARRANTIES
Mortgagor represents and warrants to Mortgagee that:
Section 4.1 Warranty of Title. Mortgagor has good and
marketable fee simple title to each Property and has the right to mortgage,
grant, bargain, sell, pledge, assign, warrant, transfer and convey the same and
that Mortgagor possesses an unencumbered fee simple absolute estate in the Land
and the Improvements and that it owns each Property free and clear of all liens,
encumbrances and charges whatsoever except for those exceptions shown in the
title insurance policy insuring the lien of the Mortgage (the "Permitted
Exceptions"). This Mortgage constitutes a first priority lien on each Property,
subject only to the Permitted Exceptions. Mortgagor shall forever warrant,
defend and preserve the title and the validity and priority of the lien of this
Mortgage and shall forever warrant and defend the same to Mortgagee
against the claims of all persons whomsoever. The Permitted Exceptions do not
and will not materially and adversely affect (i) the ability of Mortgagor to pay
in full the principal and interest on the Notes in a timely manner, or (ii) the
use of any Property for the use currently made thereof, the operation of any
Property as currently being operated or the value of any Property.
Section 4.2 [Intentionally Omitted..]
Section 4.3 Legal Status and Authority. Mortgagor (a) is duly
organized, validly existing and in good standing under the laws of its state of
organization or incorporation; (b) is duly qualified to transact business and is
in good standing in the State where each Property is located and each other
jurisdiction in which it is required; and (c) has all necessary approvals,
governmental and otherwise, and full power and authority to own each Property
and carry on its business as now conducted and proposed to be conducted.
Mortgagor now has and shall continue to have the full right, power and authority
to operate and lease each Property, to encumber each Property as provided herein
and to perform all of the Other Obligations to be performed by Mortgagor under
the Notes, this Mortgage and the Other Security Documents.
Section 4.4 [Intentionally Omitted.]
Section 4.5 Litigation. Except as set forth on Schedule 4.5
attached hereto, there is no action, suit or proceeding, judicial,
administrative or otherwise (including any condemnation or similar proceeding)
pending or, to the best of Mortgagor's knowledge, threatened or contemplated in
writing against, or affecting, Mortgagor or any Property. Except as specifically
noted, all such actions referenced on Schedule 4.5 are covered by insurance.
There are no judgments, decrees or orders of any kind against Mortgagor unpaid
of record which would affect the ability of Mortgagor to comply with its
obligations under the Notes, this Mortgage or the Other Security Documents.
Section 4.6 Status of Property.
(a) Except as set forth on Schedule 4.6(a), no portion of any
of the Improvements is located in an area identified by the Secretary
of Housing and Urban Development or any successor thereto as an area
having special flood hazards pursuant to the National Flood Insurance
Act of 1968 or the Flood Disaster Protection Act of 1973, as amended,
or any successor law, or, if located within any such area, Mortgagor
has obtained and will maintain the insurance prescribed in Section 3.3
hereof.
(b) Mortgagor has obtained all necessary certificates,
licenses and other approvals, governmental and otherwise, necessary for
the operation of each Property and the conduct of its business and all
required zoning, building code, land use, environmental and other
similar permits or approvals, all of which are in full force and effect
as of the date hereof and not subject to revocation, suspension,
forfeiture or modification.
(c) Except as set forth in the structural reports referenced
on Schedule 4.6(c), each Property and the present and contemplated use
and occupancy thereof is in full compliance with all applicable zoning
ordinances (without reliance upon grandfather provisions or adjoining
or other properties), building codes, land use and environmental laws,
laws relating to the disabled (including, but not limited to, the ADA)
and other similar laws.
(d) Each Property is serviced by all utilities required for
the current or contemplated use thereof. All utility service is
provided by public utilities and each Property has accepted or is
equipped to accept such utility service.
(e) All public roads and streets necessary for service of and
access to each Property for the current or contemplated use thereof
have been completed, are serviceable and all-weather and are physically
and legally open for use by the public, and each Property has access to
such public roads.
(f) Each Property is served by public water and sewer systems.
(g) Except as set forth in the structural reports referenced
on Schedule 4.6(c), to the best knowledge of Mortgagor there is no
latent or patent structural deficiency of any Property. To the best
knowledge of Mortgagor, each Property is free of damage and waste that
would materially and adversely affect the value of such Property and
each Property is in good repair. Each Property is free from damage
caused by fire or other casualty.
(h) All costs and expenses of any and all labor, materials,
supplies and equipment used in the construction of the Improvements
have been paid in full. Subject to Mortgagor's right to contest as set
forth in this Mortgage, there are no mechanics' or similar liens or
claims that have been filed and recorded for work, labor or materials
that affects any Property and that are or may be liens prior to, or
coordinate with, the lien of this Mortgage.
(i) Except as set forth on Schedule 4.6(i) attached hereto,
Mortgagor has paid in full for, and is the owner of, all furnishings,
fixtures and equipment (other than tenants' property) used in
connection with the operation of the Property, free and clear of any
and all security interests, liens or encumbrances, except the lien and
security interest created hereby.
(j) To the best knowledge of Mortgagor, all liquid and solid
waste disposal, septic and sewer systems located on each Property are
in a good and safe condition and repair and in compliance with all
Applicable Laws.
(k) Except as may be shown on the surveys delivered by
Mortgagor to Mortgagee, all Improvements lie within the boundaries and
building restrictions of the Land, no such Improvements encroach upon
easements benefiting any Property other than encroachments that do not
materially adversely affect the use or occupancy of any Property and no
improvements on adjoining properties encroach upon any Property or
easements benefiting the Property other than encroachments that do not
materially adversely affect the use or occupancy of any Property. All
amenities, access routes or other items that materially benefit each
Property are under direct control of Mortgagor, constitute permanent
easements that benefit all or part of such Property or are public
property, and each Property by virtue of such easements or otherwise is
contiguous to a physically open, dedicated all-weather public street,
and has the necessary permits for ingress and egress.
(l) There are no delinquent taxes, ground rents, water
charges, sewer rents, assessments (including assessments payable in
future installments, insurance premiums, leasehold payments, or other
outstanding charges affecting any Property.
Section 4.7 No Foreign Person. Mortgagor is not a "foreign
person" within the meaning of Sections 1445(f)(3) of the Internal Revenue Code
of 1986, as amended and the related Treasury Department regulations, including
temporary regulations.
Section 4.8 Separate Tax Lot. Each individual parcel
comprising each Property is assessed for real estate tax purposes as one or more
wholly independent tax lot or lots, separate from any adjoining land or
improvements not constituting a part of such lot or lots, and no other land or
improvements is assessed and taxed together with each such individual Property
or any portion thereof.
Section 4.9 ERISA Compliance.
(a) As of the date hereof and throughout the term of
this Mortgage, (i) Mortgagor is not and will not be an "employee
benefit plan" as defined in Section 3(3) of ERISA, which is subject to
Title I of ERISA, and (ii) the assets of Mortgagor do not and will not
constitute "plan assets" of one or more such plans for purposes of
Title I of ERISA; and
(b) As of the date hereof and throughout the term of
this Mortgage (i) Mortgagor is not and will not be a "governmental
plan" within the meaning of Section 3(3) of ERISA and (ii) transactions
by or with Mortgagor are not and will not be subject to state statutes
applicable to Mortgagor regulating investments of and fiduciary
obligations with respect to governmental plans.
Section 4.10 Leases. Except as shown on the rent rolls
attached hereto as Schedule 4.10, (a) Mortgagor is the sole owner of the entire
lessor's interest in the Leases; (b) the Leases are valid and enforceable; (c)
the terms of all alterations, modifications and amendments to the Leases are
reflected in the certified rent roll delivered to Mortgagee, (d) none of the
Rents reserved in the Leases have been assigned or otherwise pledged or
hypothecated; (e) none of the Rents have been collected for more than one (1)
month in advance (not including security deposits and last month's rent); (f)
the premises demised under the Leases have been completed and the tenants under
the Leases have accepted the same and have taken possession of the same on a
rent-paying basis; (g) to the best knowledge of Mortgagor, there exist no
offsets or defenses to the payment of any portion of the Rents; (h) no Lease
contains an option to purchase, right of first refusal to purchase, or any other
similar provision, except as approved by Mortgagee; (i) no person or entity has
any possessory interest in or right to occupy any Property except under and
pursuant to a Lease; (j) there are no prior assignment, pledges, hypothecation
or other encumbrances of any Leases or any portion of Rents due and payable or
to become due and payable thereunder which are presently outstanding and have
priority to the assignment of rents set forth in this Mortgage; and (k) the
Property is not subject to any Lease other than the Leases described in the rent
rolls delivered to Mortgagee on or prior to the Closing Date.
Section 4.11 [Intentionally Omitted.]
Section 4.12 Business Purposes. The loan evidenced by the
Notes is solely for the business purpose of Mortgagor, and is not for personal,
family, household, or agricultural purposes.
Section 4.13 Taxes. Mortgagor has filed all federal, state,
county, municipal, and city income and other tax returns required to have been
filed by it and has paid all taxes and related liabilities which have become due
pursuant to such returns or pursuant to any assessments received by it.
Mortgagor does not know of any basis for any additional assessment in respect of
any such taxes and related liabilities for prior years.
Section 4.14 Mailing Address. Mortgagor's mailing address, as
set forth in the opening paragraph hereof or as changed in accordance with the
provisions hereof, is true and correct.
Section 4.15 [Intentionally Omitted.]
Section 4.16 [Intentionally Omitted.]
Section 4.17 Illegal Activity. No portion of the Property has
been or will be purchased with proceeds of any illegal activity.
Section 4.18 Trade Names. Mortgagor does not do any business
with respect to any Property under any trade name.
Section 4.19 Contracts. All contracts, agreements, consents,
waivers, documents and writings of every kind or character at any time to which
the Mortgagor is a party to be delivered to Mortgagee pursuant to any of the
provisions of this Mortgage are valid and enforceable against the Mortgagor and,
to the best knowledge of Mortgagor, are enforceable against all other parties
thereto, and in all respects are what they purport to be and, to the best
knowledge of Mortgagor, to the extent that any such writing shall impose any
obligation or duty on the party thereto or constitute a waiver of any rights
which any such party might otherwise have, said writing shall be valid and
enforceable against said party in accordance with the terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, reorganization
or similar laws affecting the rights of creditors generally.
Section 4.20 [Intentionally Omitted.]
Section 4.21 Contingent Liabilities. Mortgagor has no known
material contingent liabilities.
Section 4.22 No Other Obligations. Mortgagor has no material
financial obligations under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which Mortgagor is a party or by
which the Mortgagor or any Property is otherwise bound, other than obligations
incurred in the ordinary course of the operation of the Property and other than
the obligations under this Mortgage and the Other Security Documents.
Section 4.23 No Other Debt. Mortgagor has not borrowed or
received other debt financing that has not been heretofore repaid in full.
Section 4.24 Special Assessments. Except as disclosed in the
title insurance policy, there are no pending or, to the knowledge of Mortgagor,
proposed special or other assessments for public improvements or otherwise
affecting any Property, nor to the knowledge of Mortgagor, are there any
contemplated improvements to the property that may result in such special or
other assessments.
Section 4.25 [Intentionally Omitted.]
Section 4.26 Title Insurance. Each Property is covered by an
American Land Title Association mortgagee's title policy in favor of the
Mortgagee in an amount equal to the Allocated Note Amount for each Property
insuring a valid first lien on each Property, which is in full force and effect
in the name of the Mortgagee, subject only to the Permitted Exceptions.
Section 4.27 Survival. The foregoing representations and
warranties shall survive the execution and delivery of this Mortgage until the
Debt has been fully paid and satisfied and Mortgagee shall have no further
commitment to advance funds hereunder.
Article 5 - OBLIGATIONS AND RELIANCE
Section 5.1 Relationship of Mortgagor and Mortgagee. The
relationship between Mortgagor and Mortgagee is solely that of debtor and
creditor, and Mortgagee has no fiduciary or other special relationship with
Mortgagor, and no term or condition of any of the Notes, this Mortgage and the
Other Security Documents shall be construed so as to deem the relationship
between Mortgagor and Mortgagee to be other than that of debtor and creditor.
Section 5.2 No Reliance on Mortgagee. The officers, principals
and (if Mortgagor is a trust) beneficial owners of Mortgagor are experienced in
the ownership and operation of properties similar to each Property, and
Mortgagor and Mortgagee are relying solely upon such expertise and business plan
in connection with the ownership and operation of each Property. Mortgagor is
not relying on Mortgagee's expertise, business acumen or advice in connection
with any Property.
Section 5.3 No Mortgagee Obligations.
(a) Notwithstanding the provisions of Subsections 1.1(f) and
(1) or Section 1.2, Mortgagee is not undertaking the performance of (i)
any obligations under the Leases; or (ii) any obligations with respect
to such agreements, contracts, certificates, instruments, franchises,
permits, trademarks, licenses and other documents.
(b) By accepting or approving anything required to be
observed, performed or fulfilled or to be given to Mortgagee pursuant
to this Mortgage, the Notes or the Other Security Documents, including,
without limitation, any officer's certificate, balance sheet, statement
of profit and loss or other financial statement, survey, appraisal, or
insurance policy, Mortgagee shall not be deemed to have warranted,
consented to, or affirmed the sufficiency, the legality or
effectiveness of same, and such acceptance or approval thereof shall
not constitute any warranty or affirmation with respect thereto by
Mortgagee.
