UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
Washington, D. C. 20549
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|x| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended August 2, 1997
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 0-15385
ONE PRICE CLOTHING STORES, INC.
(Exact name of registrant as specified in its charter)
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DELAWARE 57-0779028
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Highway 290, Commerce Park
1875 East Main Street
Duncan, South Carolina 29334
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 433-8888
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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
The number of shares of the Registrant's Common Stock outstanding as of
September 5, 1997 was 10,435,531.
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INDEX
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARIES
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed consolidated balance sheets - August 2, 1997, February 1, 1997 and August 3, 1996
Condensed consolidated statements of income - Three-month and
six-month periods ended August 2, 1997 and August 3, 1996
Condensed consolidated statements of cash flows - Six-month
periods ended August 2, 1997 and August 3, 1996
Notes to unaudited condensed consolidated financial statements -- August 2, 1997
Independent accountants' report on review of interim financial information
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
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SIGNATURES
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PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
One Price Clothing Stores, Inc. and Subsidiaries
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August 2, February 1, August 3,
1997 1997 1996
(Unaudited) (1) (Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,691,000 $ 2,557,000 $ 96,000
Merchandise inventories 43,925,000 48,371,000 37,310,000
Federal and state income taxes receivable -- 4,237,000 2,778,000
Deferred income taxes 2,094,000 1,935,000 1,992,000
Other current assets 5,989,000 4,791,000 5,464,000
TOTAL CURRENT ASSETS 54,699,000 61,891,000 47,640,000
PROPERTY AND EQUIPMENT, at cost 58,935,000 57,608,000 57,439,000
Less accumulated depreciation 22,873,000 21,457,000 19,701,000
36,062,000 36,151,000 37,738,000
OTHER ASSETS 3,032,000 2,925,000 2,970,000
$ 93,793,000 $100,967,000 $ 88,348,000
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 25,232,000 $ 25,908,000 $ 18,376,000
Current portion of long-term debt and note payable 658,000 16,565,000 4,593,000
Sundry liabilities 8,488,000 6,249,000 7,594,000
TOTAL CURRENT LIABILITIES 34,378,000 48,722,000 30,563,000
LONG-TERM DEBT 7,963,000 4,868,000 5,658,000
DEFERRED INCOME TAXES AND OTHER
NON-CURRENT LIABILITIES 3,275,000 3,035,000 2,341,000
SHAREHOLDERS' EQUITY
Preferred Stock, par value $0.01 -
authorized and unissued 500,000 shares
Common Stock, par value $0.01 --
authorized 35,000,000 shares, issued and
outstanding 10,435,531 shares (all periods) 104,000 104,000 104,000
Additional paid-in capital 11,453,000 11,453,000 11,453,000
Retained earnings 36,620,000 32,785,000 38,229,000
48,177,000 44,342,000 49,786,000
$ 93,793,000 $100,967,000 $ 88,348,000
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(1) Derived from audited financial statements
See notes to unaudited condensed consolidated financial statements
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
One Price Clothing Stores, Inc. and Subsidiaries
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Three-Month Period Ended Six-Month Period Ended
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
NET SALES $ 86,134,000 $ 87,450,000 $165,033,000 $163,744,000
Cost of goods sold, distribution
and buying costs 55,027,000 56,230,000 104,397,000 103,797 000
GROSS MARGIN 31,107,000 31,220,000 60,636,000 59,947,000
Selling, general and administrative
expenses 19,252,000 18,553,000 38,284,000 36,945,000
Store rent and related expenses 6,276,000 6,289,000 12,573,000 12,837,000
Depreciation and amortization
expense 1,185,000 1,159,000 2,408,000 2,348,000
Interest expense 485,000 437,000 1,071,000 998,000
27,198,000 26,438,000 54,336,000 53,128,000
Interest income 26,000 67,000 40,000 78,000
NET EXPENSES 27,172,000 26,371,000 54,296,000 _ 53,050,000
INCOME BEFORE
INCOME TAXES 3,935,000 4,849,000 6,340,000 6,897,000
Provision for income taxes 1,544,000 1,909,000 __ 2,505,000 2,720,000
NET INCOME $ 2,391,000 $ 2,940,000 $ 3,835,000 $ 4,177,000
Net income per common share -
Notes B & D $ 0.23 $ 0.28 $ 0.37 $ 0.40
=========== =========== ============ =============
Weighted average common shares
outstanding - Note B 10,468,554 10,444,250 10,466,351 10,393,778
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See notes to unaudited condensed consolidated financial statements
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
One Price Clothing Stores, Inc. and Subsidiaries
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Six-Month Period Ended
August 2, August 3,
1997 1996
OPERATING ACTIVITIES:
Net income $ 3,835,000 $ 4,177,000
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 2,408,000 2,348,000
Decrease in other noncurrent assets 255,000 294,000
Increase in other noncurrent liabilities 330,000 --
Deferred income tax (benefit) provision (181,000) 707,000
Loss on disposal of property and equipment 367,000 325,000
Changes in operating assets and liabilities 8,735,000 1,441,000
NET CASH PROVIDED BY OPERATING ACTIVITIES 15,749,000 9,292,000
INVESTING ACTIVITIES:
Purchases of property and equipment (2,336,000) (1,039,000)
Purchases of other noncurrent assets (198,000) (218,000)
NET CASH USED IN INVESTING ACTIVITIES (2,534,0000) (1,257,000)
-------------- ---------------
FINANCING ACTIVITIES:
Net repayment of revolving credit facility (14,478,000) (9,801,000)
Proceeds from long-term debt borrowings 9,572,000 7,500,000
Repayment of long-term debt (7,906,000) (5,763,000)
Debt financing costs incurred (201,000) (710,000)
Payment of capital lease obligation (44,000) --
Decrease in amount due to related party (24,000) (21,000)
Proceeds from exercise of Common Stock options -- 452,000
NET CASH USED IN FINANCING ACTIVITIES _ (13,081,000) (8,343,000)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 134,000 (308,000)
Cash and cash equivalents at beginning of period 2,557,000 404,000
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,691,000 $ 96,000
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 818,000 $ 788,000
Income taxes paid 54,000 63,000
Noncash financing activity - capital leases 10,000 --
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See notes to unaudited condensed consolidated financial statements
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
One Price Clothing Stores, Inc. and Subsidiaries
August 2, 1997
NOTE A -- BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements are unaudited and
include the accounts of One Price Clothing Stores, Inc. and its subsidiaries,
all of which are wholly-owned (the "Company"). All significant intercompany
accounts and transactions have been eliminated in consolidation.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and the
instructions of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements.
For interim reporting, the Company's gross profit is calculated on a current
quarterly basis by its inventory management system. Inventories are stated at
the lower of cost (using the first-in, first-out (FIFO) retail method) or
market.
In the opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included. Due
to the seasonality of the Company's sales, operating results for the three-month
and six-month periods ended August 2, 1997 are not necessarily indicative of the
results that may be expected for the year ending January 31, 1998. For further
information, refer to the financial statements and footnotes thereto included in
the Company's Annual Report on Form 10-K for the year ended February 1, 1997.
NOTE B -- EARNINGS PER SHARE
Earnings per share are computed based upon the weighted average number of common
and common equivalent shares outstanding. Common equivalent shares consist of
shares under option. See Note D.
NOTE C - CREDIT FACILITIES
In May 1997, the Company amended its financing arrangements with its primary
lender. The agreement provides for a two-year extension through March 2000 and
continues to provide a revolving credit facility of up to $37,500,000 (including
a letter of credit sub-facility of up to $25,000,000). The amendment also
increased the term loan portion of the agreement by approximately $1,450,000,
thereby bringing the amount of such term loan up to its original $7,500,000. In
June 1997, the Company again amended the credit facility to terminate the term
loan portion and permit the Company to enter into a mortgage loan agreement with
a commercial bank (discussed further below).
Borrowings under the credit agreement are collateralized by all assets owned by
the Company during the term of the agreement (other than the land, building,
fixtures and improvements collateralizing the mortgage loan discussed below) and
bear interest, at the Company's option (subject to certain limitations in the
agreement), at the prime rate plus 0.5% or the Adjusted Eurodollar Rate, as
defined, plus 2.5%. Maximum borrowings under the revolving credit facility and
utilization of the letter of credit facility are based on a borrowing base
formula determined with respect to eligible inventory (as defined in the
agreement). Availability under the revolving credit facility will fluctuate in
accordance with the Company's seasonal variations in inventory levels. At August
2, 1997, the Company had outstanding borrowings of $508,000 under the revolving
credit facility and approximately $19.2 million of excess availability under the
borrowing base formula. The lending formula may be revised from time to time in
response to changes in the composition of the Company's inventory or other
business conditions.
The Company's amended revolving credit agreement contains certain covenants
which, among other things, restrict the ability of the Company to incur
indebtedness, or encumber or dispose of assets, and prohibit the Company from
repurchasing its Common Stock or paying dividends. Additionally, the Company
must maintain a minimum adjusted net worth (as defined in the agreement) of
$34,000,000 and maintain a minimum working capital, exclusive of amounts
outstanding under the revolving credit facility, of $5,000,000. The Company was
in compliance with these covenants at August 2, 1997 and as of the date of this
document.
In May 1997, the Company entered into an agreement with a commercial bank to
provide a letter of credit facility of up to $3,000,000. The facility expires at
the earlier of June 1998 or termination of the Company's revolving credit
facility with its primary lender. Letters of credit issued under the agreement
are collateralized by inventories purchased using such letters of credit. The
agreement contains certain restrictive covenants which are substantially the
same as those within the Company's revolving credit facility discussed above.
