United States 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 September 30, 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: 1-9419
SHOPCO LAUREL CENTRE, L.P.
Exact Name of Registrant as Specified in its Charter
Delaware 13-3392074
State or Other Jurisdiction of I.R.S. Employer Identification No.
Incorporation or Organization
3 World Financial Center, 29th Floor,
New York, NY Attn.: Andre Anderson 10285
Address of Principal Executive Offices Zip Code
(212) 526-3237
Registrant's Telephone Number, Including Area Code
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 ____
Part I. - Financial Information Item 1. Financial Statements.
Consolidated Balance Sheets At September 30, At December 31,
1996 1995
Assets
Real estate, at cost:
Land $ 5,304,011 $ 5,304,011
Building 61,448,229 61,062,234
Improvements 3,824,602 3,668,110
70,576,842 70,034,355
Less accumulated depreciation
and amortization (15,574,566) (14,100,499)
55,002,276 55,933,856
Cash and cash equivalents 7,767,743 13,427,085
Accounts receivable, net of allowance
of $692,458 in 1996 and $254,927
in 1995 101,252 242,818
Deferred rent receivable 547,418 482,624
Deferred charges, net of
accumulated amortization of
$314,871 in 1996 and $273,442
in 1995 104,988 133,295
Prepaid expenses 800,066 553,034
Total Assets $ 64,323,743 $ 70,772,712
Liabilities, Minority Interest
and Partners' Capital (Deficit)
Liabilities:
Accounts payable and
accrued expenses $ 286,123 $ 285,035
Zero coupon first mortgage
note payable 57,663,803 53,525,503
Second mortgage note payable 2,000,000 2,000,000
Second mortgage note accrued
interest payable 19,167 19,167
Due to affiliates 9,029 8,851
Security deposits payable 10,648 14,633
Deferred income 788,853 804,171
Distribution payable 6,354,545 588,384
Total Liabilities 67,132,168 57,245,744
Minority interest (774,592) (583,239)
Partners' Capital (Deficit):
General Partner 756,315 917,755
Limited Partners (4,660,000 limited
partnership units authorized,
issued and outstanding) (2,790,148) 13,192,452
Total Partners' Capital (Deficit) (2,033,833) 14,110,207
Total Liabilities, Minority
Interest and Partners' Capital
(Deficit) $ 64,323,743 $ 70,772,712
Consolidated Statement of Partners' Capital (Deficit)
For the nine months ended September 30, 1996
Limited General
Partners Partner Total
Balance at December 31, 1995 $ 13,192,452 $ 917,755 $ 14,110,207
Net loss (954,100) (9,637) (963,737)
Distributions (15,028,500) (151,803) (15,180,303)
Balance at September 30, 1996 $ (2,790,148) $ 756,315 $ (2,033,833)
Consolidated Statements of Operations
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
Income
Rental income $ 1,474,534 $ 1,515,640 $ 4,496,497 $ 4,359,157
Escalation income 1,144,763 1,252,270 3,642,026 3,889,071
Miscellaneous income 284,405 131,919 550,476 306,803
Interest income 136,285 145,916 482,378 424,239
Total Income 3,039,987 3,045,745 9,171,377 8,979,270
Expenses
Interest expense 1,469,837 1,336,095 4,310,800 3,918,921
Property operating
expenses 1,243,417 1,022,097 3,232,421 2,869,158
Depreciation and
amortization 508,472 497,742 1,565,496 1,474,793
Real estate taxes 257,602 255,665 768,932 767,632
General and administrative 108,429 50,855 268,701 157,701
Total Expenses 3,587,757 3,162,454 10,146,350 9,188,205
Loss before minority
interest (547,770) (116,709) (974,973) (208,935)
Minority interest 5,533 1,418 11,236 1,244
Net Loss $ (542,237) $ (115,291) $ (963,737) $ (207,691)
Net Loss Allocated:
To the General Partner $ (5,422) $ (1,153) $ (9,637) $ (2,077)
To the Limited Partners (536,815) (114,138) (954,100) (205,614)
$ (542,237) $ (115,291) $ (963,737) $ (207,691)
Per limited partnership
unit (4,660,000
outstanding) $ (.11) $ (.02) $ (.20) $ (.04)
Consolidated Statements of Cash Flows
For the nine months ended September 30, 1996 1995
Cash Flows From Operating Activities:
Net loss $ (963,737) $ (207,691)
Adjustments to reconcile net loss
to net cash provided by operating
activities:
Minority interest (11,236) (1,244)
Depreciation and amortization 1,565,496 1,474,793
Increase in interest on zero coupon
first mortgage note payable 4,138,300 3,746,421
Increase (decrease) in cash arising
from changes in operating assets
and liabilities:
Accounts receivable 141,566 84,862
Deferred rent receivable (64,794) (113,884)
Deferred charges (13,122) (37,621)
Prepaid expenses (247,032) (265,495)
Accounts payable and accrued expenses 1,088 8,426
Due to affiliates 178 734
Security deposits payable (3,985) --
Deferred income (15,318) 52,402
Net cash provided by operating activities 4,527,404 4,741,703
Cash Flows From Investing Activities:
Additions to real estate (592,487) (1,509,078)
Net cash used for investing activities (592,487) (1,509,078)
Cash Flows From Financing Activities:
Cash distributions to partners (9,414,142) (1,765,152)
Cash distributions-minority interest (180,117) (24,014)
Net cash used for financing activities (9,594,259) (1,789,166)
Net increase (decrease) in cash and
cash equivalents (5,659,342) 1,443,459
Cash and cash equivalents, beginning
of period 13,427,085 10,431,820
Cash and cash equivalents, end
of period $ 7,767,743 $ 11,875,279
Supplemental Disclosure of Cash
Flow Information:
Cash paid during the period for interest $ 172,500 $ 172,500
Notes to the Consolidated Financial Statements
The unaudited interim consolidated financial statements should be read in
conjunction with the annual 1995 audited consolidated financial statements
within Form 10-K of Shopco Laurel Centre, L.P. ("Shopco").
The unaudited interim consolidated financial statements include all adjustments
which are, in the opinion of management, necessary to present a fair statement
of financial position as of September 30, 1996 and the results of operations
and cash flows for the nine months ended September 30, 1996 and 1995 and the
consolidated statement of partner's capital (deficit) for the nine months ended
September 30, 1996. Results of operations for the periods are not indicative
of the results expected for the full year.
The following significant events have occurred subsequent to fiscal year 1995
which require disclosure in this interim report per Regulation S-X, Rule 10-01,
Paragraph (a)(5):
On September 20, 1996, State Street Bank and Trust Company ("State Street"),
one of the mortgage lenders to Laurel Owner Partners Limited Partnership (the
"Owner Partnership") of which Shopco is the sole general partner and which owns
an interest in a shopping mall in Laurel, Maryland (the "Property" or the
"Mall"), obtained a temporary restraining order (the "TRO") in the Circuit
Court for Prince George's County, Maryland (the "Court"), enjoining the payment
of a cash distribution of $1.35 per Unit declared by Shopco on September 20,
1996, and scheduled to be paid on October 10, 1996, to Unitholders of record as
of September 30, 1996. The TRO also enjoined the Owner Partnership, Shopco and
its general partner, Laurel Centre Inc. ("LCI"), from taking any act to
disseminate, distribute or convey cash and cash equivalents except, subject to
State Street's approval, to pay normal operating expenses incurred in the
operation of the Mall. The TRO was issued pursuant to a lawsuit commenced
against the Owner Partnership, Shopco and LCI by State Street alleging, among
other things, that the distribution declared on September 20, 1996, would
constitute a fraudulent conveyance and a conversion of the lenders' interest in
the rents from the Property and that there had been a waste of State Street's
collateral. The Owner Partnership filed a memorandum of law with the Court
taking the position that no waste had occurred, State Street's remedy was
solely to the Property because of the non-recourse nature of the mortgage loan,
and that the TRO should be vacated.