Section 5.4 Reliance. Mortgagor recognizes and acknowledges
that in accepting the Notes, this Mortgage and the Other Security Documents,
Mortgagee is expressly and primarily relying on the truth and accuracy of the
warranties and representations set forth in Article 4 without any obligation to
investigate any Property and notwithstanding any investigation of any Property
by Mortgagee; that such reliance existed on the part of Mortgagee prior to the
date hereof; that the warranties and representations are a material inducement
to the issuance of the Notes, this Mortgage and the Other Security Documents;
and that the Holders would not be willing to make the Loan evidenced by the
Notes, this Mortgage and the Other Security Documents and accept this Mortgage
in the absence of the warranties and representations as set forth in Article 4.
Article 6 - FURTHER ASSURANCES
Section 6.1 Recording of Mortgage, etc. Mortgagor forthwith
upon the execution and delivery of this Mortgage and thereafter, from time to
time, will cause this Mortgage and any of the Other Security Documents creating
a lien or security interest or evidencing the lien hereof upon the Property and
each instrument of further assurance to be filed, registered or recorded in such
manner and in such places as may be required by any present or future law in
order to publish notice of and fully to protect and perfect the lien or security
interest hereof upon, and the interest of Mortgagee in, the Property. Mortgagor
will pay all taxes, filing, registration or recording fees, and all expenses
incident to the preparation, execution, acknowledgment and/or recording of the
Notes, this Mortgage, the Other Security Documents, any note or mortgage
supplemental hereto, any security instrument with respect to the Property and
any instrument of further assurance, and any modification or amendment of the
foregoing documents, and all federal, state, county and municipal taxes, duties,
imposts, assessments and charges arising out of or in connection with the
execution and delivery of this Mortgage, any mortgage supplemental hereto, any
security instrument with respect to the Property or any instrument of further
assurance, and any modification or amendment of the foregoing documents, except
where prohibited by law so to do.
Section 6.2 Further Acts, etc. Mortgagor will, at the cost of
Mortgagor, and without expense to Mortgagee, do, execute, acknowledge and
deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignments, transfers and assurances as Mortgagee
shall, from time to time, reasonably require, for the better assuring,
conveying, assigning, transferring, and confirming unto Mortgagee the property
and rights hereby mortgaged, granted bargained, sold, conveyed, confirmed,
pledged, assigned, warranted and transferred or intended now or hereafter so to
be, or which Mortgagor may be or may hereafter become bound to convey or assign
to Mortgagee, or for carrying out the intention or facilitating the performance
of the terms of this Mortgage or for filing, registering or recording this
Mortgage, or for complying with all Applicable Laws in connection with the Debt
or any document evidencing or securing the Debt. Mortgagor, on demand, will
execute and deliver one or more financing statements, chattel mortgages or other
instruments, to evidence more effectively the security interest of Mortgagee in
the Property. Mortgagor grants to Mortgagee an irrevocable power of attorney
coupled with an interest for the purpose of performing any and all of
Mortgagor's obligations under this Section 6.2 in the event Mortgagor fails to
comply with the terms of this Section 6.2 within ten (10) days of any request by
Mortgagee.
Section 6.3 Changes in Tax, Debt, Credit and Documentary Stamp
Laws.
(a) If any law is enacted or adopted or amended after the date
of this Mortgage which deducts the Debt from the value of any Property
for the purpose of taxation or which imposes a tax, either directly or
indirectly, on the Debt or Mortgagee's interest in the Property,
Mortgagor will pay the tax, with interest and penalties thereon, if
any. If Mortgagee is advised by counsel chosen by it that the payment
of tax by Mortgagor would be unlawful or taxable to Mortgagee or
unenforceable or provide the basis for a defense of usury, then
Mortgagee shall have the option by written notice of not less than
ninety (90) days to declare that portion of the Debt equal to the
Release Price (as hereinafter defined) for such Property immediately
due and payable.
(b) Mortgagor will not claim or demand or be entitled to any
credit or credits on account of the Debt for any part of the Taxes or
Other Charges assessed against any Property, or any part thereof, and
no deduction shall otherwise be made or claimed from the assessed value
of any Property, or any part thereof, for real estate tax purposes by
reason of this Mortgage or the Debt. If such claim, credit or deduction
shall be required by law, Mortgagee shall have the option, by written
notice of not less than ninety (90) days, to declare the Debt
immediately due and payable.
(c) If at any time the United States of America, any State
thereof or any subdivision of any such State shall require revenue or
other stamps to be affixed to the Notes, this Mortgage, or any of the
Other Security Documents or impose any other tax or charge on the same,
Mortgagor will pay for the same, with interest and penalties thereon,
if any.
Section 6.4 Estoppel Certificates. At Mortgagee's reasonable
request, Mortgagor shall use commercially reasonable efforts to deliver to
Mortgagee duly executed estoppel certificates from any one or more lessees as
required by Mortgagee and, to the extent such estoppel certificates have been
previously received by Mortgagee, duly executed updated landlord estoppel
certificates, attesting to such facts regarding the Leases as Mortgagee may
reasonably require, including, but not limited to, attestations that to the
extent applicable each Lease covered thereby is in full force and effect with no
defaults thereunder on the part of any party, that none of the Rents have been
paid more than one month in advance, and that the lessee claims no defense or
offset against the full and timely performance of its obligations under the
Lease.
Section 6.5 Flood Insurance. After Mortgagee's request,
Mortgagor shall deliver evidence satisfactory to Mortgagee that no portion of
the Improvements is situated in a federally designated "special flood hazard
area" or, if located with such area, Mortgagor shall maintain the insurance
prescribed in Section 3.3 hereof.
Section 6.6 Splitting of Mortgage. This Mortgage and the Notes
shall, at any time until the same shall be fully paid and satisfied, at the sole
election of Mortgagee, be split or divided into two or more notes and two or
more security instruments, each of which shall cover all or a portion of the
Property to be more particularly described therein. To that end, Mortgagor, upon
written request of Mortgagee, shall execute, acknowledge and deliver, or cause
to be executed, acknowledged and delivered by the then owner of the affected
Property, to Mortgagee and/or its designee or designees substitute notes and
security instruments in such principal amounts, aggregating not more than the
then unpaid principal amount of this Mortgage, and containing terms, provisions
and clauses similar to those contained herein and in the Notes, and such other
documents and instruments as may be reasonably required by Mortgagee.
Section 6.7 Replacement Documents. Upon receipt of an
affidavit of an officer of Mortgagee as to the loss, theft, destruction or
mutilation of the Notes or any Other Security Document which is not of public
record, and, in the case of any such mutilation, upon surrender and cancellation
of such Notes or Other Security Document, Mortgagor will issue, in lieu thereof,
a replacement Notes or Other Security Document, dated the date of such lost,
stolen, destroyed or mutilated Notes or Other Security Document in the same
principal amount thereof, otherwise of like tenor and shall provide that it is a
replacement instrument and that such lost, stolen or destroyed instrument is
deemed null and void.
Article 7 - DUE ON SALE/ENCUMBRANCE
Section 7.1 Mortgagee Reliance. Mortgagor acknowledges that
Mortgagee has examined and relied on the experience of Mortgagor in owning and
operating properties such as the Property in agreeing to make the Loan, and will
continue to rely on Mortgagor's ownership of each Property as a means of
maintaining the value of such Property as security for repayment of the Debt and
the performance of the Other Obligations. Mortgagor acknowledges that Mortgagee
has a valid interest in maintaining the value of each Property so as to ensure
that, should Mortgagor default in the repayment of the Debt or the performance
of the Other Obligations, Mortgagee can recover the Debt by a sale of any or all
of the Property.
Section 7.2 No Sale/Encumbrance. Except to the extent provided
in Article 14 hereof, Mortgagor agrees that Mortgagor shall not (i) sell convey,
mortgage, grant, bargain, encumber, pledge, assign, or otherwise transfer any
Property or any part hereof or permit any Property or any part thereof to be
sold, conveyed, mortgaged, granted, bargained, encumbered, pledged, assigned, or
otherwise transferred, (ii) permit any owner of a beneficial ownership interest
in any Property to transfer such interest, whether by transfer of stock,
partnership interest or other beneficial interest in any entity, or otherwise,
except the transfer of the stock of Mortgagor's parent company, Value Property
Trust, provided, that, such transfer(s) do not result in a Change in Control (as
defined in the Indenture) or (iii) sell, assign, convey, transfer, mortgage,
encumber, grant a security interest in, or otherwise dispose of any legal or
beneficial ownership interest in Mortgagor, or permit any owner of a legal or
beneficial interest in Mortgagor to do the same.
Section 7.3 Sale/Encumbrance Defined. A sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer within
the meaning of this Article 7 shall be deemed to include, but not be limited to,
(a) an installment sales agreement wherein Mortgagor agrees to sell any Property
or any part thereof for a price to be paid in installments; and (b) an agreement
by Mortgagor leasing all or a substantial part of any Property for other than
actual occupancy by a space tenant thereunder or a sale, assignment or other
transfer of, or the grant of a security interest in, Mortgagor's right, title
and interest in and to any Leases or any Rents.
Section 7.4 Mortgagee's Rights. Mortgagee shall not be
required to demonstrate any actual impairment of its security or any increased
risk of default hereunder in order to declare the Debt immediately due and
payable upon Mortgagor's sale, conveyance, mortgage, grant, bargain,
encumbrance, pledge, assignment, or transfer of any Property in contravention of
the terms hereof without Mortgagee's consent. This provision shall apply to
every sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of any Property regardless of whether voluntary or not,
or whether or not Mortgagee has consented to any previous sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of any
Property.
Article 8 - PREPAYMENT
Section 8.1 Prepayment. The Debt may be prepaid only in strict
accordance with the express terms and conditions of the Note.
Article 9 - DEFAULT
Section 9.1 Events of Default. The occurrence of any one or
more of the following events shall constitute an "Event of Default":
(a) if a violation of Article 7 or Section 3.19 hereof has
occurred and is continuing;
(b) subject to the terms of Section 3.5 hereof, if any of the
Taxes or Other Charges is not paid when the same is due and payable
except to the extent sums sufficient to pay such Taxes and Other
Charges have been deposited with Mortgagee in accordance with the terms
of this Mortgage and such amount(s) (together with any late charges
and/or interest and penalties) remain unpaid for a period of thirty
(30) days from the date such amounts became delinquent;
(c) if the Policies are not kept in full force and effect, or
if the Policies are not delivered to Mortgagee within ten (10) days of
request or Mortgagor has not delivered within ten (10) days of request
evidence of the renewal of the Policies thirty (30) days prior to their
expiration as provided in Section 3.3(b);
(d) if any Property is subject to actual waste and such
occurrence has a material adverse effect (in Mortgagee's reasonable
judgment) on the use, value or operation of such Property;
(e) if Mortgagor shall be in default after the expiration of
any applicable cure period under any other mortgage, deed of trust,
deed to secure debt or other security agreement covering any part of
any parcel of Land or any Improvements;
(f) subject to the terms of Section 3.5 hereof, if the
Property becomes subject to any mechanic's, materialman's or other lien
other than a lien for local real estate taxes and assessments not then
due and payable and the lien shall remain undischarged of record (by
payment, bonding or otherwise) for a period of thirty (30) days;
(g) subject to the terms of Section 3.5 hereof, if any federal
tax lien is filed against Mortgagor or the Property and same is not
discharged of record within thirty (30) days after same is filed;
(h) if an Event of Default occurs under the Note, the
Indenture, the Note Purchase Agreement or any of the Other Security
Documents; or
(i) if for more than thirty (30) days after notice from
Mortgagee or such shorter time period as provided in the Note, this
Mortgage or the Other Security Documents, Mortgagor shall continue to
be in default under any other term, covenant or condition of this
Mortgage, provided that if such default cannot reasonably be cured
within such thirty (30) day period or such shorter time as provided for
in the Note, this Mortgage or the Other Security Documents and
Mortgagor shall have commenced to cure such default within such thirty
(30) day period or such shorter time as provided for in the Note, this
Mortgage or the Other Security Documents and thereafter diligently,
continuously and expeditiously proceeds to cure the same, such thirty
(30) day period or such shorter time as provided for in the Note, this
Mortgage or the Other Security Documents shall be extended for so long
as it shall require Mortgagor in the exercise of due diligence, in
Mortgagee's reasonable judgment, to cure such default.
Section 9.2 Default Interest. Mortgagor does hereby agree that
upon the occurrence of an Event of Default, Mortgagee shall be entitled to
receive and Mortgagor shall pay interest on the entire principal amount
outstanding of the Notes in accordance with the terms of the Notes and the
Indenture. Interest calculated at the Default Rate shall be added to the Debt,
and shall be deemed secured by this Mortgage. This clause, however, shall not be
construed as an agreement or privilege to extend the date of the payment of the
Debt, nor as a waiver of any other right or remedy accruing to Mortgagee by
reason of the occurrence of any Event of Default.