In June 1997, the Company repaid the term loan portion of its primary credit
facility and entered into a twenty-year mortgage agreement with a commercial
bank. The agreement provides for a mortgage loan of $8,125,000, secured by the
Company's real property located at its corporate offices including land,
buildings, fixtures and improvements. Commencing August 1, 1997, the mortgage
loan is payable in 240 consecutive equal monthly installments (including
interest at the rate of 9.125% per annum). Certain fees may be payable by the
Company if the mortgage loan is repaid prior to June 2014. The mortgage
agreement contains certain nonfinancial covenants with which the Company was in
compliance at August 2, 1997.
NOTE D - EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS
The FASB issued SFAS 128, "Earnings Per Share," effective for periods ending
after December 15, 1997. The new standard requires a dual presentation of
"basic" and "diluted" EPS on the face of the income statement. If the Company
had applied the principles of SFAS 128 for the three-month and six-month periods
ended August 2, 1997, basic and diluted EPS would have been the same as reported
under APB Opinion No. 15, the current EPS accounting standard.
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INDEPENDENT ACCOUNTANTS' REVIEW REPORT
To the Board of Directors and Shareholders of
One Price Clothing Stores, Inc.
Duncan, South Carolina
We have reviewed the accompanying condensed consolidated balance sheets of One
Price Clothing Stores, Inc. and subsidiaries (the "Company") as of August 2,
1997 and August 3, 1996, and the related condensed consolidated statements of
income for the three-month and six-month periods then ended and the condensed
consolidated statement of cash flows for the six-month periods then ended. These
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to such condensed consolidated financial statements for them to be in
conformity with generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of One Price Clothing Stores, Inc. and
subsidiary as of February 1, 1997, and the related consolidated statements of
operations, shareholders' equity, and cash flows for the year then ended (not
presented herein); and in our report dated March 14, 1997, we expressed an
unqualified opinion on those consolidated financial statements. In our opinion,
the information set forth in the accompanying condensed consolidated balance
sheet as of February 1, 1997 is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been derived.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
August 21, 1997
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Net sales for the quarter ended August 2, 1997 decreased 2% to $86,134,000
compared to $87,450,000 for the quarter ended August 3, 1996. During the second
quarter of fiscal 1997, the Company operated an average of 22 fewer stores
compared to the same period last year. Comparable store sales for the quarter
decreased 2% while average store sales increased 2% compared to the same quarter
last year. The Company considers stores that have been open 18 months or more to
be comparable, and there were 609 such stores at August 2, 1997.
Net sales for the six-month period ended August 2, 1997 increased 1% to
$165,033,000 compared to $163,744,000 for the six-month period ended August 3,
1996. During the six-month period ended August 2, 1997, the Company operated an
average of 31 fewer stores compared to the same period last year. Comparable
store sales for the six-month period increased 1% and average store sales
increased 6% compared to the same period last year.
Twelve stores were opened during the second quarter of fiscal 1997, five stores
were relocated and eight underperforming stores were closed. At August 2, 1997,
the Company operated 652 stores, 11 fewer than at quarter-end last year, in 27
states, the District of Columbia, Puerto Rico and the U.S. Virgin Islands.
Management believes that the comparable store sales decrease for the quarter
ended August 2, 1997 resulted primarily from slow sales due to the unseasonably
cold weather early in the quarter followed by the Company's not aggressively
pursuing the opportunistic purchases of summer merchandise which may have aided
sales when the weather became warmer later in the quarter. Management believes
that the comparable store sales increase for the first six months of fiscal 1997
resulted primarily from earlier placement of spring merchandise in the stores
accompanied by milder weather in the first two months of the fiscal year.
Average store sales increases in both the three-month and six-month periods were
primarily the result of higher average sales from stores opened in fiscal 1996
and fiscal 1997 and the closing of lower volume stores during both periods.
In fiscal 1997, the Company began implementing its previously announced plans to
offer certain categories of merchandise at higher, alternative price points
along with its traditional $7 retail price. At August 2, 1997, the Company had
implemented this concept in all its stores. Management believes that initial
customer reaction to the alternative price merchandise has been favorable. Sales
of alternative price merchandise comprised approximately 8% of total sales for
the first six months of fiscal 1997. In the last four weeks of the second
quarter of fiscal 1997, when implementation of the new concept was complete,
sales of this higher-priced merchandise comprised 17% of total sales for the
same period.
Gross margin increased to 36.1% of net sales in the second quarter of fiscal
1997 compared to 35.7% of net sales in the second quarter of fiscal 1996. For
the first six months of fiscal 1997, gross margin increased to 36.7% of net
sales compared to 36.6% of net sales for the same period last year. The increase
in gross margin as a percentage of net sales for both periods presented was
principally due to efficiencies achieved in the Company's distribution center
and was partially offset by higher markdowns as a result of lower than planned
sales.
Selling, general and administrative ("SG&A") expenses were 22.4% of net sales in
the second quarter of fiscal 1997 compared to 21.2% of net sales in the second
quarter of fiscal 1996. SG&A expenses were 23.2% of net sales in the first six
months of fiscal 1997 compared to 22.6% of net sales for the same period last
year. SG&A expenses per average store increased 7.4% in the first quarter of
fiscal 1997 and 8.6% in the first six months of fiscal 1997 compared to the same
periods last year. These increases were, in part, due to costs associated with
replacing open positions in the Company's field operations and corporate staff.
Additionally, average salaries and wages in the Company's stores increased as a
result of higher average sales per store and due to the increase in the Federal
Minimum Wage which took effect in October 1996.
Store rent and related expenses were 7.3% of net sales in the second quarter of
fiscal 1997 compared to 7.2% of net sales in the second quarter of fiscal 1996.
Store rent and related expenses per average store increased 3% in both the
second quarter and first six months of fiscal 1997 compared to the same periods
last year. The increase in average store rents was due to entering into leases
in markets with higher sales volume potential and, therefore, higher base rent
structures, as well as the closing of older, underperforming stores which
generally had lower average rent expense. For the first six months of fiscal
1997, store rent and related expenses were 7.6% of net sales compared to 7.8% of
net sales in the first six months of fiscal 1996. The decrease in store rent
when expressed as a percentage of net sales was due to higher average sales per
store experienced in the first six months of fiscal 1997 compared to the same
period last year.
Outlook
Sales trends since August 2, 1997 have been below expectations. The Company is
aggressively clearing slow-moving merchandise from its stores in order to devote
selling space to opportunistic purchases of transitional and fall merchandise.
This clearance strategy may result in an increased level of markdowns in the
third quarter of fiscal 1997 compared to plan. The Company's sales and operating
results are seasonal, as is typical in the women's apparel industry. The
Company's sales and operating results have been highest in the first quarter
(February - April) and second quarter (May - July) and lowest in the third
quarter (August - October) and fourth quarter (November - January). Management
expects sales of its alternative price merchandise will ultimately have a
beneficial impact on sales, especially in the important months of October,
November and December. As a result, management anticipates these improved sales
volumes, if realized, to leverage expected increases in average store rent and
SG&A costs per average store.
Average store rent may increase due to the Company's continuing strategy of
entering into leases in markets with higher sales volume potential and,
therefore, higher base rent structures. On September 1, 1997, the second phase
of the Federal Minimum Wage increase took effect. Management estimates the
incremental impact of the increases in the Federal Minimum Wage, including the
October 1996 increase, will increase store payroll expense in fiscal 1997 by
approximately $900,000, before consideration of the impact on those hourly
associates earning in excess of the minimum wage.
The Company expects to open approximately 60 stores, relocate approximately 15
stores and close approximately 25 underperforming stores during fiscal 1997,
ending the fiscal year with approximately 680 stores.
Liquidity and Capital Resources
During the first six months of fiscal 1997 and fiscal 1996, net cash provided by
operating activities was used primarily to reduce amounts owed by the Company on
its revolving credit facility.
Total merchandise inventories at the end of the second quarter of fiscal 1997
increased 18% compared to the end of the second quarter of fiscal 1996. The
increase in merchandise inventories was due to higher levels of merchandise
in-transit to the Company's distribution center and to higher unit costs
associated with alternative price merchandise. Alternative price merchandise
comprised 24% (at retail) of the Company's merchandise inventories at August 2,
1997. The level and source of inventories are subject to fluctuations because of
the Company's opportunistic buying strategy and prevailing business conditions.
Total accounts payable and amounts outstanding under the credit facilities,
including the long-term portions thereof, increased 18% to $33,853,000 at the
end of the second quarter of fiscal 1997 from $28,627,000 at the end of the
second quarter of fiscal 1996. The increase in accounts payable and amounts
outstanding under the credit facilities was principally due to funding the
increase in merchandise inventories described above.
For the first six months of fiscal 1997, the Company purchased approximately 25%
of its merchandise directly from foreign sources compared to approximately 21%
for the first six months of fiscal 1996. During the second quarter of fiscal
1997, the Company began to decrease its levels of foreign purchases compared to
the same period last year and sought to increase its opportunistic purchases of
merchandise inventory from domestic sources, particularly for alternative price
categories. This resulted in outstanding documentary letters of credit totaling
approximately $7,235,000 at August 2, 1997 compared to $11,745,000 at August 3,
1996. Management expects to continue to increase its purchases of merchandise
from domestic sources, but will pursue purchases of merchandise from foreign
sources when it is deemed in the best interest of the Company.