On October 9, 1996, the Owner Partnership entered into an agreement (the
"Settlement Agreement") with the lenders who hold the mortgage debt of the
Owner Partnership. The terms of the non- recourse mortgage loans, which are
secured by the Property and have a maturity date of October 15, 1996 (the
accreted amount of which was approximately $59.9 million on such date), permit
the lenders to exercise certain remedies upon a default in the payment of
principal or interest on the loans, including foreclosure of the mortgages on
the Property and the appointment of a receiver. The Owner Partnership did not
pay the mortgage loans when due at maturity. In accordance with the terms of
the Settlement Agreement and the mortgage loan documents, Capital Growth
Mortgage Investors, L.P., one of the mortgage lenders, docketed a foreclosure
action with the Court on October 16, 1996, and pursuant to a Court order (the
"Consent Order"), had a receiver appointed for the Property (the "Receiver").
Pursuant to the Consent Order, the Receiver took possession of the Property and
was authorized, among other things: to manage the Mall; to collect all rent
proceeds from Mall tenants paid on or after October 16, 1996; and to apply such
proceeds to the payment of, among other things, the Mall's management and
operating expenses, capital improvements and leasing expenses, with any
remaining funds to be paid to the mortgage lenders; in each case, in accordance
with the terms of the Settlement Agreement. Shopco and the Owner Partnership
therefore no longer receive cash flow from, or manage, the Mall from and after
October 16, 1996.
In the Settlement Agreement, the lenders agreed, among other things, after
satisfaction of the conditions set forth in the Settlement Agreement, to
release Shopco, the Owner Partnership and LCI and their respective unitholders,
partners, stockholders and directors on the Release Date (as defined below)
from any claims the lenders may have against such parties with respect to the
Settlement Agreement, the mortgage loans, the Mall, and the cash held by
Shopco, the Owner Partnership and LCI for periods prior to October 16, 1996
(other than $260,000, which is expected to be used for October expenses of the
Mall), including the cash needed for the payment of Shopco's previously
declared distribution. Similarly, Shopco, the Owner Partnership and LCI agreed
to release the mortgage lenders on the Release Date from any claims they may
have with respect to the Settlement Agreement, the mortgage loans, and the
Mall.
Pursuant to the Settlement Agreement, the parties have also agreed to a
standstill of the present litigation and not to commence any new litigation in
connection with this matter, provided that Shopco, the Owner Partnership and
LCI do not violate the TRO, as modified by the Settlement Agreement, and do
not, among other things, object to or delay the foreclosure, file a petition
for voluntary bankruptcy, or violate the exclusive right of the Receiver to
collect rent proceeds from the Mall and manage the Mall pursuant to the Consent
Order.
The Settlement Agreement also provides for the continued effectiveness of the
TRO pending the completion of the foreclosure process. State Street has
consented in advance to Shopco's use of cash during this period for the payment
of certain ordinary expenses, including accounting and financial reporting
expenses and legal fees, up to certain dollar thresholds. Additionally, the
Owner Partnership is required pursuant to the Settlement Agreement to pay all
of its payables that were due and payable as of October 15, 1996, or before.
All other expenses of the Mall are to be paid by the Receiver.
The TRO, as modified by the Settlement Agreement, is expected to terminate on
the earlier of the date upon which the lenders complete the foreclosure of the
Property or March 15, 1997 (the "Outside Date") (such earlier date being the
"Release Date"), but is conditioned upon, among other things, Shopco, the Owner
Partnership and LCI not objecting to or delaying the foreclosure, not filing a
petition for voluntary bankruptcy, and not violating the exclusive right of the
Receiver to collect rent proceeds from the Mall and manage the Mall pursuant to
the Consent Order. Pursuant to the Settlement Agreement, the Outside Date will
be extended by one day for every day the lenders' prosecution of the
foreclosure is delayed as a result of any litigation commenced by or on behalf
of any person holding any interest in Shopco, the Owner Partnership or LCI. If
the foreclosure is completed, the TRO could be terminated before, and perhaps
substantially before March 15, 1997. However, to Shopco's knowledge, the
lenders have not yet scheduled a foreclosure sale date. Shopco intends to make
the previously declared distribution after the TRO terminates. However, due to
the uncertainties of the timing of the foreclosure process and other factors,
some of which are beyond the control of Shopco, there can be no assurance as to
the amount or timing of the distribution, or whether a distribution will be
made.
Following the anticipated foreclosure of the mortgages secured by the Property
and payment of the previously declared cash distribution, Shopco intends to
wind up its activities and dissolve pursuant to the terms of its partnership
agreement. Any remaining cash available for distribution, after provision for
expenses, would be distributed to the partners at such time.
The American Stock Exchange (the "Exchange") has determined that Shopco no
longer meets the guidelines and procedures for continued listing eligibility
established by the Exchange, and it intends to remove Shopco's Units from
listing and registration effective November 21, 1996. The Units have been
trading on the NASD's over-the-counter bulletin board under the symbol "LSCZZ".
Quotes and transactions may continue to be available through retail brokers.
However, no broker or other person has an obligation to make a market in the
Units, and there can be no assurance that a market for Units will develop or
continue.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Liquidity and Capital Resources
The Owner Partnership's two non-recourse mortgage loans secured by the Owner
Partnership's interest in the Mall, matured on October 15, 1996. The accreted
value of the mortgages as of the maturity date totaled approximately $59.9
million. In anticipation of the maturity of the loans, Shopco pursued both a
sale of the Mall and a refinancing or extension of the mortgage debt. Such
efforts did not result in any sales or refinancing proposals which would have
sufficiently allowed the Owner Partnership to meet its debt obligations, and,
although Shopco pursued possible extensions of the existing loans, the mortgage
lenders did not grant an extension of the loans. As a result, the Owner
Partnership did not pay the mortgage loans when due at maturity.
On September 20, 1996, Shopco declared a cash distribution of $1.35 per Unit.
This distribution was scheduled to be paid on October 10, 1996, to Unitholders
of record as of September 30, 1996. As a result of the declaration,
distribution payable increased from $588,384 at December 31, 1995 to
$6,354,545 at September 30, 1996.
Also on September 20, 1996, State Street obtained a TRO in the Court, enjoining
the payment of the $1.35 per Unit distribution declared on September 20, 1996.
The TRO also enjoined the Owner Partnership, Shopco and LCI from taking any act
to disseminate, distribute or convey cash and cash equivalents except, subject
to State Street's approval, to pay normal operating expenses incurred in the
operation of the Mall. The TRO was issued pursuant to a lawsuit commenced
against the Owner Partnership, Shopco and LCI by State Street alleging, among
other things, that the distribution declared on September 20, 1996, would
constitute a fraudulent conveyance and a conversion of the lenders' interest in
the rents from the Property and that there had been a waste of State Street's
collateral. The Owner Partnership filed a memorandum of law with the Court
taking the position that no waste had occurred, State Street's remedy was
solely to the Property because of the non-recourse nature of the mortgage loan,
and that the TRO should be vacated.