Article 10 - RIGHTS AND REMEDIES
Section 10.1 Remedies. Upon the occurrence of any Event of
Default but subject to the terms of Article 5 of the Indenture, Mortgagor agrees
that Mortgagee may take such action, without notice or demand, as it deems
advisable to protect and enforce its rights against Mortgagor and in and to any
Property, including, but not limited to, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such order as
Mortgagee may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Mortgagee:
(a) declare the entire unpaid Debt to be immediately due and
payable in accordance with the terms of the Indenture;
(b) institute proceedings, judicial or otherwise, for the
complete foreclosure of this Mortgage under any applicable provision of
law in which case the Property or any interest therein may be sold for
cash or upon credit in one or more parcels or in several interests or
portions and in any order or manner;
(c) with or without entry, to the extent permitted and
pursuant to the procedures provided by applicable law, institute
proceedings for the partial foreclosure of this Mortgage for the
portion of the Debt then due and payable, subject to the continuing
lien and security interest of this Mortgage for the balance of the Debt
not then due, unimpaired and without loss of priority;
(d) sell for cash or upon credit any Property or any part
thereof and all estate, claim, demand, right, title and interest of
Mortgagor therein and rights of redemption thereof, pursuant to power
of sale or otherwise, at one or more sales, as an entity or in parcels,
at such time and place, upon such terms and after such notice thereof
as may be required or permitted by law;
(e) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained
herein, in the Notes or in the Other Security Documents;
(f) recover judgment on the Notes either before, during or
after any proceedings for the enforcement of this Mortgage or the Other
Security Documents;
(g) apply for the appointment of a receiver, trustee,
liquidator or conservator of any Property, without notice, unless
required by law, and without regard for the adequacy of the security
for the Debt and without regard for the solvency of Mortgagor or of any
person, firm or other entity liable for the payment of the Debt;
(h) subject to any applicable law, the license granted to
Mortgagor under Section 1.2 shall automatically be revoked and
Mortgagee may enter into or upon any or all of the Property, either
personally or by its agents, nominees or attorneys and dispossess
Mortgagor and its agents and servants therefrom, without liability for
trespass, damages or otherwise and exclude Mortgagor and its agents or
servants wholly therefrom, and take possession of all books, records
and accounts relating thereto and Mortgagor agrees to surrender
possession of the Property and of such books, records and accounts to
Mortgagee upon demand, and thereupon Mortgagee may (i) use, operate,
manage, control, insure, maintain, repair, restore and otherwise deal
with all and every part of any Property and conduct the business
thereat in accordance with the standards imposed on Mortgagor herein;
(ii) complete any construction on the Property in such manner and form
as Mortgagee deems advisable; (iii) make alterations, additions,
renewals, replacements and improvements to or on any Property to the
extent that such action, in Mortgagee's reasonable judgment, increases
the overall value of such Property; (iv) exercise all rights and powers
of Mortgagor with respect to any Property, whether in the name of
Mortgagor or otherwise, including, without limitation, the right to
make, cancel, enforce or modify Leases, obtain and evict tenants, and
demand, sue for, collect and receive all Rents of the Property and
every part thereof; (v) require Mortgagor to vacate and surrender
possession of any or all of the Property to Mortgagee or to such
receiver and, in default thereof, Mortgagor may be evicted by summary
proceedings or otherwise; and (vi) apply the receipts from any or all
of the Property to the payment of the Debt, in such order, priority and
proportions as Mortgagee shall deem appropriate in its sole discretion
after deducting therefrom all expenses (including reasonable attorneys'
fees) actually incurred in connection with the aforesaid operations and
all amounts necessary to pay the Taxes, Other Charges, insurance and
other expenses in connection with the Property, as well as just and
reasonable compensation for the services of Mortgagee, its counsel,
agents and employees:
(i) exercise any and all rights and remedies granted to a
secured party upon default under the Uniform Commercial Code,
including, without limiting the generality of the foregoing: (i) the
right to take possession of the Personal Property or any part thereof,
and to take such other measures as Mortgagee may deem necessary for the
care, protection and preservation of the Personal Property, and (ii)
request Mortgagor at its expense to assemble the Personal Property and
make it available to Mortgagee at a convenient place acceptable to
Mortgagee. Any notice of sale, disposition or other intended action by
Mortgagee with respect to the Personal Property sent to Mortgagor in
accordance with the provisions hereof at least ten (10) days prior to
such action, shall constitute commercially reasonable notice to
Mortgagor;
(j) apply any sums then deposited in the Escrow Fund, if any,
and any other sums held in escrow or otherwise by Mortgagee in
accordance with the terms of this Mortgage or any Other Security
Document to the payment of the following items in any order in its
uncontrolled discretion:
(i) Taxes and Other Charges;
(ii) Insurance Premiums;
(iii) Operating Expenses (as defined in the
Indenture)
(iv) Interest on the unpaid principal balance of
the Note;
(v) Amortization of the unpaid principal balance
of the Note; and
(vi) All other sums payable pursuant to the Note,
this Mortgage and the Other Security
Documents, including without limitation
advances made by Mortgagee pursuant to the
terms of this Mortgage;
(k) in connection with a foreclosure sale or other disposition
of any Property, surrender the Policies maintained pursuant to Article
3 hereof, collect the unearned Insurance Premiums and apply such sums
as a credit on the Debt in such priority and proportion as Mortgagee in
its discretion shall deem proper, and in connection therewith,
Mortgagor hereby appoints Mortgagee as agent and attorney-in-fact
(which is coupled with an interest and is therefore irrevocable) for
Mortgagor to collect such Insurance Premiums;
(l) pursue such other remedies as Mortgagee may have under
applicable law; and
(m) apply the undisbursed balance of any Net Proceeds
Deficiency deposit, together with interest thereon, to the payment of
the Debt in such order, priority and proportions as Mortgagee shall
deem to be appropriate in its discretion.
In the event of a sale, by foreclosure, power of sale, or otherwise, of less
than all of the Property, this Mortgage shall continue as a lien and security
interest on the remaining portion of the Property unimpaired and without loss of
priority.
Section 10.2 Application of Proceeds. The purchase money,
proceeds and avails of any disposition of any Property, or any part thereof, or
any other sums collected by Mortgagee pursuant to this Article and pursuant to
the Indenture, the Note, this Mortgage or the Other Security Documents, shall be
applied by Mortgagee as provided in Section 5.10 of the Indenture.
Section 10.3 Right to Cure Defaults. Upon the occurrence of
any Event of Default, Mortgagee may, but without any obligation to do so and
without notice to or demand on Mortgagor and without releasing Mortgagor from
any obligation hereunder, make or do the same in such manner and to such extent
as Mortgagee may deem necessary to protect the security hereof. Mortgagee is
authorized to enter upon the Property for such purposes, or appear in, defend,
or bring any action or proceeding to protect its interest in the Property or to
foreclose this Mortgage or collect the Debt, and the cost and expense thereof
(including reasonable attorneys' fees to the extent permitted by law), with
interest as provided in this Section 10.3, shall constitute a portion of the
Debt and shall be due and payable to Mortgagee upon demand. All such costs and
expenses actually incurred by Mortgagee in remedying such Event of Default or
such failed payment or act or in appearing in, defending, or bringing any such
action or proceeding shall bear interest at the Default Rate, for the period
after notice from Mortgagee that such cost or expense was incurred and paid by
Mortgagee to the date of payment to Mortgagee. All such costs and expenses
incurred by Mortgagee together with interest thereon calculated at the Default
Rate shall be deemed to constitute a portion of the Debt and be secured by this
Mortgage and the Other Security Documents and shall be immediately due and
payable upon demand by Mortgagee therefor.
Section 10.4 Actions and Proceedings. Mortgagee has the right
to appear in and defend any action or proceeding brought with respect to the
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its discretion, decides should be brought to
protect its interest in the Property. Mortgagee shall notify Mortgagor of the
pendency of any such action.
Section 10.5 Recovery of Sums Required to Be Paid. Mortgagee
shall have the right from time to time to take action to recover any sum or sums
which constitute a part of the Debt as the same become due, without regard to
whether or not the balance of the Debt shall be due, and without prejudice to
the right of Mortgagee thereafter to bring an action of foreclosure, or any
other action, for a default or defaults by Mortgagor existing at the time such
earlier action was commenced.
Section 10.6 Examination of Books and Records. Mortgagee, its
respective agents, accountants and attorneys shall have the right to examine, at
Mortgagee's expense, the records, books, management and other papers of
Mortgagor and its affiliates which reflect upon their financial condition, at
the Property or at any office regularly maintained by, Mortgagor or its
affiliates where the books and records are located. Mortgagee and its agents
shall have the right to make copies and extracts from the foregoing records and
other papers. In addition, Mortgagee, its respective agents, accountants and
attorneys shall have the right, upon two (2) Business Days' notice to Mortgagor,
to examine, copy and audit, at Mortgagee's expense, the books and records of
Mortgagor and its affiliates pertaining to the income, expenses and operation of
the Property during reasonable business hours at any office of Mortgagor or its
affiliates where the books and records are located in a manner that shall not
materially interfere with Mortgagor's business. This Section 10.6 shall apply
throughout the term of the Notes and without regard to whether an Event of
Default has occurred or is continuing; provided, further and notwithstanding the
foregoing to the contrary, that if an Event of Default has occurred and is
continuing, the examination(s), audits and copying conducted pursuant to this
Section 10.6 shall be at Mortgagor's sole cost and expense and shall not require
prior notice.
Section 10.7 Other Rights, etc.
(a) The failure of Mortgagee to insist upon strict performance
of any term hereof shall not be deemed to be a waiver of any term of
this Mortgage. Mortgagor shall not be relieved of Mortgagor's
obligations hereunder by reason of (i) the failure of Mortgagee to
comply with any request of Mortgagor to take any action to foreclose
this Mortgage or otherwise enforce any of the provisions hereof or of
the Notes or the Other Security Documents, (ii) the release, regardless
of consideration, of the whole or any part of the Property; or of any
person liable for the Debt or any portion thereof, or (iii) any
agreement or stipulation by Mortgagee extending the time of payment or
otherwise modifying or supplementing the terms of the Note, this
Mortgage or the Other Security Documents.
(b) It is agreed that the risk of loss or damage to the
Property is on Mortgagor, and Mortgagee shall have no liability
whatsoever for decline in value of the Property, for failure to
maintain the Policies, or for failure to determine whether insurance in
force is adequate as to the amount of risks insured. Possession by
Mortgagee shall not be deemed an election of judicial relief, if any
such possession is requested or obtained, with respect to any Property
or collateral not in Mortgagee's possession.
(c) Mortgagee may take action to recover the Debt, or any
portion thereof, or to enforce any covenant hereof without prejudice to
the right of Mortgagee thereafter to foreclose this Mortgage. The
rights of Mortgagee under this Mortgage shall be separate, distinct and
cumulative and none shall be given effect to the exclusion of the
others. No act of Mortgagee shall be construed as an election to
proceed under any one provision herein to the exclusion of any other
provision. Mortgagee shall not be limited exclusively to the rights and
remedies herein stated but shall be entitled to every right and remedy
now or hereafter afforded at law or in equity.
Section 10.8 Right to Release Any Portion of the Property.
Mortgagee may release any portion of the Property for such consideration as
Mortgagee may require without, as to the remainder of the Property, in any way
impairing or affecting the lien or priority of this Mortgage, or improving the
position of any subordinate lienholder with respect thereto, except to the
extent that the obligations hereunder shall have been reduced by the actual
monetary consideration, if any, received by Mortgagee for such release, and may
accept by assignment, pledge or otherwise any other property in place thereof as
Mortgagee may require without being accountable for so doing to any other
lienholder. This Mortgage shall continue as a lien and security interest in the
remaining portion of the Property.
Section 10.9 Right of Entry. Upon two (2) Business Days'
notice to Mortgagor, Mortgagee and its agents shall have the right to enter and
inspect any Property at all reasonable times, including, without limitation, the
right to enter and inspect in order to conduct an appraisal of any Property at
Mortgagee's expense. This Section 10.9 shall apply throughout the term of the
Notes and without regard to whether an Event of Default has occurred or is
continuing; provided, further and notwithstanding the foregoing to the contrary,
that if an Event of Default has occurred and is continuing, Mortgagee and its
agents shall not be required to give Mortgagor notice before exercising their
right of entry pursuant to this Section 10.9. Mortgagee shall use reasonable
efforts to not interfere with the use and operation of any Property in
connection with the exercise of its rights under this section.
Article 11 - ENVIRONMENTAL HAZARDS
Section 11.1 Environmental Representations and Warranties.