During the first six months of fiscal 1997, net cash of $2,336,000 was used to
purchase property and equipment. This consisted principally of costs incurred to
open twenty-two new stores, to relocate eight stores and to remodel twenty
stores. In fiscal 1997, the Company plans to spend approximately $5 million on
capital expenditures, primarily to fund the fiscal 1997 new store openings,
store relocations and remodeling of certain existing stores.
In May 1997, the Company amended its financing arrangements with its primary
lender. The agreement provides for a two-year extension through March 2000 and
continues to provide a revolving credit facility of up to $37,500,000 (including
a letter of credit sub-facility of up to $25,000,000). The amendment also
increased the term loan portion of the agreement by approximately $1,450,000,
thereby bringing the amount of such term loan up to its original $7,500,000. In
June 1997, the Company again amended the credit facility to terminate the term
loan portion and permit the Company to enter into a mortgage loan agreement with
a commercial bank (discussed further below).
Borrowings under the credit agreement are collateralized by all assets owned by
the Company during the term of the agreement (other than the land, building,
fixtures and improvements collateralizing the mortgage loan discussed below) and
bear interest, at the Company's option (subject to certain limitations in the
agreement), at the prime rate plus 0.5% or the Adjusted Eurodollar Rate, as
defined, plus 2.5%. Maximum borrowings under the revolving credit facility and
utilization of the letter of credit facility are based on a borrowing base
formula determined with respect to eligible inventory (as defined in the
agreement). Availability under the revolving credit facility will fluctuate in
accordance with the Company's seasonal variations in inventory levels. At August
2, 1997, the Company had outstanding borrowings of $508,000 under the revolving
credit facility and approximately $19.2 million of excess availability under the
borrowing base formula. The lending formula may be revised from time to time in
response to changes in the composition of the Company's inventory or other
business conditions.
The Company's amended revolving credit agreement contains certain covenants
which, among other things, restrict the ability of the Company to incur
indebtedness, or encumber or dispose of assets, and prohibit the Company from
repurchasing its Common Stock or paying dividends. Additionally, the Company
must maintain a minimum adjusted net worth (as defined in the agreement) of
$34,000,000 and maintain a minimum working capital, exclusive of amounts
outstanding under the revolving credit facility, of $5,000,000. The Company was
in compliance with these covenants at August 2, 1997 and as of the date of this
document.
In May 1997, the Company entered into an agreement with a commercial bank to
provide a letter of credit facility of up to $3,000,000. The facility expires at
the earlier of June 1998 or termination of the Company's revolving credit
facility with its primary lender. Letters of credit issued under the agreement
are collateralized by inventories purchased using such letters of credit. The
agreement contains certain restrictive covenants which are substantially the
same as those within the Company's revolving credit facility discussed above.
In June 1997, the Company repaid the term loan portion of its primary credit
facility and entered into a twenty-year mortgage agreement with a commercial
bank. The agreement provides for a mortgage loan of $8,125,000, secured by the
Company's real property located at its corporate offices including land,
buildings, fixtures and improvements. Commencing August 1, 1997, the mortgage
loan is payable in 240 consecutive equal monthly installments (including
interest at the rate of 9.125% per annum). Certain fees may be payable by the
Company if the mortgage loan is repaid prior to June 2014. The mortgage
agreement contains certain nonfinancial covenants with which the Company was in
compliance at August 2, 1997.
Management believes that the Company's liquidity requirements in the foreseeable
future will be met principally through cash provided by operations and the use
of its credit facilities. If deemed by management to be in the best interest of
the Company, additional long term debt, capital leases or other permanent
financing may be considered.
Effect of New Accounting Pronouncements
The FASB issued SFAS 128, "Earnings Per Share," effective for periods ending
after December 15, 1997. The new standard requires a dual presentation of
"basic" and "diluted" EPS on the face of the income statement. If the Company
had applied the principles of SFAS 128 for the three-month and six-month periods
ended August 2, 1997, basic and diluted EPS would have been the same as reported
under APB Opinion No. 15, the current EPS accounting standard.
Private Securities Litigation Reform Act of 1995
All statements contained in this document as to future expectations, including
sales and financial results should be considered forward-looking statements
subject to the safe harbor created by the Private Securities Litigation Reform
Act of 1995. The Company cautions readers of this Quarterly Report on Form 10-Q
that a number of important factors could cause the Company's actual results in
1997 and beyond to differ materially from those expressed in such
forward-looking statements. These factors include, but are not limited to, the
general economic conditions and consumer demand; consumer preferences; weather
patterns; competitive factors, including pressure from pricing and promotional
activities of competitors; the impact of excess retail capacity and the
availability of desirable store locations on suitable terms; whether or not the
Company's merchandising strategy to offer alternative categories of merchandise
at alternative price points will increase sales and operating results or
increase and attract new customers; the availability, selection and purchasing
of attractive merchandise on favorable terms; import risks, including potential
disruptions and duties, tariffs and quotas on imported merchandise; and other
factors described in the Company's filings with the Securities and Exchange
Commission from time to time. The Company does not undertake to publicly update
or revise its forward-looking statements even if experience or future changes
make it clear that any projected results expressed or implied therein will not
be realized.
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
The summary of votes at the Annual Meeting of the Company's Shareholders held
June 4, 1997 are incorporated herein by reference to Item 4 in the Company's
quarterly report on Form 10-Q for the quarter ended May 3, 1997 (File No.
0-15385).
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are included herein:
10(a) Amendment Number One to the Loan and Security Agreement by and between Congress Financial Corporation
(Southern) as Lender and the Registrant and One Price Clothing of Puerto Rico, Inc., as Borrowers dated
May 16, 1997: Incorporated by reference to exhibit of same number in the Registrant's Quarterly Report
on Form 10-Q for the quarter ended May 3, 1997 (File No. 0-15385)("the April 1997 Form 10-Q").
10(b) Continuing Commercial Credit Agreement by and between Carolina First Bank as Lender
and the Registrant, One Price Clothing of Puerto Rico, Inc. and One Price Clothing - US Virgin Islands,
Inc. as Borrowers dated May 16, 1997: Incorporated by reference to exhibit of same number in the April
1997 Form 10-Q (File No. 0-15385).
10(c) Amendment No. 2 to the Loan and Security Agreement by and between Congress
Financial Corporation (Southern) as Lender and the Registrant and One Price Clothing of
Puerto Rico, Inc. as Borrowers dated June 17, 1997.
10(d) Mortgage and Security Agreement by and between First
Union National Bank, as Mortgagee and One Price
Realty, Inc., as Mortgagor dated June 17, 1997.
10(e) Promissory Note by and between First Union National Bank and One Price Realty, Inc.
dated June 17, 1997.
10(f) Lease Agreement by and between One Price Clothing
Stores, Inc., as Tenant and One Price Realty, Inc.,
as Landlord dated June 17, 1997.
11 Computation of Per Share Earnings
15 Acknowledgment of Deloitte & Touche LLP, Independent Accountants
27 Financial Data Schedule (electronic filing only)
(b) The Company was not required to file any report on Form 8-K
for the three-month period ended August 2, 1997.
</TABLE>
<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.
ONE PRICE CLOTHING STORES, INC. (Registrant)
<TABLE>
<S> <C> <C>
Date: September 10 , 1997 /s/ Larry I. Kelley
Larry I. Kelley
President and Chief Executive Officer
(principal executive officer)
Date: September 10, 1997 /s/ Stephen A. Feldman
Stephen A. Feldman
Executive Vice President &
Chief Financial Officer
(principal financial officer)
</TABLE>
<PAGE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARIES
EXHIBIT 10(c) - Amendment No. 2 to the Loan and Security Agreement by and
between Congress Financial Corporation (Southern) as Lender and
the Registrant and One Price Clothing of Puerto Rico,
Inc. as Borrowers dated June 17, 1997
<PAGE>
AMENDMENT NO. 2 TO FINANCING AGREEMENTS
June 17, 1997
One Price Clothing Stores, Inc.
1875 East Main Street
Duncan, South Carolina 29334
One Price Clothing of Puerto Rico, Inc.
1875 East Main Street
Duncan, South Carolina 29334
Gentlemen:
Congress Financial Corporation (Southern) ("Lender"), One Price
Clothing Stores, Inc. ("One Price") and One Price Clothing of Puerto Rico, Inc.
("One Price PR"; and together with One Price, individually referred to as a
"Borrower" and collectively as the "Borrowers") have entered into certain
financing arrangements pursuant to the Loan and Security Agreement, dated March
25, 1996, between the Lender and Borrowers (the "Loan Agreement"), as amended by
the Amendment No. 1 to Financing Agreements, dated May 16, 1997, together with
various other agreements, documents and instruments at any time executed and/or
delivered in connection therewith or related thereto (as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, collectively, the "Financing Agreements"). All capitalized terms used
herein and not herein defined shall have the meanings given to them in the
Financing Agreements.
Borrowers have requested that Lender (a) consent to the formation of
One Price Realty, Inc., a wholly-owned subsidiary of One Price ("One Price
Realty"), (b) consent to the transfer by One Price of certain real estate and
fixtures (including the Distribution Center) owned by One Price located in
Spartanburg County, South Carolina to One Price Realty (the "Duncan Real
Property"), (c) release its security interest and lien on the Duncan Real
Property, (d) permit the contingent indebtedness of One Price to First Union
National Bank ("First Union") pursuant to an indemnity and guaranty agreement by
One Price with respect to certain obligations of One Price Realty to First Union
and an environmental indemnity agreement in favor of First Union, and (e) to
amend the Loan Agreement in connection with the foregoing; and Lender is willing
to agree to such formation, transfer, release, indebtedness and amendments,
subject to the terms and conditions set forth herein.