On October 9, 1996, the Owner Partnership entered into a Settlement Agreement
with the lenders who hold the mortgage debt of the Owner Partnership. The
terms of the non-recourse mortgage loans permit the lenders to exercise certain
remedies upon a default in the payment of principal or interest on the loans,
including foreclosure of the mortgages on the Property and the appointment of a
receiver. As a result of the Owner Partnership not paying the mortgage loans
in full at maturity and in accordance with the terms of the Settlement
Agreement and the mortgage loan documents, Capital Growth Mortgage Investors,
L.P., one of the mortgage lenders, docketed a foreclosure action with the Court
on October 16, 1996, and pursuant to a Consent Order, had a Receiver appointed
for the Property. Pursuant to the Consent Order, the Receiver took possession
of the Property and was authorized, among other things: to manage the Mall; to
collect all rent proceeds from Mall tenants paid on or after October 16, 1996;
and to apply such proceeds to the payment of, among other things, the Mall's
management and operating expenses, capital improvements and leasing expenses,
with any remaining funds to be paid to the mortgage lenders; in each case, in
accordance with the terms of the Settlement Agreement. Shopco and the Owner
Partnership therefore no longer receive cash flow from, or manage, the Mall
from and after October 16, 1996.
In the Settlement Agreement, the lenders agreed, among other things, after
satisfaction of the conditions set forth in the Settlement Agreement, to
release Shopco, the Owner Partnership and LCI and their respective unitholders,
partners, stockholders and directors on the Release Date from any claims the
lenders may have against such parties with respect to the Settlement Agreement,
the mortgage loans, the Mall, and the cash held by Shopco, the Owner
Partnership and LCI for periods prior to October 16, 1996 (other than $260,000,
which is expected to be used for October expenses of the Mall), including the
cash needed for the payment of Shopco's previously declared distribution.
Similarly, Shopco, the Owner Partnership and LCI agreed to release the mortgage
lenders on the Release Date from any claims they may have with respect to the
Settlement Agreement, the mortgage loans, and the Mall.
The Settlement Agreement also provides for the continued effectiveness of the
TRO pending the completion of the foreclosure process. State Street has
consented in advance to Shopco's use of cash during this period for the payment
of certain ordinary expenses, including accounting and financial reporting
expenses and legal fees, up to certain dollar thresholds. Additionally, the
Owner Partnership is required pursuant to the Settlement Agreement to pay all
of its payables that were due and payable as of October 15, 1996, or before.
All other expenses of the Mall are to be paid by the Receiver.
The TRO, as modified by the Settlement Agreement, is expected to terminate on
the Release Date, but is conditioned upon, among other things, Shopco, the
Owner Partnership and LCI not objecting to or delaying the foreclosure, not
filing a petition for voluntary bankruptcy, and not violating the exclusive
right of the Receiver to collect rent proceeds from the Mall and manage the
Mall pursuant to the Consent Order. If the foreclosure is completed, the TRO
could be terminated before, and perhaps substantially before March 15, 1997.
However, to Shopco's knowledge, the lenders have not yet scheduled a
foreclosure sale date. Shopco intends to make the previously declared
distribution after the TRO terminates. However, due to the uncertainties of
the timing of the foreclosure process and other factors, some of which are
beyond the control of Shopco, there can be no assurance as to the amount or
timing of the distribution, or whether a distribution will be made.
Following the anticipated foreclosure of the mortgages secured by the Property
and payment of the previously declared cash distribution, Shopco will wind up
its activities and dissolve pursuant to the terms of its partnership agreement.
Any remaining cash available for distribution, after provision for expenses,
would be distributed to the partners at such time.
At September 30, 1996, Shopco and the Owner Partnership had cash and cash
equivalents totaling $7,767,743, compared with $13,427,085 at December 31,
1995. The decrease is primarily a result of cash distributions to limited
partners and expenditures for property improvements exceeding net cash provided
by operating activities. Shopco paid a second quarter 1996 cash distribution
totaling $1.75 per unit on August 15, 1996.
Accounts receivable decreased from $242,818 at December 31, 1995 to $101,252 at
September 30, 1996 reflecting an increase in the allowance for doubtful
accounts related to several current and vacated tenants at the Mall. The
decrease in accounts receivable is partially offset by the continued billing of
base rents to bankrupt tenants which have vacated the mall. Billings of base
rents to bankrupt tenants which have vacated the mall continue until a
settlement is reached between the parties involved in such bankruptcy
proceedings.
At September 30, 1996, prepaid expenses totaled $800,066 compared with $553,034
at December 31, 1995. The increase reflects the prepayment during the third
quarter of 1996 of real estate taxes for the July 1, 1996 to June 30, 1997 real
estate tax year.
The zero coupon first mortgage note payable increased from $53,525,503 at
December 31, 1995 to $57,663,803 at September 30, 1996, reflecting the accrual
of interest on the zero coupon first mortgage note.
Results of Operations
The results of operations are primarily attributable to the Mall's operations
and to a lesser extent the interest earned on cash reserves held by the
Partnership. For the three and nine months ended September 30, 1996, the
Partnership reported net losses of $542,237 and $963,737, respectively,
compared with net losses of $115,291 and $207,691 for the comparable periods in
1995. The higher net losses during the 1996 periods are primarily the result
of increases in all expense categories, partially offset by increases in most
income categories. Net cash flow provided by operating activities totaled
$4,527,404 for the nine months ended September 30, 1996, compared with
$4,741,703 for the corresponding period in 1995. The decrease is primarily
attributable to the larger net loss in the 1996 period.
Rental income for the three and nine months ended September 30, 1996 totaled
$1,474,534 and $4,496,497, respectively, compared to $1,515,640 and $4,359,157
for the same periods in 1995. The decrease for the three-month period reflects
a decrease in percentage rent for the period. The increase for the nine-month
period reflects step increases in existing base rents and higher temporary
tenant income.
Escalation income represents billings to tenants for their proportional share
of common area maintenance, operating and real estate tax expenses. Escalation
income for the three and nine months ended September 30, 1996 totaled
$1,144,763 and $3,642,026, respectively, compared to $1,252,270 and $3,889,071
for the same periods in 1995. The decrease reflects a lower anticipated
recovery rate from the mall tenants for operating expenses during the 1996
periods as a result of a decline in occupancy. Miscellaneous income for the
three and nine months ended September 30, 1996 totaled $284,405 and $550,476,
respectively, compared to $131,919 and $306,803 for the same periods in 1995.
The increases reflect a lease buyout by one Mall tenant of $200,000 and higher
late charges and interest on percentage rent payments to the Partnership.
Interest income totaled $136,285 and $482,378 for the three and nine months
ended September 30, 1996 compared with $145,916 and $424,239 during the
corresponding periods in 1995. The decrease for the three-month period is
primarily due to a decrease in the Partnership's invested cash balances
resulting from the payment of the Partnership's 1996 second quarter cash
distribution on August 15, 1996. The increase for the nine-month period
reflects higher average invested cash balances.
The increase in total expenses for the three and nine months ended September
30, 1996 reflects increases in all expenses categories.