Except as may be disclosed in those certain environmental reports obtained by
Mortgagor in connection with the Property and referenced on Schedule 11 attached
hereto and based on Environmental Laws in effect as of the date of this
Mortgage, Mortgagor hereby represents and warrants as follows:
(a) there are not now, and, to the best of Mortgagor's actual
knowledge, never have been, Hazardous Substance (defined below) not in
compliance with the Environmental Laws (defined below) nor underground
storage tanks at, in, on, or under any Property not in compliance with
the Environmental Laws;
(b) there are no present or, to the best of Mortgagor's actual
knowledge, past or threatened (in writing) Releases (defined below) of
Hazardous Substances at, in, on, under, or from any Property, except
where such Releases are both (i) in compliance with the Environmental
Laws and (ii) are not reasonably likely to require Remediation;
(c) to the best of Mortgagor's actual knowledge, there is no
written threat of any Release of Hazardous Substances migrating to any
Property;
(d) there is no present or, to the best of Mortgagor's actual
knowledge, past non-compliance with the Environmental Laws or with
permits issued pursuant thereto, in connection with any Property, and
there are currently, no circumstances that may be reasonably expected
to prevent or interfere with such compliance in the future;
(e) in connection with any Property, Mortgagor has not
received any written notice from any person or entity (including, but
not limited to, a governmental entity) of possible liability relating
to (i) the presence of Hazardous Substances or for Remediation (defined
below) of Hazardous Substances, (ii) non-compliance with any
Environmental Law, or any actual or potential administrative or
judicial proceedings in connection with any of the foregoing;
(f) to Mortgagor's actual knowledge, none of the Property (i)
is listed or proposed for listing on the National Priorities List,
CERCLIS, or any analogous list maintained by any governmental entity of
sites that may require investigation or cleanup, (ii) is the subject of
any investigation or cleanup, or is or has been the subject of a CERCLA
Section 104(e) notice, or (iii) is subject to any restrictions on
ownership, occupancy, use, or transferability under any Environmental
Law;
(g) Mortgagor has not received any written notice of potential
liability with respect to any site other than the Property arising from
Hazardous Substances generated, stored, treated, disposed of, or
transported at or from the Property; and
(h) Mortgagor has provided to Mortgagee, in writing, all
information in its possession and of which Mortgagor knows to exist
relating to the environmental conditions at, in, on, under, or from any
Property.
The term "Environmental Indemnified Parties" includes
Mortgagee, the Holders, any person or entity who is or will have been involved
in the origination of the Loan, any person or entity who is or will have been
involved in the servicing of the Loan, any person or entity in whose name the
encumbrance created by this Mortgage is or will have been recorded, persons and
entities who may hold or acquire or will have held a full or partial interest in
the Loan (custodians, trustees and other fiduciaries who hold or have held a
full or partial interest in the Loan for the benefit of third parties) as well
as the respective directors, officers, shareholders, partners, employees,
agents, servants, representatives, contractors, subcontractors, affiliates,
subsidiaries, participants, any successors and assigns of any and all of the
foregoing (including, but not limited to, any other person or entity who holds
or acquires or will have held a participation or other full or partial interest
in the Loan or any Property, whether during the term of the Loan or as part of
or following a foreclosure of the Loan and including, but not limited to, any
successors by merger, consolidation or acquisition of all or a substantial
portion of Mortgagee's assets and business).
The term "Environmental Laws" means any present and future
federal, state and local laws, statutes, ordinances, rules, regulations, any
judicial or administrative interpretations thereof (including any judicial or
administrative order, consent, decree or judgment), and common law, relating to
protection of human health or the environment, relating to Hazardous Substances,
relating to liability for or costs of Remediation or prevention of Releases of
Hazardous Substances or relating to liability for or costs of other actual or
threatened danger to the environment, and includes, but is not limited to, the
following statutes, as amended, and any regulations promulgated pursuant
thereto, and any state or local statutes, ordinances, rules, regulations
addressing similar issues: the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA"); the Emergency Planning and Community
Right-to-Know Act; the Hazardous Substances Transportation Act; the Resource
Conservation and Recovery Act (including, but not limited to, Subtitle I
relating to underground storage tanks); the Solid Waste Disposal Act; the Clean
Water Act; the Clean Air Act; the Toxic Substances Control Act; the Safe
Drinking Water Act; the Occupational Safety and Health Act; the Federal Water
Pollution Control Act; the Federal Insecticide, Fungicide and Rodenticide Act;
the Endangered Species Act; the National Environmental Policy Act; and the River
and Harbors Appropriation Act; any law conditioning transfer of property upon a
negative declaration or other approval of a governmental authority of the
environmental condition of the property; any law requiring notification or
disclosure of Releases of Hazardous Substances or other environmental condition
of any Property to any governmental authority or other person or entity, whether
or not in connection with transfer of title to or interest in property; and any
law relating to nuisance, trespass or other causes of action related to any
Property.
The term "Environmental Losses" includes any losses, damages,
costs, fees, expenses, claims, suits, judgments, awards, liabilities (including,
but not limited to, strict liabilities), obligations, debts, diminutions in
value, fines, penalties, charges, costs of Remediation (whether or not performed
voluntarily), amounts paid in settlement, consequential damages, litigation
costs, reasonable attorneys' fees, reasonable engineers' fees, reasonable
environmental consultants' fees, and reasonable investigation costs (including,
but not limited to, costs for sampling, testing and analysis of soil, water,
air, building materials, and other materials and substances whether solid,
liquid, or gas), of whatever kind or nature, and whether or not incurred in
connection with any judicial or administrative proceedings, actions, claims,
suits, judgments, or awards. The term "reasonable", as used in this definition,
shall only be construed to determine whether the costs incurred are reasonable
given the particular scope of work required by Environmental Indemnified
Parties.
The term "Hazardous Substances" includes, but is not limited
to, any and all substances (whether solid, liquid, or gas) defined, listed, or
otherwise regulated under the Environmental Laws, or for which liability may be
incurred under the Environmental Laws, including, but not limited to, hazardous
wastes, hazardous substances, hazardous materials, toxic substances, pollutants,
contaminants, petroleum and petroleum products, asbestos and asbestos-containing
materials, polychlorinated biphenyls, lead, radon, radioactive materials,
flammables, and explosives.
The term "Legal Action" means any claim, action, suit,
proceeding or investigation, whether administrative or judicial in nature.
The term "Release" with respect to any Hazardous Substance
includes, but is not limited to, any release, deposit, discharge, emission,
leaking, leaching, spilling, seeping, migrating, injecting, pumping, pouring,
emptying, escaping, dumping, disposing, or other movement of Hazardous
Substances.
The term "Remediation" includes but, is not limited to, any
response, remedial, removal, or corrective action; any activity to clean up,
detoxify, decontaminate, contain or otherwise remediate any Hazardous Substance;
any actions to prevent, cure or mitigate any Release of any Hazardous Substance;
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto; any inspection, investigation, study, monitoring, assessment,
audit, sampling and testing, laboratory or other analysis, or evaluation
relating to any Hazardous Substances or to anything referred to in Article 12.
Section 11.2 Environmental Covenants. Mortgagor covenants and
agrees that:
(a) all uses and operations on or of each Property, whether by
Mortgagor or its tenants, lessees, contractors, licensees, business
invitees, agents, or any other person or entity lawfully using or
operating on the Property shall be in compliance with the Environmental
Laws;
(b) (i) it will not engage in actions or omissions that will
result in a Release of Hazardous Substances at, in, on, under, or from
any Property, except for such Releases that are both in compliance with
the Environmental Laws and that are not reasonably likely to require
Remediation; (ii) it will make its best efforts to ensure that any
other person using or operating on any Property will not engage in
actions or omissions that will result in a Release of Hazardous
Substances at, in, on, under, or from such Property, except for such
Releases that are both in compliance with the Environmental Laws and
that are not reasonably likely to require Remediation, and (iii) it
will promptly notify Mortgagee in the event of any Release of Hazardous
Substances prohibited by this subsection;
(c) it will use best efforts to prevent its tenants to permit
the use of Hazardous Substances at, in, on, or under any Property,
except those that are (i) in compliance with the Environmental Laws and
(ii) incidental to use of any Property;
(d) subject to the terms of Section 3.5 hereof, Mortgagor
shall keep the Property free and clear of all statutory liens or
encumbrances imposed pursuant to any Environmental Laws, whether due to
any act or omission of Mortgagor or any other person or entity (the
"Environmental Liens");
(e) Mortgagor shall, at its sole cost and expense, fully and
expeditiously cooperate in all activities pursuant to Section 12.4 of
the Mortgage, including, but not limited to, providing all relevant
information and making knowledgeable persons available for interviews;
(f) Mortgagor shall deliver to Mortgagee within ten (10) days
of Mortgagor's receipt of same, full and complete copies of any and all
environmental site assessments, reports or analyses regarding any
Property; and
(g) upon discovery, Mortgagor shall promptly notify Mortgagee
in writing of (A) any presence or Release of Hazardous Substances or
threatened in writing Release of Hazardous Substances at, in, on,
under, from, or migrating toward the Property, except for such Releases
that are both in compliance with the Environmental Laws and that are
not reasonably likely to require Remediation; (B) any non-compliance
with the Environmental Laws related to the Property; (C) any actual
Environmental Lien relating to the Property; (D) any required or
proposed Remediation of environmental conditions relating to the
Property; (E) any listing or written proposal of a listing of any
Property on the National Priorities List, CERCLIS, or any analogous
list maintained by any governmental entity of sites that may require
investigations or cleanup; (F) receipt of a CERCLA Section 104(e)
notice relating to any Property; (G) any written notice relating in any
way to (i) the presence of Hazardous Substances not in compliance with
the Environmental Laws at, in, on, or under the Property or Remediation
thereof, (ii) possible liability of any person or entity pursuant to
any Environmental Law in connection with the Property, (iii) other
environmental conditions in connection with the Property, or (iv) any
actual or potential administrative or judicial proceedings in
connection with anything referred to in this Agreement; and (H) any
circumstances or conditions that cause or may cause any Environmental
Representation and Warranty to be untrue or that results in a breach
thereof.
Section 11.3 Environmental Assessments.
(a) Upon the occurrence and during the continuance of an Event
of Default, at Mortgagor's expense, Mortgagor will perform promptly
upon request or, in the event Mortgagor fails to do so, Mortgagee may
cause the performance at Mortgagor's expense additional assessments to
update any environmental reports pertaining to each Property and report
any new or newly discovered information related to the environmental
conditions at each Property and otherwise provide copies of such
assessments to the Environmental Indemnified Parties. Mortgagor may,
but is not required to, use its own personnel to perform these
assessments.
(b) In the event that an environmental assessment to be
conducted under subsection (a) of this Section or other information
identifies a Release of Hazardous Substances or threatened (in writing)
Release of Hazardous Substances which Release constitutes or has the
potential to constitute a violation of Environmental Law, Mortgagor
shall engage, at its expense, an environmental consultant approved by
Mortgagee (which approval shall not be unreasonably withheld) to
perform necessary testing of such Release, threatened Release or
condition according to a scope of work, protocol and consultant
approved by Mortgagor and the Environmental Indemnified Parties (which
approval shall not be unreasonably withheld) and to prepare a report of
the results. Mortgagee or any Environmental Indemnified Party may elect
to engage an environmental consultant approved by Mortgagor (which
approval shall not be unreasonably withheld) to conduct such testing
and to prepare a report, but in such event Mortgagor shall reimburse
Mortgagee or other Environmental Indemnified Party only for that
portion of the testing and report cost agreed to by Mortgagor. Upon
written notice of not less than five (5) Business Days (or such longer
period as may be required by any agreement with any tenant, lessee, or
other lawful user or operator of the Property), Mortgagor shall provide
Mortgagee, other Environmental Indemnified Parties, or its consultant
with access to the affected Property during regular business hours and
upon reasonable conditions to perform the testing identified in the
preceding sentence of this subsection. Regardless of which party to
this Agreement performs the testing identified herein, the other party
shall be entitled to observe (at its own expense) and receive
representative split samples of any samples taken as part of such
testing. Such testing may include taking samples of soil, groundwater
or other water, air or building materials, and other invasive testing.
(c) In addition to environmental inspections or assessments
conducted pursuant to Subsection 11.3(b), upon the occurrence and
during the continuance of an Event of Default or in the event such
party has reasonable grounds to believe Mortgagor has defaulted with
respect to its obligations under this Article 11, Environmental
Indemnified Parties and any other person or entity designated by
Environmental Indemnified Parties (including but not limited to any
receiver, any representative of a governmental entity and any
environmental consultant), shall have the right at its cost and expense
(unless Mortgagee has reasonable grounds to believe there has been a
default in Mortgagor's obligations under this Article 11 in which
event, at Mortgagor's cost and expense) but not the obligation to enter
upon any Property at all reasonable times to assess the environmental
condition of any Property and its use, including, but not limited to,
conducting any environmental assessment or audit (the scope of which
shall be determined in Mortgagee's sole and absolute discretion) and
taking samples of soil, groundwater or other water, air or building
materials, and conducting other invasive testing. Upon written notice
of not less than five (5) Business Days (or such longer period as may
be required by any agreement with any tenant, lessee, or other lawful
user or operator of the Property), Mortgagor shall provide Mortgagee,
other Environmental Indemnified Parties, or its consultant with access
to each Property during regular business hours and upon reasonable
conditions to perform the environmental investigation discussed above,
Mortgagor may be entitled to observe (at its own expense) and receive
representative split samples taken as part of any testing conducted
pursuant to the investigation.