<PAGE>
In consideration of the foregoing, the mutual agreements and covenants
contained herein and other good and valuable consideration, the parties hereto
agree as follows:
<TABLE>
<S> <C> <C> <C>
1. Additional Definitions. Effective as of the date hereof, the following terms shall have the
respective meanings given to them below and the Loan Agreement is hereby amended to include, in addition and not
in limitation, each of the following definitions:
(a) "Duncan Lease" shall mean the Lease, dated the date hereof
between One Price Realty, as Landlord, and One Price as Tenant, with respect to
the Duncan Real Property.
(b) "Duncan Real Property" shall have the meaning set forth in the introductory paragraphs
of this Amendment.
(c) "First Union" shall mean First Union National Bank, a
national banking association, and its successors and assigns.
(d) "First Union Financing" shall have the meaning set forth in Section 6 hereof.
(e) "One Price Guaranty" shall mean, collectively, the
Indemnity and Guaranty Agreement, dated the date hereof, by One Price with
respect to certain obligations of One Price Realty to First Union, and the
Environmental Indemnity Agreement, dated the date hereof, by One Price and One
Price Realty in favor of First Union, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced.
(f) "One Price Realty" shall mean One Price Realty, Inc., a
South Carolina corporation, and its successors and assigns.
2. Consent. Subject to the terms and conditions herein, Lender hereby
(a) confirms that is has no objection to (i) the formation of One Price Realty
as a wholly-owned subsidiary of One Price, (ii) the transfer by One Price to One
Price Realty of the Duncan Real Property and the leasing of the Duncan Real
Property by One Price Realty to One Price pursuant to the Duncan Lease, (iii)
the indemnity and guaranty by One Price with respect to certain obligations of
One Price Realty to First Union and the indemnity by One Price in favor of First
Union with respect to certain environmental liabilities related to the Duncan
Real Property, in each case pursuant to the One Price Guaranty; and (b) agrees
to release its security interests and liens in the Duncan Real Property.
3. Indebtedness. Section 9.9 of the Loan Agreement is hereby amended by adding a new Section
9.9(h) thereto as follows:
"(h) contingent indebtedness of One Price to First
Union arising under the One Price Guaranty in respect of or
relating to the obligations of One Price Realty to First
Union; provided, that: (i) the total principal amount of the
guaranteed indebtedness outstanding at any time thereunder
shall not exceed $8,125,000, (ii) One Price shall not,
directly or indirectly, without Lender's prior written
consent, amend, modify, alter or change the terms of such
guaranteed indebtedness or the One Price Guaranty as in effect
on the date hereof, (iii) One Price shall furnish to Lender
all notices or demands in connection with such guaranteed
indebtedness or the One Price Guaranty either received by One
Price or on its behalf, promptly after the receipt thereof, or
sent by One Price or on its behalf, concurrently with the
sending thereof, as the case may be, (iv) Lender shall
receive, in form and substance satisfactory to Lender, a
Mortgagee Agreement between Lender and First Union, duly
authorized, executed and delivered by First Union and (v)
Lender shall receive, in form and substance satisfactory to
Lender, a Landlord Agreement, duly authorized, executed and
delivered by One Price Realty."
4. Conditions Precedent. The effectiveness of the consent and Collateral release contained in
Section 2 hereof and the amendments to the Loan Agreement and the other Financing Agreements provided for herein
is conditioned upon the satisfaction of each of the following conditions precedent in a manner satisfactory to
Lender:
(a) Lender shall have received true, correct and complete
copies of the (i) One Price Guaranty, (ii) the documents related to the loan by
First Union to One Price Realty secured by the Duncan Real Property, (iii) the
deed and all other documents (if any) evidencing or relating to the transfer of
the Duncan Real Property from One Price to One Price Realty, and (iv) the Duncan
Lease, each duly authorized, executed and delivered by the parties thereto;
(b) Lender shall have received, in form and substance
satisfactory to Lender, a Mortgagee Agreement between First Union and Lender,
duly authorized, executed and delivered by First Union;
(c) Lender shall have received, in form and substance
satisfactory to Lender, a Landlord Agreement, duly authorized, executed and
delivered by One Price Realty;
(d) Lender shall have received, the amount of $7,368,421 in
immediately available funds representing repayment of the entire principal
amount outstanding under the Term Loan;
(e) No Event of Default, or act, condition or event which with
notice or passage of time or both would constitute an Event of Default shall
exist or have occurred; and
(f) Lender shall have received an original of this Amendment,
duly authorized, executed and delivered by Borrowers and One Price VI.
5. Release of Duncan Real Property.
Upon fulfillment of all of the conditions precedent set forth
in Section 4 of this Amendment, the Mortgage will be endorsed by Lender and
delivered to One Price (or as One Price shall direct) for cancellation, and
Lender will execute and deliver to One Price (or as One Price shall direct) a
UCC termination statement with respect to the UCC fixture filing filed with the
RMC Office for Spartanburg County, South Carolina at File No. 9600549; but
neither such endorsement and cancellation of the Mortgage nor the execution and
delivery of such UCC termination statement shall be deemed to satisfy or
extinguish any of the Obligations secured thereby (other than the principal
amount of the Term Loan repaid pursuant to the terms hereof), nor to release any
other Collateral for the Obligations (except for the Duncan Real Property
including the fixtures described in the UCC fixture filing so terminated by
Lender, but not any trade fixtures, equipment or other personal property covered
by any other UCC financing statement(s) filed by Lender against One Price).
6. Notices of Compliance with First Union Financing and Duncan Lease; Rights to Cure.
(a) On or before the third day of each month, One Price shall
provide to Lender evidence satisfactory to Lender that (i) One Price has paid
all rent and other amounts due under the Duncan Lease as of and through the
first day of such month and that One Price and One Price Realty are in all other
respects in compliance with the terms thereof, (ii) One Price Realty has paid
all principal, interest and other amounts due as of and through the first day of
such month in respect of the guaranteed indebtedness referred to in Section
9.9(h) of the Loan Agreement as amended hereby and otherwise under the financing
agreements relating thereto (collectively, the First Union Financing"), and
(iii) One Price Realty and One Price are in all other respects in compliance
with the terms of the First Union Financing.
(b) In addition to and not by way of limiting Lender's rights
under Section 7.6 of the Loan Agreement, Lender may cure for Borrowers' account
any default by One Price or One Price Realty under the Lease and/or any default
by One Price Realty or One Price under the First Union Financing. Lender may add
any amounts so expended to the Obligations and charge Borrowers' account(s)
therefor, such amounts to be repayable by Borrowers on demand. Lender shall be
under no obligation to effect such cure, and shall not, by doing so, be deemed
to have assumed any obligation or liability of One Price or One Price Realty.
Any payment made or other action taken by Lender under this Section shall be
without prejudice to any right to assert an Event of Default under the Loan
Agreement and to proceed accordingly.
7. Miscellaneous.
(a) Entire Agreement; Ratification and Confirmation of the
Financing Agreements. This Amendment contains the entire agreement of the
parties with respect to the subject matter hereof and supersedes all prior or
contemporaneous term sheets, proposals, discussions, negotiations,
correspondence, commitments and communications between or among the parties
concerning the subject matter hereof. This Amendment may not be modified or any
provision waived, except in writing signed by the party against whom such
modification or waiver is sought to be enforced. Except as specifically modified
pursuant hereto, the Financing Agreements are hereby ratified, restated and
confirmed by the parties hereto as of the effective date hereof. To the extent
of conflict between the terms of this Amendment and the Financing Agreements,
the terms of this Amendment shall control.
(b) Governing Law. This Amendment and the rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance with the internal laws of the
State of Georgia, without regard to principles of conflicts of law.
(c) Binding Effect. This Amendment shall be binding upon and inure to the benefit of each
of the parties hereto and their respective successors and assigns.
(d) Counterparts. This Amendment may be executed in any number of counterparts, but all
of such counterparts shall together constitute but one and the same agreement. In making proof of this Amendment
it shall not be necessary to produce or account for more than one counterpart thereof signed by each of the
parties hereto.
</TABLE>
<PAGE>
By the signature hereto of each of their duly authorized officers, all
of the parties hereto mutually covenant and agree
as set forth herein.
<TABLE>
<S> <C> <C>
Very truly yours,
CONGRESS FINANCIAL CORPORATION
(SOUTHERN)
By: /s/ Morris P. Holloway
Title: First Vice President
AGREED AND ACCEPTED:
ONE PRICE CLOTHING STORES, INC.
By: /s/ C. Burt Duren
Title: Treasurer
ONE PRICE CLOTHING OF PUERTO RICO, INC.
By: /s/C. Burt Duren
Title: Treasurer
CONSENTED TO AND AGREED:
ONE PRICE CLOTHING - U.S. VIRGIN ISLANDS, INC.
By: /s/ C. Burt Duren
Title: Treasurer
</TABLE>
<PAGE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARIES
EXHIBIT 10(d) - Mortgage and Security Agreement by and between
First Union National bank, as Mortgagee and One Price
Realty, Inc., as Mortgagor dated June 17, 1997
<PAGE>
Loan Number 19-5113985
- -----------------------------------------------------------------------------
ONE PRICE REALTY, INC.,
as Mortgagor
to
FIRST UNION NATIONAL BANK,
as Mortgagee
---------------------------
MORTGAGE AND SECURITY AGREEMENT
---------------------------
Date: June 17, 1997
PREPARED BY AND UPON RECORDATION RETURN TO:
Graham & James LLP
885 Third Avenue
24th Floor
New York, New York 10022
Attention: Abby Wenzel, Esq.