Interest expense totaled $1,469,837 and $4,310,800 for the three and nine
months ended September 30, 1996 compared to $1,336,095 and $3,918,921 for the
same periods in 1995. The increases reflect the compounding of interest on the
zero coupon loan.
Property operating expenses for the three and nine months ended September 30,
1996 totaled $1,243,417 and $3,232,421, respectively, compared to $1,022,097
and $2,869,158 during the corresponding periods in 1995. The increase in
property operating expenses reflects an increase in bad debt expense related to
tenants which have either filed for bankruptcy protection or are in legal
proceedings and, for the nine-month period, higher snow removal costs as a
result of harsh winter weather.
General and administrative expenses for the three and nine months ended
September 30, 1996 totaled $108,429 and $268,701, respectively, compared to
$50,855 and $157,701 for the same periods in 1995. The increases are primarily
due to higher legal fees in the 1996 periods.
Mall tenant sales (exclusive of anchor tenants) for the eight months ended
August 31, 1996 and 1995 were $31,427,000 and $33,019,000 respectively. Mature
tenant sales for the eight months ended August 31, 1996 and 1995 were
$25,410,000 and $25,749,000 respectively. A mature tenant is defined as a
tenant that has operated at the Mall for each of the last two years. The
declines in tenant sales reflect lower occupancy at the property as well as
continued weakness in apparel sales and strong competition from nearby discount
stores. At September 30, 1996 and 1995, the Mall was 80.5% and 86.5% occupied,
respectively, exclusive of anchor tenants.
Part II Other Information
Item 1 Legal Proceedings.
The information that is set forth under the caption
"Notes to the Consolidated Financial Statements" in
Item 1 of Part I of this Report is incorporated herein
by reference.
Item 2 Not applicable
Item 3 Defaults Upon Senior Securities.
The information that is set forth under the caption
"Notes to the Consolidated Financial Statements" in
Item 1 of Part I of this Report is incorporated herein
by reference.
Items 4-5 Not applicable.
Item 6 Exhibits and reports on Form 8-K.
(a) Exhibits -
(10a) Settlement Agreement dated October 9, 1996, by and between
Laurel Owner Partners Limited Partnership and certain lenders
thereto.
(27) Financial Data Schedule
(b) Reports on Form 8-K -
A Current Report on Form 8-K dated September 20, 1996
pertaining to the temporary restraining order obtained
by State Street Bank and Trust Company.
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.
SHOPCO LAUREL CENTRE, L.P.
BY: LAUREL CENTRE INC.
General Partner
Date: November 14, 1996 BY: /s/ Paul L. Abbott
Director, President, and
Chief Executive Officer
Date: November 14, 1996 BY: /s/ Robert J. Hellman
Director and President
Date: November 14, 1996 BY: /s/ Joan Berkowitz
Vice President and Chief
Financial Officer
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> Dec-31-1996
<PERIOD-END> Sep-30-1996
<CASH> 7,767,743
<SECURITIES> 0
<RECEIVABLES> 1,341,128
<ALLOWANCES> (692,458)
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 70,576,842
<DEPRECIATION> (15,574,566)
<TOTAL-ASSETS> 64,323,743
<CURRENT-LIABILITIES> 7,468,365
<BONDS> 59,663,803
<COMMON> 0
0
0
<OTHER-SE> (2,033,833)
<TOTAL-LIABILITY-AND-EQUITY> 64,323,743
<SALES> 0
<TOTAL-REVENUES> 9,171,377
<CGS> 0
<TOTAL-COSTS> 4,001,353
<OTHER-EXPENSES> 1,834,197
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,310,800
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (963,737)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
October 9, 1996
BY HAND
Capital Growth Mortgage Investors, L.P.
CBA Mortgage Corp.
GE Capital Asset Management Corporation, as Servicer
State Street Bank and Trust Company
(collectively, the "Lenders")
Laurel Centre Settlement Agreement
Gentlemen:
Please refer to the pending litigation in the Circuit Court for Prince
George's County, Maryland (the "Court"), identified as Case No. CAL
96-19899 (the "Litigation"), with respect to which a Verified
Complaint for Injunction and Declaratory Relief, dated September 20,
1996 (the "Complaint") was filed with the Court.
All capitalized terms not otherwise defined in this Agreement (the
"Agreement") shall have the meanings set forth in the Complaint, but
nothing in this Agreement is intended as an admission in, or
acquiescence as to any matter with respect to, the Litigation. Terms
not defined in the Complaint are defined in this Agreement, and in some
cases used before they are defined. A complete index of terms defined
in this Agreement appears after the last signature page of this
Agreement.
At this time an ex parte injunction (the "TRO") has been entered by the
Court with respect to the claims asserted in the Litigation.
The parties now agree as follows.
1. Litigation Status. Each Lender represents and warrants to the
Defendants that as of the date hereof such Lender has not commenced any
litigation or bankruptcy proceeding, or filed any demand for
arbitration in any jurisdiction or taken any action (including any
action relating to the pleadings, filing of amended or additional
pleadings, motions, requests for discovery, or motions or other
proceedings to seek to add an additional party) (any of the foregoing,
a "Litigation Activity") with respect to the Loan or the Loan
Documents, other than the following:
a. State Street. In the case of State Street, the filing of
the Complaint and the TRO;
b. Lenders. In the case of the Lenders, the filing of an
Amended Verified Complaint for Injunction and Declaratory
Relief dated October 8, 1996;
c. Responsive Pleadings. In the case of the Borrower Parties,
the filing of Defendants' Memorandum of Law in Opposition to
State Street Bank and Trust Company's Motion for Interlocutory
Injunction dated October 8, 1996;
d. CBA. In the case of CBA, a motion for leave to intervene
as plaintiff in the Litigation, dated October 4, 1996, which
was withdrawn or CBA agrees to promptly withdraw; and
e. Foreclosure. In the case of the Lenders, preparation of
the papers for the Foreclosure as permitted herein, which
papers at this time have not yet been signed, filed, or served.
2. Standstill. During the period from the date hereof until the
Standstill Termination Date (the "Standstill Period"):
a. Continuation of TRO. The TRO shall remain in effect in
accordance with the terms of this Agreement (without prejudice
to the continuing effectiveness of the TRO through and until
the Outside Date or the Borrower Release Date, if earlier).
The Defendants in the Litigation shall, pursuant to Maryland
Rule BB72(b), consent to the extension of the TRO in accordance
with the terms of this Agreement, and no party shall seek to
modify the TRO other than upon consent of all parties.
b. No Other Action. No Litigation Activity whatsoever (other
than actions necessary to implement this Agreement) shall be
taken.
c. Time Periods. All time periods, including the time to
answer the Complaint or take other action, shall be tolled.
d. No New Litigation. No party hereto shall commence any
litigation or bankruptcy proceedings, or file any demands for
arbitration, in any jurisdiction, or otherwise commence any
Litigation Activity, against any other party in connection with
any purported claim arising out of or relating to the Loan, the
Loan Documents, the Mall, or any and all distributions or
transfers of funds from Laurel Owner to Shopco or from Shopco
to Unitholders.
e. Enforcement of this Agreement. Notwithstanding the
foregoing, during the Standstill Period any party may commence
any action or file any papers in the Litigation as may be
necessary to enforce this Agreement.
f. Foreclosure. Notwithstanding the foregoing, from and after
the Foreclosure Commencement Date and during the Standstill
Period and thereafter Lenders may commence and prosecute the
Foreclosure as provided herein.