Article 12 - INDEMNIFICATION
Section 12.1 General Indemnification. Mortgagor shall, at its
sole cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties (defined below) from and against any and all claims, suits,
liabilities (including, without limitation, strict liabilities), actions,
proceedings, obligations, debts, damages, losses, costs, expenses, diminutions
in value, fines, penalties, charges, fees, expenses, judgments, awards, amounts
paid in settlement, punitive damages, foreseeable and unforeseeable
consequential damages, of whatever kind or nature (including but not limited to
attorneys' fees and other costs of defense) (the "Losses") imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following: (a) ownership of this Mortgage, the Property or any interest therein
or receipt of any Rents; (b) any amendment to, or restructuring of, the Debt,
and the Note, this Mortgage, or any Other Security Documents; (c) any and all
lawful action that may be taken by Mortgagee in connection with the enforcement
of the provisions of this Mortgage or the Notes or the Other Security Documents,
whether or not suit is filed in connection with same, or in connection with
Mortgagor and/or any partner, joint venturer or shareholder thereof becoming a
party to a voluntary or involuntary federal or state bankruptcy, insolvency or
similar proceeding; (d) any accident, injury to or death of persons or loss of
or damage to property occurring in, on or about the Property or any part thereof
or on the adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, streets or ways; (e) any use, nonuse or condition in, on or about the
Property or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or was; (f) any failure on the part
of Mortgagor to perform or be in compliance with any of the terms of this
Mortgage; (g) performance of any labor or services or the furnishing of any
materials or other property in respect of the Property or any part thereof; (h)
the failure of any person to file timely with the Internal Revenue Service an
accurate Form 1099-B, Statement for Recipients of Proceeds from Real Estate,
Broker and Barter Exchange Transactions, which may be required in connection
with the Mortgage, or to supply a copy thereof in a timely fashion to the
recipient of the proceeds of the transaction in connection with which this
Mortgage is made; (i) any failure of the Property to be in compliance with any
Applicable Laws: (j) the enforcement by any Indemnified Party of the provisions
of this Article 12; (k) any and all claims and demands whatsoever which may be
asserted against Mortgagee by reason of any alleged obligations or undertakings
on its part to perform or discharge any of the terms, covenants, or agreements
contained in any Lease; (l) the payment of any commission, charge or brokerage
fee to anyone which may be payable in connection, with the funding of the loan
evidenced by the Notes and secured by this Mortgage; or (m) any
misrepresentation made by Mortgagor in this Mortgage or any Other Security
Document; except to the extent such Losses (i) arise from the gross negligence
or willful misconduct of the Indemnified Party seeking indemnification from
Mortgagor hereunder or (ii) relate directly to such Indemnified Party's failure
to comply with Applicable Law or with third party contractual obligations. Any
amounts payable to Mortgagee by reason of the application of this Section 12.1
shall become immediately due and payable and shall bear interest at the Default
Rate from the date loss or damage is sustained by Mortgagee until paid. For
purposes of this Article 12, the term "Indemnified Parties" means Mortgagee, the
Holders and any person or entity who is or will have been involved in the
origination of this loan, any person or entity who is or will have been involved
in the servicing of this loan, any person or entity in whose name the
encumbrance created by this Mortgage is or will have been recorded, persons and
entities who may hold or acquire or will have held a full or partial interest in
this loan as well as custodians, trustees and other fiduciaries who hold or have
held a full or partial interest in this loan for the benefit of third parties)
as well as the respective directors, officers, shareholders, partners,
employees, agents, servants, representatives, contractors, subcontractors,
affiliates, subsidiaries, participants, successors and assigns of any and all of
the foregoing (including but not limited to any other person or entity who holds
or acquires or will have held a participation or other full or partial interest
in this loan or the Property, whether during the term of this loan or as a part
of or following a foreclosure of this loan and including, but not limited to,
any successors by merger, consolidation or acquisition of all or a substantial
portion of Mortgagee's assets and business).
Section 12.2 Mortgage and/or Intangible Tax. Mortgagor shall,
at its sole cost and expense, protect, defend, indemnify, release and hold
harmless the Indemnified Parties from and against any and all Losses imposed
upon or incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any tax on the making and or
recording of this Mortgage, the Notes or any of the Other Security Documents.
Section 12.3 ERISA Indemnification. Mortgagor shall, at its
sole cost and expense, protect, defend, indemnify, release and hold harmless the
Indemnified Parties from and against any and all Losses (including, without
limitation, attorneys' fees and costs incurred in the investigation, defense,
and settlement of Losses incurred in correcting any prohibited transaction or in
the sale of a prohibited loan, and in obtaining any individual prohibited
transaction exemption under ERISA that may be required, in Mortgagee's sole
discretion) that Mortgagee may incur, directly or indirectly, as a result of a
default under Section 4.9.
Section 12.4 Environmental Indemnification.
(a) Mortgagor covenants and agrees at its sole cost and
expense, to protect, defend, indemnify, release and hold Environmental
Indemnified Parties harmless from and against any and all Environmental
Losses imposed upon or incurred by or asserted against any
Environmental Indemnified Parties and directly or indirectly arising
out of or in any way relating to any one or more of the following:
(i any presence of any Hazardous Substances at,
in, on, above or under the Property;
(ii any past, present, or threatened Release of
Hazardous Substances at, in, on, above, under, or from the
Property;
(iii any activity by Mortgagor, any person or
entity affiliated with Mortgagor, and any tenant or other user
of the Property in connection with any actual, proposed or
threatened use, treatment, storage, holding, existence,
disposition or other Release, generation, production,
manufacturing, processing, refining, control, management,
abatement, removal, handling, transfer or transportation to or
from the Property of any Hazardous Substances at, in, on,
above or under the Property;
(iv any activity by Mortgagor, any person or
entity affiliated with Mortgagor, and any tenant or other user
of the Property in connection with any actual or proposed
Remediation of any Hazardous Substances at, in, on, above or
under the Property, whether or not such Remediation is
voluntary or pursuant to court or administrative order,
including, but not limited to, any removal, remedial or
corrective action;
(v any past, present or threatened
non-compliance or violations of any Environmental Laws in
connection with the Property, operations thereon or transfer
thereof including, but not limited to, any failure by
Mortgagor, any person or entity affiliated with Mortgagor, and
any tenant or other user of the Property to comply with any
order of any governmental authority in connection with and
Environmental Laws:
(vi the imposition, recording or filing or the
threatened imposition, recording or filing of any
Environmental Lien encumbering the Property:
(vii any administrative process or proceedings
or judicial proceedings in any way connected with any matter
addressed in this Section 12.4;
(viii any past, present or threatened injury
to, destruction of or loss of natural resources in any way
connected with the Property or use thereof, including, but not
limited to, costs to investigate and assess such injury,
destruction or loss;
(ix any acts of Mortgagor, any person or entity
affiliated with Mortgagor, and any tenant or other user of the
Property in arranging for disposal or treatment, or arranging
with a transporter for transport for disposal or treatment, or
Hazardous Substances at any facility or incineration vessel
owned or operated by another person or entity;
(x any acts of Mortgagor any person or entity
affiliated with Mortgagor, and any tenant or other user of the
Property in accepting any Hazardous Substances for transport
to disposal or treatment facilities, incineration vessels or
sites from which there is a Release, or a threatened Release
of any Hazardous Substance which causes the incurrence of
costs for Remediation;
(xi any personal injury, wrongful death, or
property or other damage arising under any statutory or common
law theory related to the environmental condition of the
Property, including, but not limited to, damages assessed for
private or public nuisance or for the conducting of an
abnormally dangerous activity on the Property; and
(xii any misrepresentation or inaccuracy in any
representation or warranty or material breach or failure to
perform any covenants or other obligations pursuant to this
Mortgage in each case relating to Hazardous Substances, the
Release of Hazardous Substances, Environmental Laws,
Environmental Losses or any other environmental matter.
(b) This indemnity shall not apply if it is determined that
both (i) any contamination of the Property was caused solely by or as a result
of Hazardous Substances that were not present at, in, on, or under the Property
prior to the date that Mortgagee or other Environmental Indemnified Parties (or
any purchaser at a foreclosure sale) acquires title to the Property, pursuant to
foreclosure or deed in lieu of foreclosure; and (ii) any Releases of Hazardous
Substances at, in, on, or under the Property were not caused by the direct or
indirect actions of Mortgagor or any agents of Mortgagor.
Section 12.5 Duty to Defend; Attorneys' Fees and Other Fees
and Expenses. Upon written request by any Indemnified Party or Environmental
Indemnified Party in connection with any Losses or Environmental Losses,
Mortgagor shall defend in any Legal Action same (if requested by any Indemnified
Party or Environmental Indemnified Party, in the name of the Indemnified Party
or the Environmental Indemnified Party) by attorneys and other professionals
reasonably approved by the Indemnified Parties or the Environmental Indemnified
Parties. Notwithstanding the foregoing, any Indemnified Parties or Environmental
Indemnified Parties may, in their sole and absolute discretion, but at their
cost and expense as to additional attorneys engage their own attorneys and other
professionals to defend or assist them, and, at the option of Indemnified
Parties or Environmental Indemnified Parties, their attorneys shall control the
resolution of any claim or proceeding, except that Indemnified Parties or
Environmental Indemnified Parties, as the case may be, shall provide written
notice to Mortgagor of any settlement that Indemnified Parties or Environmental
Parties intend to execute in order to resolve such proceeding. Indemnified
Parties or Environmental Indemnified Parties may settle such proceeding without
the consent of Mortgagor, except that Indemnified Parties or Environmental
Indemnified Parties shall not settle such proceeding if Mortgagor, within
fourteen (14) days of receiving notice from any Indemnified Party or
Environmental Indemnified Party (i) provides written notice that Mortgagor does
not consent to the proposed settlement; and (ii) posts a bond or other security
satisfactory to Indemnified Parties or Environmental Indemnified Parties, at
Mortgagor's sole cost and expense, adequate to cover a judgment against
Indemnified Parties or Environmental Indemnified Parties in an amount equal to
the amount of all claims against such Indemnified Party or Environmental
Indemnified Party plus reasonable costs and expenses likely to be incurred by
such Indemnified Party or Environmental Indemnified Party in connection with its
failure to settle such suit or other proceeding. Mortgagor shall maintain said
bond or other security until the proceeding has been settled, the Indemnified
Parties' or the Environmental Indemnified Parties' liability or exposure has
been fully extinguished, and the Indemnified Parties or the Environmental
Indemnified Parties have been reimbursed in accordance with the terms of this
Article 12. Within ten (10) days of demand, Mortgagor shall pay or, in the sole
and absolute discretion of the Indemnified Parties or the Environmental
Indemnified Parties, reimburse, the Indemnified Parties or the Environmental
Indemnified Parties for the payment of reasonable fees and disbursements of
attorneys (other than additional attorneys), engineers, environmental
consultants, laboratories and other professionals in connection with the above.
Article 13 - WAIVERS
Section 13.1 Waiver of Counterclaim. Mortgagor hereby waives
the right to assert a counterclaim, other than a mandatory or compulsory
counterclaim, in any action or proceeding brought against it by Mortgagee
arising out of or in any way connected with this Mortgage, the Note, the Other
Security Documents or the Obligations.
Section 13.2 Marshalling and Other Matters. Mortgagor hereby
waives, to the extent permitted by law, the benefit of all appraisement,
valuation, stay, extension, reinstatement and redemption Laws now or hereafter
in force and all rights of marshalling in the event of any sale hereunder of the
Property or any part thereof or any interest therein. Further, Mortgagor hereby
expressly waives any and all rights of redemption from sale under any order or
decree of foreclosure of this Mortgage on behalf of Mortgagor, and on behalf of
each and every person acquiring any interest in or title to the Property
subsequent to the date of this Mortgage and on behalf of all persons to the
extent permitted by applicable law.
Section 13.3 Waiver of Notice. Mortgagor shall not be entitled
to any notices of any nature whatsoever from Mortgagee except with respect to
matters for which this Mortgage specifically and expressly provides for the
giving of notice by Mortgagee to Mortgagor and except with respect to matters
for which Mortgagee is required by applicable law to give notice, and Mortgagor
hereby expressly waives the right to receive any notice from Mortgagee with
respect to any matter for which this Mortgage does not specifically and
expressly provide for the giving of notice by Mortgagee to Mortgagor.
Section 13.4 Waiver of Statute of Limitations. Mortgagor
hereby expressly waives and releases to the fullest extent permitted by law, the
pleading of any statute of limitations as a defense to payment of the Debt or
performance of its Other Obligations.
Section 13.5 Discretion of Mortgagee. Wherever pursuant to
this Mortgage (a) Mortgagee exercises any right given to it to approve or
disapprove, (b) any arrangement or term is to be satisfactory to Mortgagee, or
(c) any other decision or determination is to be made by Mortgagee, the decision
of Mortgagee to approve or disapprove, all decisions that arrangements or terms
are satisfactory or not satisfactory and all other decisions and determinations
made by Mortgagee, shall be exercised in the reasonable discretion of Mortgagee,
except as otherwise expressly provided herein.