- --------------------------------------------------------------------------------
<PAGE>
-1-
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE AND SECURITY AGREEMENT (this "Mortgage") is made
as of June 17, 1997 by ONE PRICE REALTY, INC., a South Carolina, corporation, as
Mortgagor ("Mortgagor"), whose address is HWY. 290 - Commerce Park, 1875 East
Main Street, Suite B, P.O. Box 147, Duncan, South Carolina 29334, to FIRST UNION
NATIONAL BANK, a national banking association, as Mortgagee ("Mortgagee"), whose
address is One First Union Center DC-6, Charlotte, North Carolina 28288-0166.
W I T N E S S E T H:
THAT FOR AND IN CONSIDERATION OF THE SUM OF TEN AND NO/100 DOLLARS ($10), AND
OTHER VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY
ACKNOWLEDGED, MORTGAGOR HEREBY IRREVOCABLY MORTGAGES, GRANTS, BARGAINS, SELLS,
CONVEYS, TRANSFERS, PLEDGES, SETS OVER AND ASSIGNS, WITH POWER OF SALE, all of
Mortgagor's estate, right, title and interest in, to and under any and all of
the following described property, whether now owned or hereafter acquired by
Mortgagor (collectively, the "Mortgaged Property"):
A. All that certain real property situated in the County of
Spartanburg, State of South Carolina, more particularly described on Exhibit A
attached hereto and incorporated herein by this reference (the "Premises"),
together with all of the easements, rights, privileges, franchises, tenements,
hereditaments and appurtenances now or hereafter thereunto belonging or in any
way appertaining thereto, and all of the estate, right, title, interest, claim
and demand whatsoever of Mortgagor therein or thereto, either at law or in
equity, in possession or in expectancy, now or hereafter acquired;
B. All structures, buildings and improvements of every
kind and description now or at any time hereafter located or placed on the
Premises (the "Improvements");
C. All fixtures (other than trade fixtures) owned by Mortgagor
now or hereafter located on, attached to or used in and about the Improvements,
and all of t he following equipment owned by Mortgagor: all boilers, dynamos,
elevators, stokers, tanks, cabinets, awnings, screens, shades, blinds, wall and
floor coverings, draperies, and all plumbing, heating, air conditioning,
lighting, ventilating, electrical, refrigerating, disposal and incinerating
equipment, and all fixtures and appurtenances thereto, as are now or hereafter
used or furnished in operating the Improvements, and all warranties and
guaranties relating thereto, and all additions thereto and substitutions and
replacements therefor (exclusive of any of the foregoing owned or leased by
tenants of space in the Improvements);
<PAGE>
-2-
D. All easements, rights-of-way, strips and gores of land,
vaults, streets, ways, alleys, passages, sewer rights, and other emblements now
or hereafter located on the Premises or under or above the same or any part or
parcel thereof, and all estates, rights, titles, interests, tenements,
hereditaments and appurtenances, reversions and remainders whatsoever, in any
way belonging, relating or appertaining to the Mortgaged Property or any part
thereof, or which hereafter shall in any way belong, relate or be appurtenant
thereto, whether now owned or hereafter acquired by Mortgagor;
E. All water, ditches, wells, reservoirs and drains and all
water, ditch, well, reservoir and drainage rights which are appurtenant to,
located on, under or above or used in connection with the Premises or the
Improvements, or any part thereof, whether now existing or hereafter created or
acquired;
F. All minerals, crops, timber, trees, shrubs,
flowers and landscaping features now or hereafter located on, under or above
the Premises;
G. All cash funds, deposit accounts and other rights and
evidence of rights to cash, now or hereafter created or held by Mortgagee
pursuant to this Mortgage or any other of the Loan Documents (as hereinafter
defined), including, without limitation, all funds now or hereafter on deposit
in the Impound Account, the Payment Reserve, the Replacement Reserve and the
Repair and Remediation Reserve (each as hereinafter defined);
H. That certain lease between Mortgagor, as landlord, and One
Price Clothing Stores, Inc., a Delaware corporation, as tenant ("Tenant"), dated
as the even date herewith (as the same may be amended, modified or supplemented
from time to time, the "Lease") and all other leases (including, without
limitation, oil, gas and mineral leases), licenses, concessions and occupancy
agreements of all or any part of the Premises or the Improvements, whether
written or oral, now or hereafter entered into (the "Other Leases") and all
rents, royalties, issues, profits, bonus money, revenue, income, rights and
other benefits (collectively, the "Rents and Profits") of the Premises or the
Improvements, now or hereafter arising from the use or enjoyment of all or any
portion thereof or from any present or future Lease, Other Leases or other
agreement pertaining thereto or arising from the Lease or any of the Other
Leases or any of the General Intangibles (as hereinafter defined) and all cash
or securities deposited to secure performance by the tenants, lessees or
licensees, as applicable, of their obligations under any such Leases, whether
said cash or securities are to be held until the expiration of the terms of said
Other Leases or applied to one or more of the installments of rent coming due
prior to the expiration of said terms, subject, however, to the provisions
contained in Section 1.11 hereinbelow;
I. All contracts and agreements now or hereafter entered into
covering any part of the Premises or the Improvements (collectively, the
"Contracts") and all revenue, income and other benefits thereof, including,
without limitation, management agreements, service contracts, maintenance
contracts, equipment leases, personal property leases and any contracts or
documents relating to construction on any part of the Premises or the
Improvements (including plans, drawings, surveys, tests, reports, bonds and
governmental approvals) or to the management or operation of any part of the
Premises or the Improvements;
J. All present and future monetary deposits given to
any public or private utility with respect to utility services furnished to any
part of the Premises or the Improvements;
K. All of Mortgagor's estate, right, title and interest in
present and future funds, accounts, instruments, accounts receivable, documents,
causes of action, claims, general intangibles (including, without limitation,
trademarks, trade names, service marks and symbols now or hereafter used in
connection with any part of the Premises or the Improvements, all names by which
the Premises or the Improvements may be operated or known, all rights to carry
on business under such names, and all rights, interest and privileges which
Mortgagor has or may have as developer or declarant under any covenants,
restrictions or declarations now or hereafter relating to the Premises or the
Improvements) and all notes or chattel paper now or hereafter arising from or by
virtue of any transactions related to the Premises or the Improvements
(collectively, the "General Intangibles");
L. All water taps, sewer taps, certificates of occupancy,
permits, licenses, franchises, certificates, consents, approvals and other
rights and privileges now or hereafter obtained in connection with the Premises
or the Improvements and all present and future warranties and guaranties
relating to the Improvements or to any property of Mortgagor referred to in
clause (C) above now or hereafter located or installed on the Premises or the
Improvements;
M. All building materials, building supplies and building
equipment now or hereafter placed on the Premises or in the Improvements
and all architectural renderings, models, drawings, plans, specifications,
studies and data now or hereafter relating to the Premises or the Improvements;
N. All right, title and interest of Mortgagor in any insurance
policies or binders now or hereafter relating to the Mortgaged Property,
including any unearned premiums thereon;
O. All proceeds, products, substitutions and accessions
(including claims and demands therefor) of the conversion, voluntary or
involuntary, of any of the foregoing into cash or liquidated claims,
including, without limitation, proceeds of insurance and condemnation awards;
P. All of Mortgagor's claims and rights to damages and any
other remedies in connection with or arising from the rejection of the Lease by
Tenant or any trustee, custodian or receiver pursuant to the provisions of the
U.S. Bankruptcy Code in the event that there shall be filed by or against the
Tenant any petition, action or proceeding under the U.S. Bankruptcy Code or
under any other similar federal or state law now or hereafter in effect; and
Q. All other or greater rights and interests of every
nature in the Premises or the Improvements and in the possession or use thereof
and income therefrom, whether now owned or hereafter acquired
by Mortgagor.
FOR THE PURPOSE OF SECURING:
1. The debt evidenced by that certain Promissory Note (such
Promissory Note, together with any and all renewals, amendments, modifications,
consolidations and extensions thereof, is hereinafter referred to as the "Note")
of even date with this Mortgage, made by Mortgagor payable to the order of
Mortgagee in the principal face amount of EIGHT MILLION ONE HUNDRED TWENTY-FIVE
THOUSAND AND NO/100 DOLLARS ($8,125,000.00), together with interest as therein
provided;
2. The full and prompt payment and performance of all of the
provisions, agreements, covenants and obligations herein contained and contained
in any other agreements, documents or instruments now or hereafter evidencing,
securing or otherwise relating to the Debt (as hereinafter defined) including,
but not limited to, the Environmental Indemnity Agreement (as hereinafter
defined)(the Note, this Mortgage, and such other agreements, documents and
instruments, together with any and all renewals, amendments, extensions and
modifications thereof, are hereinafter collectively referred to as the "Loan
Documents") and the payment of all other sums herein or therein covenanted to be
paid;
3. Any and all additional advances made by Mortgagee to
protect or preserve the Mortgaged Property or the lien or security interest
created hereby on the Mortgaged Property, or for taxes, assessments or insurance
premiums as hereinafter provided or for performance of any of Mortgagor's
obligations hereunder or under the other Loan Documents or for any other purpose
provided herein or in the other Loan Documents (whether or not the original
Mortgagor remains the owner of the Mortgaged Property at the time of such
advances); and
4. Any and all other indebtedness now owing or which may
hereafter be owing by Mortgagor to Mortgagee, including, without limitation, all
prepayment fees, however and whenever incurred or evidenced, whether express or
implied, direct or indirect, absolute or contingent, or due or to become due,
and all renewals, modifications, consolidations, replacements and extensions
thereof, it being contemplated by Mortgagor and Mortgagee that Mortgagor may
hereafter become so indebted to Mortgagee.