3. Standstill Termination Date.
a. Definition. The "Standstill Termination Date" shall mean
the date of the occurrence of (i) any violation by any Borrower
Party of the TRO as modified by this Agreement, which violation
is not cured within seven days after written notice to Laurel
Owner or (ii) the occurrence of any Borrower Interference. (It
is understood, however, that any other material breach of this
Agreement that continues for more than seven days after written
notice may be remedied by specific performance, only.)
b. Time to Answer. The time period to answer the Complaint
shall be extended to the date 20 days after the Standstill
Termination Date.
4. Protection of TRO. Until the Outside Date, the TRO shall remain in
effect, subject only to earlier termination upon the Borrower Release
Date. Defendants shall not attack the validity of the TRO because
more than ten days has passed since it was entered; because a hearing
on an "interlocutory injunction" was not held within ten days under
Maryland Rule BB70; because the hearing with respect to the TRO and the
time to answer the Complaint shall have been extended as provided for
in this Agreement; or any other similar procedural basis.
5. Extension of TRO. The parties shall from time to time promptly
take all actions in the Litigation as necessary to: (a) extend the
effective period of the TRO so that the TRO shall continue to be
effective until the Outside Date (subject to earlier dissolution of the
TRO on the Borrower Release Date); and (b) extend the hearing date on
the TRO (now October 9, 1996) to the earliest date available on the
court calendar within the period commencing on the first day and ending
on the seventh day after the Standstill Termination Date. The
Defendants in the Litigation shall, pursuant to Maryland Rule BB72(b),
consent to the extension of the TRO in accordance with the terms of
this Agreement until the Outside Date (subject to earlier termination
on the Borrower Release Date).
6. Management of Mall.
a. Appointment of Receiver. Laurel Owner acknowledges that
pursuant to and as part of the Foreclosure, Lenders intend to
obtain the appointment of Zamias Services, Inc. or such other
manager as the Lenders shall select (or, at Lenders' option,
individuals qualifying under Maryland law who will engage such
manager to act on their behalf) as receiver of the Mall (Zamias
Services, Inc., or such other manager, or such individuals, as
applicable, as receiver of the Mall, the "New Manager"),
effective upon October 16, 1996 (the "Foreclosure Commencement
Date") or as promptly thereafter as New Manager can be
appointed as receiver. New Manager shall have all the rights,
powers, duties and obligations as set forth in the Order
Appointing Receiver to be filed in the Foreclosure. Laurel
Owner, Shopco, or LCI (collectively, the "Borrower Parties")
shall not file any papers objecting to appointment of New
Manager as receiver, or objecting to the terms and conditions
under which the Lenders shall seek to obtain such appointment
(so long as such terms and conditions do not contain Adverse
Allegations).
b. Consent to Appointment. Provided that such papers do not
contain any Adverse Allegations, Laurel Owner and its counsel
shall promptly, when and as requested by Lenders, sign Lenders'
papers seeking the appointment of New Manager as receiver of
the Mall. If the Court appoints a person other than New
Manager as receiver of the Mall, then the Borrower Parties
shall not object to such actions as Lenders shall take to cause
the designated receiver to engage a manager selected by Lenders
as managing agent for the Mall. Laurel Owner acknowledges
that pursuant to the Loan Documents, Laurel Owner has consented
to the appointment of a receiver without notice. Accordingly,
Laurel Owner acknowledges that New Manager may be appointed as
receiver of the Mall without notice to Laurel Owner, and Laurel
Owner consents thereto.
c. Transition. On the date of New Manager's appointment as
receiver of the Mall (the effective date of such appointment,
the "Management Transition Date"), Laurel Owner shall cause
Shopco Management Corp. (the "Existing Manager") to deliver
possession of the Mall to New Manager, together with all
security deposits, the building management office, tenant books
and records and original leases, office equipment used in the
building management office, computer files and databases, lists
of accounts payable and receivable (including leasing brokerage
commissions), rent rolls, insurance policies, service
contracts, and all other information, documents and equipment
related to the Mall, all to the extent in Existing Manager's or
Laurel Owner's possession or control (collectively, the
"Management Materials").
d. Fees Payable on Termination. Laurel Owner shall pay,
solely from Borrower Cash, any fee payable to Existing Manager
on account of the termination of Existing Manager. For
purposes of the TRO, State Street hereby consents to the
application of Borrower Cash to pay Existing Manager, on
account of such termination, an amount not to exceed one
month's management fee to Existing Manager.
e. Transfer of Management Materials. Effective on the
Foreclosure Commencement Date, Laurel Owner hereby
unconditionally and irrevocably transfers, assigns, and conveys
to the Lenders, acting by and through New Manager, all
Management Materials, subject however to the reserved right of
Laurel Owner to inspect and copy Management Materials at
reasonable time(s) and in a reasonable manner as reasonably
necessary for Laurel Owner's financial and tax reporting and
recordkeeping.
f. Replacement of New Manager. The Lenders shall have the
right to replace New Manager as receiver in accordance with
Maryland law.
g. No New Contracts. From and after the date hereof until the
Foreclosure Commencement Date, Laurel Owner shall not enter
into any new contracts relating to the Mall requiring payments
in excess of $1,000 without approval of the Lenders, except in
an emergency or as required by law (provided that Laurel Owner
shall have given Lenders prior written notice to the extent
reasonably possible under the circumstances).
h. No Borrower Management. From and after the Foreclosure
Commencement Date, notwithstanding anything to the contrary in
the Loan Documents, all actions with respect to the management
or operation of the Mall, including any leasing, renegotiation
of existing leases, entering into or modification of service
contracts, undertaking of repairs, or directing, controlling
or paying any on-site management personnel, shall be undertaken
solely by New Manager as receiver pursuant to the Foreclosure.
Without limiting the generality of the foregoing, to the
extent that as receiver New Manager has the power or authority
to perform any action with respect to the Mall, Laurel Owner
shall not have the right or obligation to perform such action.
Nothing in this paragraph shall, however, limit Laurel Owner's
obligation (to the extent required by this Agreement) to
cooperate with the smooth transition of management to New
Manager when and as requested by the Lenders or New Manager
i. Status of Mall Operations. Laurel Owner represents and
warrants that as of the date hereof, as of the Foreclosure
Commencement Date and as of the date of appointment of New
Manager as receiver of the Mall, the Mall is being operated in
all respects substantially in accordance with Laurel Owner's
past practices, except as a result of the TRO.
j. Pre-Foreclosure Payables. Laurel Owner shall pay from
Borrower Cash all of Laurel Owner's payables that were due and
payable as of October 15, 1996 or before (the "Pre-Foreclosure
Payables"). Laurel Owner represents that Laurel Owner's
practice with respect to payables has been to direct Existing
Manager to pay bills (other than for real estate taxes and
insurance, both of which have been substantially prepaid) on or
about, or after, the required payment date. To the best of
Laurel Owner's knowledge (based on Laurel Owner's review of
operating reports provided by Existing Manager), Existing
Manager has consistently substantially complied with such
directions.
k. Funding of Operating Account. On the Management Transition
Date, Laurel Owner or Existing Manager shall deliver to New
Manager the sum of $260,000, which State Street hereby agrees
and consents may be funded from Borrower Cash. New Manager
shall hold and apply such sum as if it were Revenue collected
after the Foreclosure Commencement Date, in accordance with the
Waterfall. No Borrower Party shall have any claim or right
with respect to such sum.
l. Expenses Other Than Pre-Foreclosure Payables. All expenses
of the Mall other than Pre-Foreclosure Payables shall be paid
by New Manager from Revenue received in cash on or after the
Foreclosure Commencement Date.
m. Revenues. All Revenue paid on or after the Foreclosure
Commencement Date shall be collected by New Manager for the
benefit of Lenders regardless of the period covered, and
Borrower Parties shall promptly remit to New Manager on behalf
of the Lenders all Revenue received by Borrower Parties on or
after the Foreclosure Commencement Date.
n. Prepaid Items. No adjustment shall be made for prepaid
revenues or expenses.
o. Current Budget. Laurel Owner shall upon execution hereof
provide Lenders with a copy of Laurel Owner's annual budget,
broken down monthly, and all monthly operating statements for
1996 year to date (with monthly comparisons) for the Mall.