Section 13.6 Survival. The indemnification made pursuant to
Sections 12.1 and 12.3 shall continue indefinitely in full force and effect and
shall survive and shall in no way be impaired by any satisfaction or other
termination of this Mortgage, any assignment or other transfer of all or any
portion of this Mortgage or Mortgagee's interest in the Property (but, in such
case, shall benefit both Indemnified Parties and any assignee or transferee),
any exercise of Mortgagee's rights and remedies pursuant hereto including but
not limited to foreclosure or acceptance of a deed in lieu of foreclosure, any
exercise of any rights and remedies pursuant to the Notes or the Other Security
Documents, any transfer of all or any portion of the Property (whether by
Mortgage or by Mortgagee following foreclosure or acceptance of a deed in lieu
of foreclosure or at any other time) any amendment to this Mortgage, the Notes
or the Other Security Documents, and any act or omission that might otherwise be
construed as a release or discharge of Mortgagor from the obligations pursuant
hereto. All of the representations, warranties, covenants, and indemnities of
Section 12.4 and Article 11 shall survive the repayment of the Notes and or the
release of the lien of Mortgagee's mortgage from the Property and shall survive
for a period of one (1) year the transfer of any or all right, title, and
interest in and to the Property by Mortgagor to any party, whether or not
affiliated with Mortgagor. Notwithstanding anything herein to the contrary, in
no event shall Mortgagor's obligations extend to any third party which acquires
title to the Property except pursuant to a transfer directly from Mortgagee or
any transferee and their successors and assigns or pursuant to a foreclosure of
Mortgagor's interest in the Property.
Section 13.7 WAIVER OF TRIAL BY JURY. MORTGAGOR AND MORTGAGEE
EACH HEREBY WAIVE, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR
OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE,
THE APPLICATION FOR THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS MORTGAGE OR
THE OTHER SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF MORTGAGEE, ITS
OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
Article 14 - RELEASE
Section 14.1 Release of Property. (a) Provided that Mortgagor
satisfies the conditions set forth below, at any time, Mortgagee may cause a
portion of the Property to be released from the lien of this Mortgage prior to
the maturity date of the Notes provided:
(i Mortgagee shall have received from Mortgagor
at least fifteen (15) days' prior written notice of the date
proposed for such release (the "Release Date").
(ii No Event of Default shall have occurred and
be continuing as of the date of such notice and the Release
Date except if the Event of Default relates solely to the
Property which is the subject of the Release.
(iii Mortgagor shall pay Mortgagee on the
Release Date an amount equal to 100% of the Allocated Note
Amount plus 25% of that portion of the original principal
balance of the Notes allocated to the Property to be released,
as shown on Schedule 1 attached hereto (the "Release Price").
(iv Mortgagor shall have delivered to Mortgagee
an Officer's Certificate, dated the Release Date, confirming
the matters referred to in clause (ii) above.
(v Mortgagor, at its sole cost and expense,
shall have delivered to Mortgagee at its reasonable request
one or more endorsements to the mortgagee policies of title
insurance (the "Title Policies") delivered to Mortgagee on the
date hereof in connection with this Mortgage or such other
evidence reasonably acceptable to the Mortgagee insuring that,
after giving effect to such release, the Title Policies are in
full force and effect and unaffected by such release.
(vi With respect to any Property to be released
which has been the subject of a subdivision, Mortgagor shall
provide evidence satisfactory to Mortgagee that (A) the
portion of the Property to be released is a legal parcel and
that Mortgagor has fully complied with all laws regarding the
subdivision of such Property, (B) such subdivision has not
caused a Material Adverse Effect with respect to that portion
of the Property from which the parcel to be released has been
subdivided, (C) on or before the Release Date, Mortgagor shall
deliver to Mortgagee (1) a title insurance policy issued on
the most recent ALTA form subject only to the Permitted
Encumbrances and those exceptions to coverage as Lender shall
deem acceptable insuring the lien of this Mortgage encumbering
that portion of the Property from which the parcel to be
released has been subdivided, and with such endorsements as
Mortgagee shall reasonably require, and (2) a survey prepared
using the most recent ALTA standards showing all such
subdivided parcels and showing only those encroachments and
other defects acceptable to a prudent institutional lender.
(b) Upon or after payment of the Release Price in accordance
with Section 14.1(a)(iii), Mortgagee shall be required to effectuate the
following (hereinafter referred to as a "Property Release"): the lien of this
Mortgage relating to the portion of the Property in question shall be released
and Mortgagee will execute and deliver any agreements reasonably requested by
Mortgagor to release and terminate or reassign, at Mortgagor's option, such
Mortgage; provided, that such release and termination or reassignment shall be
without recourse to Mortgagee and without any representation and warranty.
(c) For the purposes of this Mortgage, "Allocated Note Amount"
shall mean, that portion of the original principal balance of the Notes
allocated to each Property as shown on Schedule 1 attached hereto, as such
amounts may be reduced pursuant to the application of Net Proceeds as provided
herein.
Article 15 - NOTICES
Section 15.1 Notices. All notices or other written
communications hereunder shall be deemed to have been properly given (i) when
received at the proper address, if delivered in person or by facsimile
transmission with receipt acknowledged by the recipient thereof, (ii) when
received at the proper address after having been deposited for overnight
delivery with any reputable overnight courier service, or (iii) when received at
the proper address after having been deposited in any post office or mail
depository regularly maintained by the U.S. Postal Service and sent by
registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Mortgagor: 120 Albany Street, 8th Floor
New Brunswick, NJ 08901
Telecopier No: (908) 296-3090
Attention: George R. Zoffinger
With a copy to: __________________
==================
------------------
If to Mortgagee: 135 LaSalle Street
Suite 200
Chicago, IL 60674-4107
Attention: Michael Evans
With a copy to: __________________
==================
------------------
or addressed as such party may from time to time designate by written notice to
the other parties.
Either party by notice to the other may designate additional
or different addresses for subsequent notices or communications.
Article 16 - SERVICE OF PROCESS
Section 16.1 Consent to Service.
(a) Mortgagor will maintain a place of business or an agent
for service of process in New York, New York and give prompt notice to
Mortgagee of the address of such place of business and of the name and
address of any new agent appointed by it, as appropriate. Mortgagor
further agrees that the failure of its agent for service of process to
give it notice of any service of process will not impair or affect the
validity of such service or of any judgment based thereon. If, despite
the foregoing, there is for any reason no agent for service of process
of Mortgagor available to be served, and if it at that time has no
place of business in New York, New York, then Mortgagor irrevocably
consents to service of process by registered or certified mail, postage
prepaid, to it at its address given in or pursuant to the first
paragraph hereof.
(b) Mortgagor initially and irrevocably designates __________
with offices on the date hereof at ____________ to receive for and on
behalf of Mortgagor service of process in New York, New York with
respect to this Mortgage.
Section 16.2 Submission to Jurisdiction. With respect to any
claim or action arising hereunder or under the Notes or the Other Security
Documents, Mortgagor (a) irrevocably submits to the nonexclusive jurisdiction of
the courts of the State of New York and the United States District Court located
in the Borough of Manhattan in New York, New York, and appellate courts from any
thereof, and (b) irrevocably waives any objection which it may have at any time
to the laying on venue of any suit, action or proceeding arising out of or
relating to this Mortgage brought in any such court, irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.
Section 16.3 Jurisdiction Not Exclusive. Nothing in this
Mortgage will be deemed to preclude Mortgagee from bringing an action or
proceeding with respect hereto in any other jurisdiction.
Article 17 - APPLICABLE LAW
Section 17.1 CHOICE OF LAW. THIS MORTGAGE SHALL BE DEEMED TO
BE A CONTRACT ENTERED INTO PURSUANT TO THE LAWS OF THE STATE OF NEW YORK AND
SHALL IN ALL RESPECTS BE GOVERNED, CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK, PROVIDED HOWEVER, THAT WITH RESPECT TO
THE CREATION, PERFECTION, PRIORITY AND ENFORCEMENT OF THE LIEN OF THIS MORTGAGE,
AND THE DETERMINATION OF DEFICIENCY JUDGMENTS, THE LAWS OF THE STATE WHERE THE
PROPERTY IS LOCATED SHALL APPLY.
Section 17.2 Usury Laws. This Mortgage and the Notes are
subject to the express condition that at no time shall Mortgagor be obligated or
required to pay interest on the Debt at a rate which could subject the holder of
the Notes to either civil or criminal liability as a result of being in excess
of the maximum interest rate which Mortgagor is permitted by applicable law to
contract or agree to pay. If by the terms of this Mortgage or the Note,
Mortgagor is at any time required or obligated to pay interest on the Debt at a
rate in excess of such maximum rate, the rate of interest under the Mortgage and
the Notes shall be deemed to be immediately reduced to such maximum rate and the
interest payable shall be computed at such maximum rate and all prior interest
payments in excess of such maximum rate shall be applied and shall be deemed to
have been payments in reduction of the principal balance of the Note. All sums
paid or agreed to be paid to Mortgagee for the use, forbearance, or detention of
the Debt shall, to the extent permitted by applicable law, be amortized,
prorated, allocated, and spread throughout the full stated term of the Notes
until payment in full so that the rate or amount of interest on account of the
Debt does not exceed the maximum lawful rate of interest from time to time in
effect and applicable to the Debt for so long as the Debt is outstanding.
Section 17.3 Provisions Subject to Applicable Law. All rights,
powers and remedies provided in this Mortgage may be exercised only to the
extent that the exercise thereof does not violate any applicable provisions of
law and are intended to be limited to the extent necessary, so that they will
not render this Mortgage invalid, unenforceable or not entitled to be recorded,
registered or filed under the provisions of any applicable law. If any term of
this Mortgage or any application thereof shall be invalid or unenforceable, the
remainder of this Mortgage and any other application of the term shall not be
affected thereby.
Article 18 - COSTS
Section 18.1 Performance at Mortgagor's Expense. Mortgagor
acknowledges and confirms that Mortgagee shall impose certain reasonable
administrative processing and due diligence costs and expenses in connection
with (a) certain releases, additions or substitutions of collateral or (b)
obtaining certain consents, waivers and approvals with respect to the Property
(the occurrence of any of the above shall be called an "Event"). Mortgagor shall
be responsible for the payment of costs of reappraisal of the Property or any
part thereof, required by law, regulation, or any governmental or
quasi-governmental authority or by Mortgagee pursuant to the specific terms
hereof requiring reappraisals to the extent Mortgagor is required to pay for
such cost herein. Mortgagor hereby acknowledges and agrees to pay, within thirty
(30) days after demand, all such costs and expenses (as the same may be
increased or decreased from time to time), and any additional reasonable
administrative costs of a similar type or nature which may be imposed by
Mortgagee from time to time, upon the occurrence of any Event. Wherever it is
provided for herein that Mortgagor pay any costs and expenses, such costs and
expenses shall include, but not be limited to, all reasonable legal fees and
disbursements of Mortgagee, whether by retained firms or the reimbursement for
the out-of-pocket expenses of Mortgagee or Mortgagee's in-house staff. If any
such fees, costs and expenses or any items set forth herein are not paid within
such thirty (30) day period, interest thereon shall accrue at the Default Rate
from the date paid or incurred by Mortgagee until such costs and expenses are
paid by Mortgagor.
Section 18.2 Attorney's Fees for Enforcement. (a) Mortgagor
shall pay, within thirty (30) days after demand, all reasonable legal fees
incurred by Mortgagee in connection with (i) the preparation of the Note, this
Mortgage and the Other Security Documents and (ii) the items set forth in
Section 18.1 above, and (b) Mortgagor shall, subsequent to an Event of Default,
pay to Mortgagee within ten (10) days of demand any and all expenses, including
legal expenses, reasonable attorneys' fees and due diligence costs incurred or
paid by Mortgagee in protecting its interest in the Property or Personal
Property or in collecting any amount payable hereunder or in enforcing its
rights hereunder with respect to the Property or Personal Property, whether or
not any legal proceeding is commenced hereunder or thereunder. If any Event of
Default shall have occurred and is continuing, or if any monies are not paid
within ten (10) days of demand, interest thereon shall accrue at the Default
Rate from the date paid or incurred by Mortgagee until such expenses are paid by
Mortgagor.
Article 19 - DEFINITIONS
Section 19.1 General Definitions. Unless the context clearly
indicates a contrary intent or unless otherwise specifically provided herein,
words used in this Mortgage may be used interchangeably in singular or plural
form and the word "Mortgagor" shall mean "each Mortgagor and any subsequent
owner or owners of the Property or any part thereof or any interest therein,"
the word "Mortgagee" shall mean "Mortgagee and any subsequent holder of the
Note," the word "Note" shall mean "the Notes and any other evidence of
indebtedness secured by this Mortgage," the word "person" shall include an
individual, corporation, partnership, trust, unincorporated association,
government, governmental authority, and any other entity, the word "Property"
shall include any portion of the Property and any interest therein, and the
phrases "attorneys' fees" and "counsel fees" shall include any and all
reasonable attorneys', paralegal and law clerk fees and disbursements,
including, but not limited to, fees and disbursements at the pre-trial, trial
and appellate levels incurred or paid by Mortgagee in protecting its interest in
the Property, the Leases and the Rents and enforcing its rights hereunder.
Article 20 - MISCELLANEOUS PROVISIONS
Section 20.1 No Oral Change. This Mortgage, and any provisions
hereof, may not be modified, amended, waived, extended, changed, discharged or
terminated orally or by any act or failure to act on the part of Mortgagor or
Mortgagee, but only by an agreement in writing signed by the party against whom
enforcement of any modification, amendment, waiver, extension, change, discharge
or termination is sought.