(All of the sums referred to in Paragraphs (1) through (4) above are herein
referred to as the "Debt").
TO HAVE AND TO HOLD the Mortgaged Property unto Mortgagee, its
successors and assigns forever, and Mortgagor does hereby bind itself, its
successors and assigns, to WARRANT AND FOREVER DEFEND the title to the Mortgaged
Property, subject to the Permitted Encumbrances (as hereinafter defined), to
Mortgagee against every person whomsoever lawfully claiming or to claim the same
or any part thereof;
PROVIDED, HOWEVER, that if the principal and interest and all
other sums due or to become due under the Note or under the other Loan
Documents, including, without limitation, any prepayment fees required pursuant
to the terms of the Note, shall have been paid at the time and in the manner
stipulated therein and the Debt shall have been paid and all other covenants
contained in the Loan Documents shall have been performed, then, in such case,
the liens, security interests, estates and rights granted by this Mortgage shall
be satisfied and the estate, right, title and interest of Mortgagee in the
Mortgaged Property shall cease, and upon payment to Mortgagee of all costs and
expenses incurred for the preparation of the release hereinafter referenced and
all recording costs if allowed by law, Mortgagee shall promptly satisfy and
release this Mortgage of record and the lien hereof by proper instrument.
ARTICLE I
REPRESENTATIONS, WARRANTIES AND COVENANTS OF Mortgagor
For the purpose of further securing the Debt and for the
protection of the security of this Mortgage, for so long as the Debt or any part
thereof remains unpaid, Mortgagor covenants and agrees as follows:
1.1 Representations, Warranties and Covenants of Mortgagor. Mortgagor, for
itself and its successors and assigns, does hereby represent, warrant and
covenant to and with Mortgagee, its successors and assigns, that:
(a) Mortgagor has good, marketable and
indefeasible fee simple title to the Mortgaged Property, subject only to those
matters expressly set forth as exceptions to or subordinate matters in the title
insurance policy insuring the lien of this Mortgage delivered as of the date
hereof which Mortgagee has agreed to accept, excepting therefrom all preprinted
and/or standard exceptions (such items being the "Permitted Encumbrances"), and
has full power and lawful authority to grant, bargain, sell, convey, assign,
transfer, encumber and mortgage its interest in the Mortgaged Property in the
manner and form hereby done or intended. Mortgagor will preserve its interest in
and title to the Mortgaged Property and will forever warrant and defend the same
to Mortgagee against any and all claims whatsoever and will forever warrant and
defend the validity and priority of the lien and security interest created
herein against the claims of all persons and parties whomsoever, subject to the
Permitted Encumbrances. The foregoing warranty of title shall survive the
foreclosure of this Mortgage and shall inure to the benefit of and be
enforceable by Mortgagee in the event Mortgagee acquires title to the Mortgaged
Property pursuant to any foreclosure;
(b) No bankruptcy or insolvency proceedings
are pending or contemplated by Mortgagor or, to the best knowledge of Mortgagor,
against Mortgagor or by or against any endorser or cosigner of the Note or of
any portion of the Debt, or any guarantor or indemnitor under any guaranty or
indemnity agreement executed in connection with the Note or the loan evidenced
thereby and secured hereby (an "Indemnitor");
(c) All reports, certificates, affidavits,
statements and other data furnished by or on behalf of Mortgagor to Mortgagee in
connection with the loan evidenced by the Note are true and correct in all
material respects and do not omit to state any fact or circumstance necessary to
make the statements contained therein not misleading;
(d) The execution, delivery and performance of
this Mortgage, the Note and all of the other Loan Documents have been duly
authorized by all necessary action to be, and are, binding and enforceable
against Mortgagor in accordance with the respective terms thereof and do not
contravene, result in a breach of or constitute a default (nor upon the giving
of notice or the passage of time or both will same constitute a default) under
the partnership agreement, articles of incorporation, operating agreement or
other organizational documents of Mortgagor or any contract or agreement of any
nature to which Mortgagor is a party or by which Mortgagor or any of its
property may be bound and do not violate or contravene any law, order, decree,
rule or regulation to which Mortgagor is subject;
(e) The Premises and the Improvements and
the current intended use thereof by Mortgagor comply in all material respects
with all applicable restrictive covenants, zoning ordinances, subdivision and
building codes, flood disaster laws, health and environmental laws and
regulations and all other ordinances, orders or requirements issued by any
state, federal or municipal authorities having or claiming jurisdiction over the
Mortgaged Property. The Premises and Improvements constitute one or more
separate tax parcels for purposes of ad valorem taxation. The Premises and
Improvements do not require any rights over, or restrictions against, other
property in order to comply with any of the aforesaid governmental ordinances,
orders or requirements;
(f) All utility services necessary and
sufficient for the full use, occupancy, operation and disposition of the
Premises and the Improvements for their intended purposes are available to the
Mortgaged Property, including water, storm sewer, sanitary sewer, gas, electric,
cable and telephone facilities, through public rights-of-way or perpetual
private easements approved by Mortgagee;
(g) All streets, roads, highways, bridges and
waterways necessary for access to and full use, occupancy, operation and
disposition of the Premises and the Improvements have been completed, have been
dedicated to and accepted by the appropriate municipal authority and are open
and available to the Premises and the Improvements without further condition or
cost to Mortgagor;
(h) All curb cuts, driveways and traffic signals
shown on the survey delivered to Mortgagee prior to the execution and delivery
of this Mortgage are existing and have been fully approved by the appropriate
governmental authority;
(i) There are no judicial, administrative,
mediation or arbitration actions, suits or proceedings pending or threatened
against or affecting Mortgagor or the Mortgaged Property which, if adversely
determined, would materially impair either the Mortgaged Property or Mortgagor's
ability to perform the covenants or obligations required to be performed under
the Loan Documents;
(j) The Mortgaged Property is free from
delinquent water charges, sewer rents, taxes and assessments;
(k) As of the date of this Mortgage, the
Mortgaged Property is free from unrepaired damage caused by fire, flood,
accident or other casualty;
(l) As of the date of this Mortgage, no part
of the Premises or the Improvements has been taken in condemnation, eminent
domain or like proceeding nor is any such proceeding pending or, to Mortgagor's
knowledge and belief, threatened or contemplated;
(m) Mortgagor possesses all franchises, patents,
copyrights, trademarks, trade names, licenses and permits necessary for the
conduct of its business substantially as now conducted;
(n) Except as may otherwise be disclosed in the
Engineering Report (as hereinafter defined), the Improvements are
structurally sound, in good repair and free of defects in materials and
workmanship and have been constructed and installed in substantial compliance
with the plans and specifications relating thereto. All major building systems
located within the Improvements, including, without limitation, the heating and
air conditioning systems and the electrical and plumbing systems, are in good
working order and condition;
(o) Mortgagor has delivered to Mortgagee true,
correct and complete copies of all Contracts and all amendments thereto
or modifications thereof;
(p) Each Contract constitutes the legal, valid
and binding obligation of Mortgagor and, to the best of Mortgagor's
knowledge and belief, is enforceable against any other party thereto. No default
exists, or with the passing of time or the giving of notice or both would exist,
under any Contract which would, in the aggregate, have a material adverse effect
on Mortgagor or the Mortgaged Property;
(q) No Contract provides any party with the
right to obtain a lien or encumbrance upon the Mortgaged Property superior to
the lien of this Mortgage;
(r) Mortgagor and the Mortgaged Property are
free from any past due obligations for sales and payroll taxes;
(s) There are no security agreements or
financing statements affecting all or any portion of the Mortgaged Property
other than (i) as disclosed in writing by Mortgagor to Mortgagee prior to the
date hereof and (ii) the security agreements and financing statements created in
favor of Mortgagee;
(t) Intentionally Omitted;
(u) The Lease and each Other Lease constitutes
the legal, valid and binding obligation of Mortgagor and, to the best of
Mortgagor's knowledge and belief, is enforceable against the tenant (including,
without limitation, Tenant) thereof. No default exists, or with the passing of
time or the giving of notice or both would exist, under the Lease or any Other
Lease which would, in the aggregate, have a material adverse effect on Mortgagor
or the Mortgaged Property;
(v) Neither the Tenant under the Lease nor the
tenant under any Other Lease has, as of the date hereof, paid rent more than
thirty (30) days in advance, and the rents under the Lease and such Other Leases
have not been waived, released, or otherwise discharged or compromised;
(w) All work to be performed by Mortgagor under
the Lease and any and all Other Leases has been substantially performed,
all contributions to be made by Mortgagor to the tenants (including, without
limitation, Tenant) thereunder have been made and all other conditions precedent
to each such tenant's (including, without limitation, Tenant) obligations
thereunder have been satisfied;
(x) Tenant and each tenant under any Other Lease
has entered into occupancy of the demised premises;
(y) Mortgagor has delivered to Mortgagee true, a
correct and complete copy of the Lease;
(z) To the best of Mortgagor's knowledge and
belief, Tenant and each tenant under any Other Lease, if any, is free from
bankruptcy, reorganization or arrangement proceedings or a general assignment
for the benefit of creditors;
(aa) Neither the Lease nor any Other Lease
provides any party with the right to obtain a lien or encumbrance upon the
Mortgaged Property superior to the lien of this Mortgage; and
(ab) Mortgagor is not a "foreign person" within
the meaning of '1445(f)(3) of the Internal Revenue Code of 1986, as amended, and
the related Treasury Department regulations, including temporary regulations.