7. Gross Revenues. The Lenders agree among themselves (which
agreements do not affect Borrower Parties in any way) as follows:
a. Collection of Revenue. All rent, concession payments,
additional rent (including CAM payments, percentage rent,
payments on account of real estate taxes, and all other
escalations, pass-throughs and tenant reimbursements),
service charges, security deposits applied to a tenant's
lease obligations, late charges, proceeds of business
interruption and rent loss insurance, vending machine and
pay telephone commissions, and all other income of any kind
or type whatsoever arising from the Mall, regardless of the
period with respect to which accrued (collectively, the
"Revenue"), but excluding in any case Revenue received
before the Foreclosure Commencement Date and the Borrower
Cash, received by New Manager on or after the Foreclosure
Commencement Date shall be delivered to and collected and
administered by New Manager as receiver of the Mall.
b. Application of Revenue. New Manager shall apply all
such Revenue as follows, and in the following order of
priority, all of which State Street hereby consents to for
purposes of the TRO (collectively, the "Waterfall"):
i. Operating Expenses. Operating expenses of the Mall
as approved by the Lenders.
ii. Reserves. Reserves for capital improvements and
leasing expenses as approved by the Lenders.
iii. First Interest. To the extent of remaining funds
available, interest accruing on the First Loan
Documents from and after the date hereof, at the
applicable rate(s) (including any default rate(s))
provided for in the First Loan Documents, including
Section 8 of the First Note. All interest required by
the preceding sentence shall (to the extent of
available funds) be paid in cash and shall not be
accrued, deferred or added to principal.
iv. Second Interest. To the extent of remaining funds
available, interest accruing on the Second Loan
Documents from and after the date hereof, at the
applicable rate(s) (other than any default rate(s))
provided for in the Second Loan Documents, all of which
interest shall (to the extent of available funds) be
paid in cash and shall not be accrued, deferred or
added to principal.
v. Amortization. Any residual funds shall be applied
solely to amortize the principal amount of the First
Loan Documents, without any prepayment or repayment
fee.
8. Releases.
a. Lender-Borrower Releases. Each Lender hereby releases and
discharges each Borrower Party, together with the past, present
and future affiliates, partners, unitholders, stockholders,
directors, officers, employees, agents, consultants, advisors
and attorneys (the "Related Releasees") of such Borrower Party,
from and against any and all claims or causes of action that
such Lender may now or hereafter have against each Borrower
Party or its Related Releasees with respect to this Agreement,
the Loan Documents and the Mall. The foregoing releases in
this paragraph shall become effective only if and when the
Borrower Release Date has occurred.
b. Definition: Borrower Release Date. The "Borrower Release
Date" shall mean the first to occur of the following:
i. Ratification and Expiration of Appeal Periods. The
ratification by the Circuit Court for Prince George's
County of the sale made pursuant to the Foreclosure and
the expiration of all appeal periods thereafter,
without the filing of any appeal, or if any such appeal
shall have been filed, then the passage of sixty days
after such ratification.
ii. No Objections/Deadline. The occurrence of March
15, 1997 (which date shall be extended by one day for
every day on which Lenders' prosecution of the
Foreclosure is delayed as a result of any litigation
commenced by or on behalf of any person holding any
interest in any Borrower Party) (the "Outside Date"),
provided that: (a) except to the extent that the
Lenders make Adverse Allegations in the papers
appointing the New Manager as receiver, Laurel Owner
shall have promptly signed such papers to consent
thereto if, when and as required by this Agreement; (b)
except to the extent that the Lenders make Adverse
Allegations in the papers appointing the New Manager as
receiver, no Borrower Party shall have objected to the
appointment of New Manager as receiver of the Mall or
the terms and conditions of such appointment; (c) no
Borrower Party shall have filed voluntary bankruptcy;
(d) except to the extent that the Lenders make any
Adverse Allegations in the Foreclosure, no Borrower
Party shall have filed papers in the Foreclosure
(including any papers appealing or objecting to any
relief granted or action taken in the Foreclosure)
other than papers approved by the Lenders, or asserted
any defenses to the Foreclosure; (e) except to the
extent that the Lenders make Adverse Allegations in the
Foreclosure, no Borrower Party shall have filed any
objections or defenses to the Foreclosure or to the
sale pursuant thereto; (f) except to the extent that
the Lenders make Adverse Allegations in the
Foreclosure, no Borrower Party shall have initiated or
commenced any action to enjoin, restrain, or delay the
Foreclosure in any way; (g) if an involuntary
bankruptcy shall have been filed with respect to Laurel
Owner and Lenders shall have filed a motion for relief
from stay, then Laurel Owner shall not have contested
such motion; and (h) no Borrower Party shall have
violated the exclusive right of New Manager as receiver
to collect all Revenue from the Mall paid after the
Foreclosure Commencement Date and exercise full
dominion and control over the Mall pursuant to the
order appointing New Manager as receiver of the Mall,
which violation (as to this clause "h" only) is not
cured within seven days after written notice to Laurel
Owner. (The occurrence of any of the events whose
nonoccurrence is listed in "a" through "h" shall be
referred to herein as "Borrower Interference.")
c. Borrower-Lender Releases. Each Borrower Party hereby
releases and discharges each Lender, and the Related Releasees
of such Lender, from and against any and all claims or causes
of action that such Borrower Party may now or hereafter have
against each Lender or its Related Releasees with respect to
this Agreement, the Loan Documents and the Mall. The foregoing
releases in this paragraph shall become effective only if and
when the Borrower Release Date has occurred.
d. Inter-Lender Releases. Capital Growth hereby releases and
discharges each of the other Lenders, and the Related Releasees
of each of the other Lenders, from and against any and all
claims or causes of action that Capital Growth may now or
hereafter have against each of the other Lenders or its Related
Releasees with respect to this Agreement, the Loan, the Loan
Documents and the Mall. The Lenders other than Capital Growth
hereby release and discharge Capital Growth, and Capital
Growth's Related Releasees from and against any and all claims
or causes of action that such other Lenders may now or
hereafter have against Capital Growth or its Related Releasees
with respect to this Agreement, the Loan, the Loan Documents
and the Mall. The foregoing releases in this paragraph shall
become effective only if and when the Lenders have acquired
title to the Mall. Notwithstanding the foregoing, after such
transfer of title, the Participation Agreement and this
Agreement shall continue to govern the rights and obligations
of the Lenders as direct or indirect co-owners of the Mall.