Section 20.2 Liability. This Mortgage shall be binding upon
and inure to the benefit of Mortgagor and Mortgagee and their respective
successors and assigns forever.
Section 20.3 Inapplicable Provisions. If any term, covenant or
condition of the Notes or this Mortgage is held to be invalid, illegal or
unenforceable in any respect, the Notes and this Mortgage shall be construed
without such provision.
Section 20.4 Headings, etc. The headings and captions of
various Sections of this Mortgage are for convenience of reference only and are
not to be construed as defining or limiting, in any way, the scope or intent of
the provisions hereof.
Section 20.5 Duplicate Originals; Counterparts. This Mortgage
may be executed in any number of duplicate originals and each duplicate original
shall be deemed to be an original. This Mortgage may be executed in several
counterparts, each of which counterparts shall be deemed an original instrument
and all of which together shall constitute a single Mortgage. The failure of any
party hereto to execute this Mortgage, or any counterpart hereof, shall not
relieve the other signatories from their obligations hereunder.
Section 20.6 Number and Gender. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns and pronouns shall
include the plural and vice versa.
Section 20.7 Subrogation. If any or all of the proceeds of the
Notes have been used to extinguish, extend or renew any indebtedness heretofore
existing against the Property, then, to the extent of the funds so used,
Mortgagee shall be subrogated to all of the rights, claims, liens, titles, and
interests existing against the Property heretofore held by, or in favor of, the
holder of such indebtedness and such former rights, claims, liens, titles, and
interests, if any, are not waived but rather are continued in full force and
effect in favor of Mortgagee and are merged with the lien and security interest
created herein as cumulative security for the repayment of the Debt, the
performance and discharge of Mortgagor's obligations hereunder, under the Notes
and the Other Security Documents and the performance and discharge of the Other
Obligations.
Section 20.8 No Joint Venture. Notwithstanding anything to the
contrary herein contained, Mortgagee by entering into this Mortgage or by taking
any action pursuant hereto, will not be deemed a partner or joint venturer with
Mortgagor and Mortgagor and Mortgagor agrees to hold Mortgagee harmless from any
damages and expenses resulting from such a construction of the relationship of
the parties hereto or any assertion thereof.
Section 20.9 No Benefit to Third Parties. This Mortgage is for
the sole and exclusive benefit of Mortgagor and Mortgagee and all conditions of
the obligations of Mortgagee hereunder are imposed solely and exclusively for
the benefit of Mortgagee and its assigns and no other person shall have standing
to require satisfaction of such conditions in accordance with their terms or be
entitled to assume that Mortgagee will refuse to meet its obligations hereunder
in the absence of strict compliance with any and all thereof and no other person
shall under any circumstances be deemed to be a beneficiary of such conditions,
any or all of which may be freely waived in whole or in part by the Mortgagee at
any time if it in its sole discretion deems it advisable to do so. Without
limiting the generality of the foregoing, Mortgagee shall not have any duty or
obligation to anyone to ascertain that funds advanced under the Loan are used to
pay the cost of constructing the improvements on the Property or to acquire
materials and supplies to be used in connection therewith or to pay costs of
owning, operating and maintaining same.
Section 20.10 Future Advances. This Mortgage is given to
secure payment of the Notes, whether the entire amount thereof shall have been
advanced to the Mortgagor at the date hereof, or at a later date, and to secure
the payment and performance of all other liabilities and obligations of
Mortgagor under the Notes or the Other Security Documents, and any other amount
or amounts that may be added to the Obligations under the terms of this
Mortgage, all of which Obligations being equally secured with and having the
same priority as any amounts advanced at the date hereof. It is agreed that any
future advances made by Mortgagee to or for the benefit of Mortgagor from time
to time under this Mortgage or the loan documents shall be deemed to be
obligatory, and the amount of any such advances and all interest accruing
thereon, shall be equally secured by this Mortgage and have the same priority as
all amounts, if any, advanced as of the date hereof and be subject to all of the
terms and provisions of this Mortgage.
Section 20.11 Cash and Cash Equivalents. For purposes hereof,
"Cash" shall mean coin or currency of the government of the United States of
America. "Cash and Cash Equivalents" shall have the meaning assigned to such
term in the Indenture.
Section 20.12 Entire Agreement. The Note, this Mortgage and
the Other Security Documents constitute the entire understanding and agreement
between Mortgagor and Mortgagee with respect to the transactions arising in
connection with the Debt and supersede all prior written or oral understandings
and agreements between Mortgagor and Mortgagee with respect thereto. Mortgagor
hereby acknowledges that, except as incorporated in writing in the Note, this
Mortgage and the Other Security documents, there are not, and were not, and no
persons are or were authorized by Mortgagee to make, any representations,
understandings, stipulations, agreements or promises, oral or written, with
respect to the transaction which is the subject of the Note, this Mortgage and
the Other Security Documents,
Section 20.13 Business Day. For purposes hereof, "Business
Day" shall mean any day other than a Saturday, Sunday or a day on which
commercial or other banks are authorized or required to close in New York, New
York.
<PAGE>
IN WITNESS WHEREOF, this Mortgage has been executed by
Mortgagor the day and year first above written.
----------------------------
By:
Name:
Title:
SECURITY AGREEMENT, dated as of April 30, 1996, made by VPT
Real Estate Corp. I, VPT Real Estate Corp. II, VPT Real Estate Corp. III, VPT
Real Estate Corp. IV and VPT Real Estate Corp. V, each having its chief
executive office at 120 Albany Street, New Brunswick, New Jersey 08901
(collectively, "Issuers"), in favor of LaSalle National Bank, as Trustee (in
such capacity, "Trustee") for the noteholders ("Noteholders", and together with
Trustee, "Secured Creditors") under the Indenture referred to below.
W I T N E S S E T H:
WHEREAS, pursuant to and subject to the terms and conditions
of that certain Indenture, dated as of April 30, 1996, among Issuers and Trustee
(as the same from time to time may be amended, restated, supplemented or
otherwise modified, the "Indenture"), Issuers have issued their Floating Rate
Senior Secured Notes due May 1, 1999 (the "Notes") (except as otherwise defined
herein, all other capitalized terms used in these recitals having the respective
meanings referred to in Section 1 hereof); and
WHEREAS, pursuant to the Note Purchase Agreement, dated as of
March 28, 1996, between BlackRock Capital Finance L.P. and Value Property Trust,
the execution and delivery of this Security Agreement by the Issuers is a
condition precedent to the issuance of the Notes;
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and for other good and valuable consideration,
the receipt of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINED TERMS. Unless otherwise defined herein, all
capitalized terms used herein have the respective meanings set forth or referred
to in the Indenture and the following terms shall have the following meanings:
"Debt Service Reserve Account" means that trust account
(account no. 67-7515-405) maintained at Trustee in the name of Trustee,
which shall be funded on the Issue Date by the Issuers in an amount
equal to the Debt Service Reserve Account Required Level for the Issue
Date, under the sole dominion and control of Trustee.
"Trapped Funds Account" means that trust account (account no.
67-7515-413) maintained at Trustee in the name of Trustee, under the
sole dominion and control of Trustee (subject to the provisions of
Section 3.08(vi) of the Indenture).
2. GRANT OF SECURITY INTEREST. To secure the prompt and
complete payment, performance and observance of all of the Obligations under the
Indenture and the Notes, and to induce Trustee to enter into the Indenture,
Issuers hereby grant to Trustee, for the ratable benefit of Secured Creditors, a
security interest in all of Issuers' right, title and interest in, to and under
the following, whether now owned by or owing to, or hereafter acquired by or
arising in favor of any Issuer (including, without limitation, under any trade
names, styles or divisions thereof), and whether owned, leased or consigned by
or to any Issuer, and regardless of where located (all of which being
hereinafter collectively referred to as the "Collateral"):
(i) the Debt Service Reserve Account, the Trapped
Funds Account, all amounts on deposit therein and all investments made with the
funds therein; and
(ii) to the extent not otherwise included, all
Proceeds (as such term is defined in the UCC) of any of the foregoing and all
accessions to, substitutions and replacements for, and profits and products of,
any of the foregoing, in each case to the extent still on deposit in the Debt
Service Reserve Account or the Trapped Funds Account.
Notwithstanding anything to the contrary contained above, it
is understood and agreed that the Debt Service Reserve Account, and the Trapped
Funds Account (the "Accounts") are maintained at the Trustee, in its name and
under its sole dominion and control (subject to the provisions of Section
3.08(vi) of the Indenture). Accordingly, the Issuers cannot and do not grant
security interests in the Accounts or any items contained therein. Instead, the
Issuers grant a security interest to the Trustee, up until the time the Release
Conditions have been satisfied with respect to specified amounts in the
Accounts, in their residual right to receive such amounts from the Accounts upon
the satisfaction of the Release Conditions. Once the Release Conditions have
been satisfied with respect to any funds in the Accounts or such funds otherwise
become the property of the Issuers, the security interest with regard to such
funds or the Issuers' residual interest therein is then terminated.
3. REPRESENTATIONS AND WARRANTIES. Each Issuer hereby
represents and warrants that:
(a) The Issuers are the sole owners of the Collateral in which
they purport to grant a security interest hereunder, having good title thereto
free and clear of any and all Liens except (i) the security interest granted to
Trustee under this Security Agreement and (ii) Liens permitted pursuant to
Section 4.11 of the Indenture. The Issuers will warrant and defend the
Collateral against all claims and demands of all Persons at any time claiming
the same or any interest thereon.
(b) No effective security agreement, financing statement,
equivalent security or Lien instrument or continuation statement covering all or
any part of the Collateral is on file or of record in any public office, except
(i) such as have been filed in favor of Trustee pursuant to this Security
Agreement or (ii) such as relate to Liens permitted pursuant to Section 4.11 of
the Indenture.
(c) Each Issuer's chief executive office and principal place
of business are located at 120 Albany Street, New Brunswick, New Jersey 08901.
4. COVENANTS. Each Issuer covenants and agrees with Secured
Creditors that from and after the date of this Security Agreement and until the
Termination Date:
(a) Further Assurances; Pledge of Instruments. At any time and
from time to time, upon the written request of Trustee and at the sole expense
of Issuers, Issuers shall promptly and duly execute and deliver any and all such
further instruments and documents and take such further action as Trustee may
reasonably deem desirable to obtain the full benefits of this Security Agreement
and of the rights and powers herein granted, including (i) filing any financing
or continuation statements under the UCC with respect to the liens and security
interests granted hereunder, and (ii) transferring Collateral to Trustee's
possession (if such Collateral consists of documents or instruments (as such
terms are defined in the UCC) or if a security interest in such Collateral can
be perfected only by possession). If any amount payable under or in connection
with any of the Collateral is or shall become evidenced by any instrument and
Trustee and/or the Required Holders request that such instrument be pledged and
delivered by Issuers to Trustee, such instrument shall be pledged and delivered
to Trustee as collateral security for the Obligations.
(b) Continuous Perfection. None of the Issuers shall change
its name, identity or corporate structure in any manner which might make any
financing or continuation statement filed in connection herewith seriously
misleading within the meaning of Section 9-402(7) of the UCC or any other then
applicable provision of the UCC unless such Issuer shall have given Trustee at
least thirty (30) days' prior written notice thereof and shall have taken all
action (or made arrangements to take such action substantially simultaneously
with such change if it is impossible to take such action in advance) necessary
or reasonably requested by Trustee to amend such financing statement or
continuation statement so that it is not seriously misleading.
5. REMEDIES; RIGHTS UPON DEFAULT. (a) If any Event of Default
shall occur and be continuing, Trustee may exercise in addition to all other
rights and remedies granted to it under this Agreement, the Indenture, the other
Collateral Documents and under any other instrument or agreement securing,
evidencing or relating to the Obligations, all rights and remedies of a secured
party under the UCC. Without limiting the generality of the foregoing, Issuers
expressly agree that in any such event Trustee without demand of performance or
other demand, advertisement or notice of any kind (except the notice specified
below of time and place of public or private sale) to or upon Issuers or any
other Person (all and each of which demands, advertisements and notices are
hereby expressly waived to the maximum extent permitted by the UCC and other
applicable law), may forthwith sell, lease, assign, give an option or options to
purchase, or sell or otherwise dispose of and deliver the Collateral (or
contract to do so), or any part thereof, in one or more parcels at public or
private sale or sales, at any exchange at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
Trustee and any Noteholder shall have the right upon any such public sale or
sales, and, to the extent permitted by law, upon any such private sale or sales,
to purchase for its benefit the whole or any part of said Collateral so sold,
free of any right or equity of redemption, which equity of redemption each
Issuer hereby releases. Such sales may be adjourned or continued from time to
time with or without notice.