1.2 Defense of Title. If, while this Mortgage is in force, the
title to the Mortgaged Property or the interest of Mortgagee therein shall be
the subject, directly or indirectly, of any action at law or in equity, or be
attached directly or indirectly, or endangered, clouded or adversely affected in
any manner, Mortgagor, at Mortgagor's expense, shall take all necessary and
proper steps for the defense of said title or interest, including the employment
of counsel approved by Mortgagee, the prosecution or defense of litigation, and
the compromise or discharge of claims made against said title or interest.
Notwithstanding the foregoing, in the event that Mortgagee determines that
Mortgagor is not adequately performing its obligations under this Section,
Mortgagee may, without limiting or waiving any other rights or remedies of
Mortgagee hereunder, take such steps with respect thereto as Mortgagee shall
deem necessary or proper and any and all costs and expenses incurred by
Mortgagee in connection therewith, together with interest thereon at the Default
Interest Rate (as defined in the Note) from the date incurred by Mortgagee until
actually paid by Mortgagor, shall be immediately paid by Mortgagor on demand and
shall be secured by this Mortgage and by all of the other Loan Documents
securing all or any part of the indebtedness evidenced by the Note.
1.3 Performance of Obligations. Mortgagor shall pay when due
the principal of and the interest on the Debt in accordance with the terms of
the Note. Mortgagor shall also pay all charges, fees and other sums required to
be paid by Mortgagor as provided in the Loan Documents, in accordance with the
terms of the Loan Documents, and shall observe, perform and discharge all
obligations, covenants and agreements to be observed, performed or discharged by
Mortgagor set forth in the Loan Documents in accordance with their terms.
Further, Mortgagor shall promptly and strictly perform and comply with all
covenants, conditions, obligations and prohibitions required of Mortgagor in
connection with any other document or instrument affecting title to the
Mortgaged Property, or any part thereof, regardless of whether such document or
instrument is superior or subordinate to this Mortgage.
1.4 Insurance. Mortgagor shall, at Mortgagor's expense,
maintain or cause to be maintained in force and effect on the Mortgaged Property
at all times while this Mortgage continues in effect the following
insurance:
(a) Insurance against loss or damage to the
Mortgaged Property by fire, windstorm, tornado and hail and against loss
and damage by such other, further and additional risks as may be now or
hereafter embraced by an "all-risk" or "special form" type of insurance policy.
The amount of such insurance shall be not less than one hundred percent (100%)
of the full replacement cost (insurable value) of the Improvements (as
established by an MAI appraisal), without reduction for depreciation. The
determination of the replacement cost amount shall be adjusted annually to
comply with the requirements of the insurer issuing such coverage or, at
Mortgagee's election, by reference to such indices, appraisals or information as
Mortgagee determines in its reasonable discretion in order to reflect increased
value due to inflation. Absent such annual adjustment, each policy shall contain
inflation guard coverage insuring that the policy limit will be increased over
time to reflect the effect of inflation. Full replacement cost, as used herein,
means, with respect to the Improvements, the cost of replacing the Improvements
without regard to deduction for depreciation, exclusive of the cost of
excavations, foundations and footings below the lowest basement floor. Mortgagor
shall also maintain insurance against loss or damage to furniture, furnishings,
fixtures, equipment and other items (whether personalty or fixtures) included in
the Mortgaged Property and owned by Mortgagor from time to time to the extent
applicable. Each policy shall contain a replacement cost endorsement and either
an agreed amount endorsement (to avoid the operation of any co-insurance
provisions) or a waiver of any co-insurance provisions, all subject to
Mortgagee's approval. The maximum deductible shall be $50,000.00.
(b) Commercial General Liability Insurance
against claims for personal injury, bodily injury, death and property damage
occurring on, in or about the Premises or the Improvements in amounts not less
than $1,000,000.00 per occurrence and $2,000,000.00 in the aggregate plus
umbrella coverage in an amount not less than $2,000,000. Mortgagee hereby
retains the right to periodically review the amount of said liability insurance
being maintained by Mortgagor and to require an increase in the amount of said
liability insurance should Mortgagee deem an increase to be reasonably prudent
under then existing circumstances.
(c) Boiler and machinery insurance is required
if steam boilers or other pressure-fired vessels are in operation at the
Premises. Minimum liability coverage per accident must equal the greater of the
replacement cost (insurable value) of the Improvements housing such boiler or
pressure-fired machinery or $2,000,000.00. If one or more large HVAC units is in
operation at the Premises, "Systems Breakdowns" coverage shall be required, as
determined by Mortgagee. Minimum liability coverage per accident must equal the
value of such unit(s).
(d) If the Improvements or any part thereof is
situated in an area designated by the Federal Emergency Management Agency
("FEMA") as a special flood hazard area (Zone A or Zone V), flood insurance in
an amount equal to the lesser of: (a) the minimum amount required, under the
terms of coverage, to compensate for any damage or loss on a replacement basis
(or the unpaid balance of the Debt if replacement cost coverage is not available
for the type of building insured), or (b) the maximum insurance available under
the appropriate National Flood Insurance Administration program. The maximum
deductible shall be $3,000.00 per building or a higher minimum amount as
required by FEMA or other applicable law.
(e) During the period of any construction,
renovation or alteration of the existing Improvements which exceeds the
lesser of 10% of the principal amount of the Note or $500,000, at Mortgagee's
request, a completed value, "All Risk" Builder's Risk form or "Course of
Construction" insurance policy in non-reporting form, in an amount approved by
Mortgagee, may be required. During the period of any construction of any
addition to the existing Improvements, a completed value, "All Risk" Builder's
Risk form or "Course of Construction" insurance policy in non-reporting form, in
an amount approved by Mortgagee, shall be required.
(f) When required by applicable law, ordinance
or other regulation, Worker's Compensation and Employer's Liability Insurance
covering all persons subject to the worker's compensation laws of the state in
which the Mortgaged Property is located.
(g) Business income (loss of rents) insurance
in amounts sufficient to compensate Mortgagor for all Rents or income during a
period of not less than twelve (12) months. The amount of coverage shall be
adjusted annually to reflect the Rents or income payable during the succeeding
twelve (12) month period.
(h) Such other insurance on the Mortgaged
Property or on any replacements or substitutions thereof or additions
thereto as may from time to time be required by Mortgagee against other
insurable hazards or casualties which at the time are commonly insured against
in the case of property similarly situated including, without limitation,
Sinkhole, Mine Subsidence, Earthquake and Environmental insurance, due regard
being given to the height and type of buildings, their construction, location,
use and occupancy.
All such insurance shall (i) be with insurers fully licensed
and authorized to do business in the state within which the Premises is located
and who have and maintain a rating of at least (A) A from Standard & Poors, or
equivalent or (B) A-V or higher from A.M. Best, (ii) contain the complete
address of the Premises (or a complete legal description), (iii) be for terms of
at least one year, and (iv) be subject to the approval of Mortgagee as to
insurance companies, amounts, content, forms of policies, method by which
premiums are paid and expiration dates, and (vi) include a standard,
non-contributory, mortgagee clause naming EXACTLY:
First Union National Bank,
its Successors and Assigns ATIMA
Attn.: Commercial Mortgage Servicing
P.O. Box 20068
Charlotte, NC 28202
(a) as an additional insured under all liability insurance policies, (b) as the
first mortgagee on all property insurance policies and (c) as the loss payee on
all loss of rents or loss of business income insurance policies.