9. Foreclosure. Notwithstanding anything to the contrary in this
Agreement, on the Foreclosure Commencement Date, Lenders may commence a
foreclosure action with respect to one or both of the Loans held by the
Lenders, with immediate appointment of New Manager as receiver (the
"Foreclosure"), as follows.
a. Foreclosure Papers. The papers for the Foreclosure shall
allege as the basis for the Foreclosure only Laurel Owner's
failure to pay the Loan on the Maturity Date. Such papers
shall not include any allegations of fraud, bad faith, personal
liability, or any claim to the Borrower Cash (but the foregoing
shall not be deemed Lenders' waiver of any claim to the
Borrower Cash as asserted in the Litigation) ("Adverse
Allegations"). Notwithstanding anything to the contrary in
this paragraph, if the Borrower Release Date occurs, then the
Lenders shall withdraw any claim to the Borrower Cash.
b. Events Supporting Foreclosure. Laurel Owner hereby
acknowledges that Laurel Owner is not entitled to, and no
Lender is obligated to provide, any notice, cure period, grace
period, or other forbearance with respect to the payment of the
entire principal amount of each Loan due upon the maturity date
thereof, and any such notice, cure period, grace period, or
other forbearance is hereby waived.
10. Borrower Cash.
a. Retention. Except as otherwise expressly permitted by this
Agreement or the TRO, until the Borrower Release Date, Borrower
Parties shall hold, in compliance with the TRO, any and all
cash or cash equivalents held by the Borrower Parties in
accordance with the TRO, including all Revenue collected by
Laurel Owner from the Mall on or before the Foreclosure
Commencement Date (collectively, the "Borrower Cash"),
including funds intended to be transferred to Unitholders
pursuant to the distribution (the "Special Distribution")
declared by Shopco on September 20, 1996.
b. Application. State Street hereby consents to Borrower
Parties' use of Borrower Cash (but not any Revenue paid after
the Foreclosure Commencement Date), but in any case excluding
the making of distributions, dividends or loans, in the
ordinary course of business consistent with past practice for
expenses not related to the ownership, management and operation
of the Mall, including, without limitation, to pay accounting
and financial reporting expenses, stock exchange fees,
transfer agent fees, director fees and legal fees
(collectively, "Partnership Expenses"). Partnership Expenses
may also include legal fees and disbursements incurred by
Borrower Parties. Without State Street's prior written
consent, Partnership Expenses shall not exceed the sum of: (a)
$182,095; plus (b) all legal fees and disbursements incurred by
Borrower Parties on account of work performed through October
9, 1996; plus (c) up to $500,000 on account of legal fees and
disbursements incurred by Borrower Parties for work performed
after October 9, 1996. Each Lender agrees that the foregoing
consent by State Street is a consent to such use of funds as
required by and in compliance with the TRO.
c. Release. Upon the occurrence of the Borrower Release Date,
the parties shall vacate the TRO and discontinue the Litigation
with prejudice to Plaintiffs and without costs to any party,
provided only that Laurel Owner shall have paid all its
Pre-Foreclosure Payables and Partnership Expenses, and provided
Lenders with reasonable evidence thereof. Upon such payment,
delivery of such evidence, and vacatur of the TRO on or after
the Borrower Release Date, Borrower Parties shall hold and may
apply or distribute in their discretion the Borrower Cash free
of claim or right by Lenders.
11. Conduct of Laurel Owner's Business. Until the Management
Transition Date, Laurel Owner shall continue to conduct its business in
the ordinary course of business, subject to the terms of the TRO and
this Agreement. From and after the appointment of New Manager as
receiver, Laurel Owner shall conduct no business activities of any kind
and shall incur no liabilities of any kind, except that Laurel Owner
may continue to conduct activities that would incur liabilities for
Partnership Expenses, and may continue to incur and pay liabilities for
Partnership Expenses, and may continue to own the Mall subject to the
New Manager as receiver and subject to the Foreclosure and applicable
law. Laurel Owner shall pay the Pre-Foreclosure Payables.
12. Stipulation or Consent Order. The parties shall promptly enter
into a Stipulation or Consent Order, to be filed in the Litigation,
memorializing and setting forth all terms and conditions of this
Agreement relating to the Standstill Period, the Standstill
Termination Date, the extension of the TRO and as otherwise expressly
provided herein, or attaching a copy of this Agreement. Lenders'
counsel shall draft such Stipulation or Consent Order subject to the
reasonable approval of the other parties. All parties signing this
Agreement shall cause their counsel to promptly sign and file, and to
thereafter comply with, such Stipulation or Consent Order.
13. Laurel Owner's Acknowledgment. Laurel Owner acknowledges that
nothing in this Agreement shall be deemed to violate any obligations of
any Lender to Laurel Owner, and shall not be deemed to unreasonably
involve any Lender in the management, business or operations of Laurel
Owner or cause any Lender to become a "mortgagee in possession."
Laurel Owner acknowledges that the arrangements set forth in this
Agreement are in all cases reasonably necessary and appropriate to
protect the security of the Lenders' collateral.
14. Further Assurances. Each party agrees to execute and deliver such
further documentation as may be necessary or appropriate to implement
the intentions of the parties as set forth in this Agreement.
Simultaneously with the passage of equitable title pursuant to the
Foreclosure, Laurel Owner shall assign to the Lenders or their
designee, without separate consideration, any environmental insurance
held by Laurel Owner with respect to the Mall, subject however to the
terms of any such insurance policy.
15. Rights and Remedies. Notwithstanding anything to the contrary in
the Loan Documents, except during the Standstill Period as it applies
to the TRO, nothing in this Agreement is intended to limit or restrict
any rights or remedies of either Lender under its Loan Documents.
16. Participant Approval. State Street, as participant under the
Participation Agreement, hereby consents to this Agreement and all
transactions contemplated or permitted by this Agreement and directs,
authorizes, and requests Capital Growth to enter into this Agreement,
which State Street has determined represents a reasonable, appropriate
and arm's length agreement under the circumstances.
17. Counterparts; Fax. This Agreement may be signed in counterparts,
which may be exchanged by fax. If this Agreement is signed by fax the
parties shall promptly exchange sufficient original counterparts so
each party can retain two fully executed originals. Failure to
exchange such counterparts shall not impair the validity of this
Agreement.
18. Confidentiality. All parties shall preserve the confidentiality
of this Agreement, except as required by law, stock exchange
requirements, or this Agreement, or for submission to the Court, or in
the Foreclosure. Before any Borrower Party makes any filing,
disclosure or release required by law or stock exchange requirements
relating to this Agreement or any matter relating to or arising from
this Agreement (a "Disclosure"), such Borrower Party shall obtain
Capital Growth's approval of such Disclosure, such approval not to be
unreasonably withheld or delayed. Before Capital Growth makes any
Disclosure, Capital Growth shall obtain Laurel Owner's approval of such
Disclosure, such approval not to be unreasonably withheld or delayed.
Notwithstanding the foregoing, this Agreement and its terms may be
disclosed to any attorneys, advisors or consultants working for any
party hereto.
19. Due Authorization. Each party represents and warrants that this
Agreement has been duly authorized by such party and all necessary
approvals to permit such party to enter into and perform this Agreement
have been obtained, except only for such additional approvals as are
expressly provided for in this Agreement.