Trustee shall have no obligation to Issuers to maintain or
preserve the rights of Issuers as against third parties with respect to the
Collateral while the Collateral is in the possession of Trustee. Trustee may, if
it so elects, seek the appointment of a receiver or keeper to take possession of
the Collateral and to enforce any of Trustee's remedies with respect to such
appointment without prior notice or hearing. Trustee shall apply the Asset Sale
Proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, as provided in Section 5(c) hereof, Issuers remaining liable for any
deficiency remaining unpaid after such application, and only after so paying
over such Asset Sale Proceeds and after the payment by Trustee of any other
amount required by any provision of law, including section 9-504(1)(c) of the
UCC (but only after Trustee has received what Trustee considers reasonable proof
of a subordinate party's security interest), need Trustee account for the
surplus, if any, to Issuers. To the maximum extent permitted by applicable law,
Issuers waive all claims, damages, and demands against Trustee or any Secured
Creditor arising out of the repossession, retention or sale of the Collateral
except such which may arise solely as the result of the gross negligence or
willful misconduct of such party as determined by a final nonappealable judgment
of a court of competent jurisdiction. Issuers agree that five (5) days' prior
notice by Trustee of the time and place of any public sale or of the time after
which a private sale may take place is reasonable notification of such matters.
Issuers shall remain liable for any deficiency if the proceeds of any sale or
disposition of the Collateral are insufficient to pay all amounts to which
Secured Creditors are entitled, Issuers also being liable for any attorneys'
fees incurred by Trustee to collect such deficiency.
(b) Issuers hereby waive presentment, demand, protest or any
notice (to the maximum extent permitted by applicable law) of any kind in
connection with this Security Agreement or any Collateral.
(c) In the absence of a specific determination by all of the
Secured Creditors with respect thereto, the proceeds of any sale, disposition or
other realization upon all or any part of the Collateral shall be distributed by
Trustee upon receipt, in the following order of priorities:
First, to the Trustee and its agents and attorneys for amounts
due under Section 6.06 of the Indenture, including payment of all compensation,
expense and liabilities incurred, and all advances made, by the Trustee and the
costs and expenses of collection;
Second, to Holders of Notes for amounts due and unpaid on the
Notes for interest and, to the extent all due and unpaid interest has been paid,
principal, ratably, without preference or priority of any kind, according to the
amounts due and payable on the Notes for interest and principal, respectively;
Third, without duplication, to Holders for any other
Obligations owing to the Holders under the Indenture, the Notes and the
Collateral Documents; and
Fourth, to the Issuers or their successors or assigns or as a
court of competent jurisdiction may direct.
6. LIMITATION ON TRUSTEE'S DUTY IN RESPECT OF COLLATERAL.
Trustee shall use reasonable care with respect to the Collateral in its
possession or under its control. Trustee shall not have any other duty as to any
Collateral in its possession or control or in the possession or control of any
agent or nominee of Trustee, or any income thereon or as to the preservation of
rights against prior parties or any other rights pertaining thereto. Upon
request of Issuers, Trustee shall account for any monies received by Trustee in
respect of any foreclosure on or disposition of the Collateral.
7. REINSTATEMENT. This Security Agreement shall remain in full
force and effect and continue to be effective should any petition be filed by or
against any Issuer for liquidation or reorganization, should any Issuer become
insolvent or make an assignment for the benefit of creditors or should a
receiver or trustee be appointed for all or any significant part of any Issuer's
assets, and shall continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Obligations, or any part thereof,
is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Obligations, whether as
a "voidable preference," "fraudulent conveyance," or otherwise, all as though
such payment or performance had not been made. In the event that any payment, or
any part thereof, is rescinded, reduced, restored or returned, the Obligations
shall be reinstated and deemed reduced only by such amount paid and not so
rescinded, reduced, restored or returned.
8. NOTICES. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent, approval,
declaration or other communica tion shall or may be given to or served upon any
of the parties by any other party, or whenever either of the parties desires to
give or serve upon the other party any communication with respect to this
Security Agreement, each such notice, demand, request, consent, approval,
declaration or other communication shall be in writing and shall be given in the
manner as provided for in Section 9.01 of the Indenture.
9. SEVERABILITY. Any provision of this Security Agreement
which is prohibited or unenforceable in any juris diction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. This Security
Agreement is to be read, construed and applied together with the Indenture and
the other Collateral Documents, which, taken together, sets forth the complete
understanding and agreement of the Secured Creditors and Issuers with respect to
the matters referred to herein and therein.
10. NO WAIVER; CUMULATIVE REMEDIES. Trustee shall not by any
act, delay, omission or otherwise be deemed to have waived any of its rights or
remedies hereunder, and no waiver shall be valid unless in writing, signed by
Trustee and then only to the extent therein set forth. A waiver by Trustee of
any right or remedy hereunder on any one occasion shall not be construed as a
bar to any right or remedy which Trustee would otherwise have had on any future
occasion. No failure to exercise nor any delay in exercising on the part of
Trustee, any right, power or privilege hereunder, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or future exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies
hereunder provided are cumulative and may be exercised singly or concurrently,
and are not exclusive of any rights and remedies provided by law. None of the
terms or provisions of this Security Agreement may be waived, altered, modified
or amended except by an instrument in writing, duly executed by Trustee and
Issuers and, to the extent required by the Indenture, the Required Holders.
11. LIMITATION BY LAW. All rights remedies and powers provided
in this Security Agreement may be exercised only to the extent that the exercise
thereof does not violate any applicable provision of law, and all the provisions
of this Security Agreement are intended to be subject to all applicable
mandatory provisions of law that may be controlling and to be limited to the
extent necessary so that they shall not render this Security Agreement invalid,
unenforceable, in whole or in part, or not entitled to be recorded, registered,
or filed under the provisions of any applicable law.
12. TERMINATION OF THIS SECURITY AGREEMENT. Subject to Section
7 hereof, this Security Agreement shall terminate upon the Termination Date.
13. SUCCESSOR AND ASSIGNS. This Security Agreement and all
obligations of Issuers hereunder shall be binding upon the successors and
assigns of Issuers, including any debtor in possession acting on behalf of any
Issuer, and shall, together with the rights and remedies of Trustee hereunder,
inure to the benefit of Trustee, Secured Creditors, all future holders of any
instrument evidencing any of the Obligations and their respective successors and
assigns. No sales of participations, other sales, assignments, transfers or
other dispositions of any agreement governing or instrument evidencing the
Obligations or any portion thereof or interest therein shall in any manner
affect the security interest granted to Trustee hereunder. Issuers may not
assign, sell or otherwise transfer an interest in this Security Agreement.
14. GOVERNING LAW. This Security Agreement and the obligations
arising hereunder shall be governed by, and construed and enforced in accordance
with, the internal laws in effect in the State of New York without giving effect
to principles of conflict of laws.
<PAGE>
IN WITNESS WHEREOF, each Issuer has caused this Security
Agreement to be executed and delivered by its duly authorized officer on the
date first set forth above.
VPT REAL ESTATE CORP. I
VPT REAL ESTATE CORP. II
VPT REAL ESTATE CORP. III
VPT REAL ESTATE CORP. IV
VPT REAL ESTATE CORP. V
By:
Name:
Title: Vice President of
each of the foregoing
entities
Acknowledged and accepted as of April 30, 1996:
LASALLE NATIONAL BANK,
as Trustee
By:
Name:
Title:
[Merrill Lynch Logo]
FAX: (908) 296-3090
DATE: APRIL 24, 1996
TO: VPT REAL ESTATE CORP. I, VPT REAL ESTATE CORP. II,
VPT REAL ESTATE CORP. III, VPT REAL ESTATE CORP. IV,
VPT REAL ESTATE CORP. V (INDIVIDUALLY AND COLLECTIVELY "PARTY B")
ATTN: PAUL CIANCIMINO
FROM: MERRILL LYNCH DERIVATIVE PRODUCTS AG
RE: U.S. DOLLAR SWAP TRANSACTION - REFERENCE 96dp0042
REVISED as of April 29, 1996
Dear Sir:
The purpose of this communication is to confirm the terms and
conditions of the transaction entered into between Merrill Lynch Derivative
Products AG ("Party A") and VPT Real Estate Corp. I, VPT Real Estate Corp. II,
VPT Real Estate Corp. III, VPT Real Estate Corp. IV, VPT Real Estate Corp. V
(individually and collectively "Party B") on the Trade Date specified below (the
"Transaction"). This communication constitutes a "Confirmation" as referred to
in the Master Agreement specified below.
This facsimile transmission will be the only written communication
regarding this Transaction exchanged between us, unless you request that we sign
hard copy versions of this Confirmation. Please contact the individual indicated
in the last paragraph of this letter to receive such copies.
Please sign and return this Confirmation at your earliest convenience.
Because of the importance of confirming transactions promptly and accurately, we
regret that any Confirmations which are not signed and returned within ten days
may result in a delay in payments.
The definitions and provisions contained in the 1991 ISDA Definitions
(the "Definitions"), as published by the International Swap Dealers Association,
Inc. ("ISDA") are incorporated into this Confirmation. For these purposes, all
references in those Definitions to a "Swap Transaction" shall be deemed to apply
to the Transaction referred to herein. In the event of any inconsistency between
the Definitions and this Confirmation, the terms of this Confirmation shall
govern.
<PAGE>
1. This Confirmation evidences a complete binding agreement between you
and us as to the terms of the Transaction to which this Confirmation relates. In
addition, you and we agree to use all reasonable efforts promptly to negotiate,
execute and deliver a Master Agreement in the form published by ISDA, with such
modifications as you and we shall in good faith agree. Upon the execution by you
and us of such a Master Agreement (the "Agreement"), this Confirmation will
supplement, form a part of, and be subject to the Agreement. All provisions
contained in the Agreement govern this Confirmation except as expressly modified
below.
2. Each party will make each payment specified in this Confirmation to
be made by it. Such payments will be made on the due date for value on that date
in the place of the account specified below, in freely transferable funds and in
the manner customary for payments in the required currency. If on any date
amounts would otherwise be payable in the same currency by each party to the
other, then, on such date, each party's obligation to make payment of any amount
will be automatically satisfied and discharged and, if the aggregate amount that
would otherwise have been payable by one party exceeds the aggregate amount that
would otherwise have been payable by the other party, replaced by an obligation
upon the party by whom the larger aggregate amount would have bto
pay to the other party the excess of the larger aggregate amount over the
smaller aggregate amount.
3. The terms of the particular Transaction to which this
Confirmation relates are as follows:
Type of Transaction: Rate Cap Transaction
- -------------------- --------------------
Notional Amount: USD 67,379,000.00
Trade Date: April 24, 1996
Effective Date: April 30, 1996
Termination Date: May 1, 1999
Fixed Amounts:
Fixed Amount Payer: Party B
Fixed Amount Payer
Payment Date: April 24, 1996
Fixed Amount: USD 377,322.40
Floating Amounts:
Floating Rate Payer: Party A
Cap Rate: 8.00% per annum
Floating Rate Payer
Payment Dates: The 30th calender day of each
month, in each year, commencing on
May 30, 1996, up to and including
March 30, 1999 and ending on the
Termination Date, inclusive, subject
to adjustment in accordance with the
Modified Following Business Day
Convention.
<PAGE>
Type of Transaction: Rate Cap Transaction
- -------------------- --------------------
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: One month
Floating Rate Day
Count Fraction: Actual/360
Reset Dates: The first day of each Floating Rate
Payer Calculation Period
Rate Cut-off Dates: Inapplicable
Method of Averaging: Inapplicable
Compounding: Inapplicable
Calculation Agent: Party A
Business Days: New York and London
4. Account Details
Payments to Party A: BankAmerica International, New York
FAO: Merrill Lynch Derivative
Products AG
A/C # 1-71-09254
Payments to Party B: LaSalle Chicago/Trust
ABA: 071-000-505
A/C #: 67-7515-413
Attention: Blackrock - VPT96
Tom Quinlan X-7245
<PAGE>
Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing this Confirmation and returning it to us by facsimile
transmission on (212) 449-6219, Attention: Gina Bondi [telephone: (212)
449-8314].
Very truly yours.
MERRILL LYNCH DERIVATIVE PRODUCTS AG
By: /s/ Ruqia Naqi
Authorized Signatory
Accepted and confirmed as of the date first written:
VPT REAL ESTATE CORP. I
By: /s/ Paul McArthur
Name:
Title:
VPT REAL ESTATE CORP. II
By: /s/ Paul McArthur
Name:
Title:
VPT REAL ESTATE CORP. III
By: /s/ Paul McArthur
Name:
Title:
VPT REAL ESTATE CORP. IV
By: /s/ Paul McArthur
Name:
Title:
VPT REAL ESTATE CORP. V
By: /s/ Paul McArthur
Name:
Title:
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 31,611
<SECURITIES> 0
<RECEIVABLES> 5,361
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 36,972
<PP&E> 24
<DEPRECIATION> 5
<TOTAL-ASSETS> 174,561
<CURRENT-LIABILITIES> 2,205
<BONDS> 67,379
0
0
<COMMON> 11,226
<OTHER-SE> 93,751
<TOTAL-LIABILITY-AND-EQUITY> 174,561
<SALES> 0
<TOTAL-REVENUES> 27,295
<CGS> 0
<TOTAL-COSTS> 10,884
<OTHER-EXPENSES> 2,459
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,049
<INCOME-PRETAX> 4,903
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,903
<EPS-PRIMARY> .44
<EPS-DILUTED> .44
</TABLE>