20. Brokerage. Each party: (a) represents and warrants that it has
not dealt with any broker, finder, or other person entitled to a
commission or similar compensation with respect to the negotiation and
execution of this Agreement; and (b) shall indemnify, defend, and hold
harmless all other parties from any loss suffered (including payment of
reasonable attorneys' fees) as a result of any breach of such party's
representation and warranty in clause "a."
21. Notices. All notices hereunder shall be given by Federal Express
or other documented overnight delivery service or by-hand delivery and
shall be effective upon receipt or affirmative refusal to accept
delivery. Any notice given to any one party shall simultaneously be
given to all other parties by the same means. The addresses of the
parties are as follows:
a. All Borrower Parties. 3 World Financial Center, 29th
Floor, New York, New York 10285-2900, Attention: Mr. Paul
Abbott, with a copy to Weil, Gotshal & Manges, LLP, 767 Fifth
Avenue, New York, New York 10153, Attention: Paul T. Cohn,
Esq.
b. CBA Mortgage Corp. c/o Cheslock, Bakker & Associates Inc.,
Financial Center, Suite 103, 695 East Main Street, Stamford,
Connecticut 06901. A copy of any notice to CBA Mortgage Corp.
shall be sent at the same time and by the same means to
Venable, Baetjer and Howard, LLP, Attention: Jan Guben, Esq.,
at Two Hopkins Plaza, Baltimore, Maryland 21201.
c. Capital Growth. 3 World Financial Center, 29th Floor, New
York, New York 10285-2900, Attention: Mr. Kenneth L. Zakin,
with a copy to Latham & Watkins, Attention: Joshua Stein,
Esq., at 885 Third Avenue, Suite 1000, New York, New York
10022-4802.
d. State Street. c/o GE Capital Realty Group, 16479 Dallas
Parkway, Suite 400, Dallas, Texas 75248, Attention: Mr. Joseph
Jernigan, with a copy to: Nancy Alquist, Esq., Ballard Spahr
Andrews & Ingersoll, 300 East Lombard Street, Nineteenth Floor,
Baltimore, Maryland 21202.
22. Successors and Assigns. This Agreement is intended to bind and
benefit the parties and their successors and assigns. If any party
assigns its interests with respect to the Mall, such assignment shall
automatically include its rights and obligations under this Agreement;
the assignee shall assume all obligations of the assignor under this
Agreement; and assignor and assignee shall promptly notify all other
parties of the assignment.
23. Interaction Among Lenders. The Lenders agree as follows, which
agreements do not affect Borrower Parties in any way and are intended
to modify the Participation Agreement (as previously modified by the
Agreement dated October 1, 1987, between Capital Growth's predecessor
in interest, State Street's predecessor in interest and Shearson
California, as defined therein).
a. Disputes. In the event of a dispute or disagreement among
the Lenders with respect to their exercise of their rights
under this Agreement, the relative rights and obligations of
the Lenders among themselves shall be determined pursuant to
the terms and procedures of the Participation Agreement, the
First Loan Documents and the Second Loan Documents.
b. Taking of Title. Unless the Lenders agree otherwise, if
the Lender(s) or anyone bidding on behalf of any Lender(s)
is/are the successful bidder at the Foreclosure sale, then
title to the Mall shall be taken in a single-asset corporation
owned by the Lenders in proportion to their relative interests
in the First Loan.
c. Phase I. Capital Growth shall promptly after the
Foreclosure Commencement Date order, and thereafter diligently
prosecute the completion of, an updated Phase I environmental
assessment for the Mall, and promptly provide State Street
with a copy thereof upon receipt. The cost of such Phase I
environmental assessment shall be treated as a cost of
enforcing the First Loan.
d. Prosecution of Foreclosure. Capital Growth shall promptly
commence and diligently prosecute the Foreclosure. Any change
of counsel with respect to the Foreclosure shall be subject to
approval by the Lenders, such approval not to be unreasonably
withheld. All papers to be filed in the Foreclosure shall be
subject to approval by the Lenders, such approval not to be
unreasonably withheld.
e. Participation. Provided that State Street (as originally
defined in the Complaint) continues to hold its existing
interest in the First Loan (or the Mall, directly or
indirectly, as the result of the Foreclosure) ("State Street
Ownership"), and only so long as State Street Ownership
continues, upon the taking of title to the Mall by or on behalf
of the Lenders, the Participation Agreement shall be deemed
modified so that State Street shall thereafter become Lender,
and Capital Growth shall thereafter become Participant, but
only for so long as State Street Ownership continues, except
that their respective ownership interests (i.e., 76% ownership
by State Street, 24% ownership by Capital Growth) shall remain
unchanged. Upon termination of State Street Ownership, the
Lenders shall reasonably agree upon a third-party asset manager
to manage the Mall (if owned by the Lenders) on behalf of the
Lenders, both Lenders confirming that an asset management
affiliate of General Electric Capital Corporation is
acceptable.
24. Limitation of Liability. Notwithstanding anything to the
contrary in this Agreement, no Lender's liability to any
Borrower Party under this Agreement shall extend beyond such
Lender's interest in the Mall (including, in the case of each
Lender, its interest in the First Loan or the Second Loan, as
applicable), and the proceeds thereof. Any judgment obtained
by any Borrower Party against any Lender shall not be enforced
against any assets of such Lender other than the foregoing.
Subject to the terms of this Agreement, the liability of any
Borrower Party under this Agreement shall be subject to the
same limitations of any such Borrower Party's liability that
would apply to such Borrower Party's liability under the Loan
Documents.
If the foregoing accurately reflects our understanding, please
sign and return at least one counterpart of this Agreement to
us.
Thank you.
Laurel Owner
LAUREL OWNER PARTNERS LIMITED PARTNERSHIP, a
Maryland limited partnership
By: SHOPCO LAUREL CENTRE, L.P., a Delaware limited
partnership, its general partner
By: LAUREL CENTRE INC., its general
partner
By:
Name:
Title:
Agreed to and accepted.
Capital Growth
CAPITAL GROWTH MORTGAGE INVESTORS, L.P., a Delaware limited
partnership
By: CG REALTY FUNDING, INC., a Delaware corporation
By:
Kenneth L. Zakin, President
Agreed to and accepted.
State Street
STATE STREET BANK AND TRUST COMPANY, a Massachusetts business trust
By: GE CAPITAL REALTY GROUP, INC., as Sub-Servicer for GE CAPITAL ASSET
MANAGEMENT CORPORATION, as Servicer for State Street Bank and Trust
Company
By:
Name:
Title:
Agreed to and accepted.
CBA
CBA MORTGAGE CORP.
By:
Name:
Title:
Attachment: Index of Terms Defined in This Agreement
INDEX OF TERMS DEFINED IN THIS AGREEMENT
Adverse Allegations
Agreement
Borrower Cash
Borrower Interference
Borrower Parties
Borrower Release Date
Complaint
Court
Disclosure
Existing Manager
Foreclosure
Foreclosure Commencement Date
Lenders
Litigation
Litigation Activity
Management Materials
Management Transition Date
New Manager
Outside Date
Partnership Expenses
Pre-Foreclosure Payables
Related Releasees
Revenue
Special Distribution
Standstill Period
Standstill Termination Date
State Street Ownership
TRO
Waterfall
Other terms used in this Agreement are defined in the Complaint