Mortgagor shall, as of the date hereof, deliver to Mortgagee evidence
that said insurance policies have been paid current as of the date hereof and
certified copies of such insurance policies and original certificates of
insurance signed by an authorized agent of the applicable insurance companies
evidencing such insurance satisfactory to Mortgagee. Mortgagor shall renew or
cause to be renewed all such insurance and deliver to Mortgagee certificates and
policies evidencing such renewals at least thirty (30) days before any such
insurance shall expire. Mortgagor further agrees that each such insurance
policy: (i) shall provide for at least thirty (30) days' prior written notice to
Mortgagee prior to any policy reduction or cancellation for any reason other
than non-payment of premium and at least ten (10) days' prior written notice to
Mortgagee prior to any cancellation due to non-payment of premium; (ii) shall
contain an endorsement or agreement by the insurer that any loss shall be
payable to Mortgagee in accordance with the terms of such policy notwithstanding
any act or negligence of Mortgagor which might otherwise result in forfeiture of
such insurance; (iii) shall waive all rights of subrogation against Mortgagee;
(iv) in the event that the Premises or the Improvements constitutes a legal
non-conforming use under applicable building, zoning or land use laws or
ordinances, shall include an ordinance or law coverage endorsement which will
contain Coverage A: "Loss Due to Operation of Law" (with a minimum liability
limit equal to Replacement Cost With Agreed Value Endorsement), Coverage B:
"Demolition Cost" and Coverage C: "Increased Cost of Construction" coverages;
and (v) may be in the form of a blanket policy provided that, in the event that
any such coverage is provided in the form of a blanket policy, Mortgagor hereby
acknowledges and agrees that failure to pay any portion of the premium therefor
which is not allocable to the Mortgaged Property or by any other action not
relating to the Mortgaged Property which would otherwise permit the issuer
thereof to cancel the coverage thereof, would require the Mortgaged Property to
be insured by a separate, single-property policy. The blanket policy must
properly identify and fully protect the Mortgaged Property as if a separate
policy were issued for 100% of Replacement Cost at the time of loss and
otherwise meet all of Mortgagee's applicable insurance requirements set forth in
this Section 1.4. The delivery to Mortgagee of the insurance policies or the
certificates of insurance as provided above shall constitute an assignment of
all proceeds payable under such insurance policies relating to the Mortgaged
Property by Mortgagor to Mortgagee as further security for the Debt. In the
event of foreclosure of this Mortgage, or other transfer of title to the
Mortgaged Property in extinguishment in whole or in part of the Debt, all right,
title and interest of Mortgagor in and to all proceeds payable under such
policies then in force concerning the Mortgaged Property shall thereupon vest in
the purchaser at such foreclosure, or in Mortgagee or other transferee in the
event of such other transfer of title. Approval of any insurance by Mortgagee
shall not be a representation of the solvency of any insurer or the sufficiency
of any amount of insurance. In the event Mortgagor fails to provide, maintain,
keep in force or deliver and furnish (or cause to be provided, maintained, kept
in force or delivered and furnished) to Mortgagee the policies of insurance
required by this Mortgage or evidence of their renewal as required herein,
Mortgagee may, but shall not be obligated to, procure such insurance and
Mortgagor shall pay all amounts advanced by Mortgagee therefor, together with
interest thereon at the Default Interest Rate from and after the date advanced
by Mortgagee until actually repaid by Mortgagor, promptly upon demand by
Mortgagee. Any amounts so advanced by Mortgagee, together with interest thereon,
shall be secured by this Mortgage and by all of the other Loan Documents
securing all or any part of the Debt. Mortgagee shall not be responsible for nor
incur any liability for the insolvency of the insurer or other failure of the
insurer to perform, even though Mortgagee has caused the insurance to be placed
with the insurer after failure of Mortgagor to furnish such insurance. Mortgagor
shall not obtain insurance for the Mortgaged Property in addition to that
required by Mortgagee without the prior written consent of Mortgagee, which
consent will not be unreasonably withheld provided that (i) Mortgagee is a named
insured on such insurance, (ii) Mortgagee receives complete copies of all
policies evidencing such insurance, and (iii) such insurance complies with all
of the applicable requirements set forth herein.
1.5 Payment of Taxes and Insurance. Mortgagor shall pay or
cause to be paid, except to the extent provision is actually made therefor
pursuant to Section 1.6 of this Mortgage, all taxes, assessments and insurance
premiums which are or may become a lien on the Mortgaged Property or which are
assessed against or imposed upon the Mortgaged Property. As of the date hereof,
Mortgagor has paid to its insurer(s) an amount equal to one (1) monthly premium
payment for all insurance required pursuant to Section 1.4 hereof. Mortgagor
shall furnish Mortgagee with bills, invoices and/or statements for all taxes,
assessments and insurance premiums and receipts (or if receipts are not
immediately available, with copies of canceled checks evidencing payment with
receipts to follow promptly after they become available) showing payment of such
taxes, assessments and insurance premiums at least ten (10) days prior to the
applicable delinquency date (or due date with respect to insurance premiums)
therefor. Notwithstanding the foregoing, Mortgagor may, in good faith, by
appropriate proceedings and upon notice to Mortgagee, contest the validity,
applicability or amount of any asserted tax or assessment so long as (a) such
contest is diligently pursued, (b) Mortgagee determines, in its subjective
opinion, that such contest suspends the obligation to pay the tax and that
nonpayment of such tax or assessment will not result in the sale, loss,
forfeiture or diminution of the Mortgaged Property or any part thereof or any
interest of Mortgagee therein, and (c) prior to the earlier of the commencement
of such contest or the delinquency date of the asserted tax or assessment,
Mortgagor deposits in the Impound Account (as hereinafter defined) an amount
determined by Mortgagee to be adequate to cover the payment of such tax or
assessment and a reasonable additional sum to cover possible interest, costs and
penalties; provided, however, that Mortgagor shall promptly cause to be paid any
amount adjudged by a court of competent jurisdiction to be due, with all
interest, costs and penalties thereon, promptly after such judgment becomes
final; and provided, further, that, in any event each such contest shall be
concluded and the taxes, assessments, interest, costs and penalties shall be
paid prior to the date any writ or order is issued under which the Mortgaged
Property may be sold, lost or forfeited.
1.6 Tax and Insurance Impound Account. If Mortgagor shall fail
to pay any tax, assessment or insurance premium pursuant to Section 1.4 or
Section 1.5 hereof, or to provide Mortgagee with any bill, invoice, statement,
receipt or other documentation required by Section 1.4 or Section 1.5, within
five (5) days after notice from Mortgagee (the "Initial Impound Costs Date"),
then Mortgagor shall thereafter establish and maintain at all times while this
Mortgage continues in effect an impound account (the "Impound Account") with
Mortgagee for payment of real estate taxes and assessments and insurance
premiums on the Mortgaged Property and as additional security for the Debt. On
the Initial Impound Costs Date, Mortgagor shall deposit in the Impound Account
an amount determined by Mortgagee to be necessary to ensure that there will be
on deposit with Mortgagee an amount which, when added to the monthly payments
subsequently required to be deposited with Mortgagee hereunder on account of
real estate taxes, assessments and insurance premiums, will result in there
being on deposit with Mortgagee in the Impound Account an amount sufficient to
pay the next due installment of real estate taxes and assessments on the
Mortgaged Property at least one (1) month prior to the earlier of (a) the due
date thereof or (b) any such date by which Mortgagor or Mortgagee is required by
law to pay same and the next due annual insurance premiums with respect to the
Mortgaged Property at least one (1) month prior to the due date thereof.
Commencing on the first monthly payment date under the Note after the Initial
Impound Costs Date and continuing thereafter on each monthly payment date under
the Note, Mortgagor shall pay to Mortgagee, concurrently with and in addition to
the monthly payment due under the Note and until the Debt is fully paid and
performed, deposits in an amount equal to one-twelfth (1/12) of the amount of
the annual real estate taxes and assessments that will next become due and
payable on the Mortgaged Property, plus one-twelfth (1/12) of the amount of the
annual premiums that will next become due and payable on insurance policies
which Mortgagor is required to maintain hereunder, each as estimated and
determined by Mortgagee. So long as no Event of Default has occurred, and no
event has occurred or failed to occur which with the passage of time, the giving
of notice, or both would constitute an Event of Default (a "Default"), all sums
in the Impound Account shall be held by Mortgagee in the Impound Account to pay
said taxes, assessments and insurance premiums before the same become
delinquent. Mortgagor shall be responsible for ensuring the receipt by
Mortgagee, at least thirty (30) days prior to the respective due date for
payment thereof, of all bills, invoices and statements for all taxes,
assessments and insurance premiums to be paid from the Impound Account, and so
long as no Event of Default has occurred, Mortgagee shall pay the governmental
authority or other party entitled thereto directly to the extent funds are
available for such purpose in the Impound Account. In making any payment from
the Impound Account, Mortgagee shall be entitled to rely on any bill, statement
or estimate procured from the appropriate public office or insurance company or
agent without any inquiry into the accuracy of such bill, statement or estimate
and without any inquiry into the accuracy, validity, enforceability or
contestability of any tax, assessment, valuation, sale, forfeiture, tax lien or
title or claim thereof. No interest on funds contained in the Impound Account,
if any, shall be paid by Mortgagee to Mortgagor.
1.7 Intentionally Omitted.
1.8 Replacement Reserve.
(a) As additional security for the Debt, Mortgagor
shall establish and maintain at all times while this Mortgage continues in
effect a repair reserve (the "Replacement Reserve") with Mortgagee for payment
of costs and expenses incurred by Mortgagor in connection with the performance
of work to the roofs, chimneys, gutters, downspouts, paving, curbs, ramps,
driveways, balconies, porches, patios, exterior walls, exterior doors and
doorways, windows, elevators and mechanical and HVAC equipment (collectively,
the "Repairs"). Commencing on the first monthly Payment Date under the Note and
continuing thereafter on each monthly Payment Date under the Note, Mortgagor
shall pay to Mortgagee, concurrently with and in addition to the monthly payment
due under the Note and until the Debt is fully paid and performed, a deposit to
the Replacement Reserve in an amount equal to $4,388.49 per month. So long as no
Event of Default has occurred, all sums in the Replacement Reserve shall be held
by Mortgagee in the Replacement Reserve to pay the costs and expenses of
Repairs. So long as no Default or Event of Default has occurred, Mortgagee
shall, to the extent funds are available for such purpose in the Replacement
Reserve, disburse to Mortgagor the amount paid or incurred by Mortgagor in
performing such Repairs within ten (10) days following: (a) the receipt by
Mortgagee of a written request from Mortgagor for disbursement from the
Replacement Reserve and a certification by Mortgagor in a form approved in
writing by Mortgagee that the applicable item of Repair has been completed; (b)
the delivery to Mortgagee of invoices, receipts or other evidence satisfactory
to Mortgagee, verifying the cost of performing the Repairs; (c) for disbursement
requests in excess of $10,000.00, the delivery to Mortgagee of affidavits, lien
waivers or other evidence reasonably satisfactory to Mortgagee showing that all
materialmen, laborers, subcontractors and any other parties who might or could
claim statutory or common law liens and are furnishing or have furnished
material or labor to the Mortgaged Property have been paid all amounts due for
labor and materials furnished to the Mortgaged Property; (d) for disbursement
requests in excess of $10,000.00, delivery to Mortgagee of a certification from
an inspecting architect or other third party acceptable to Mortgagee describing
the completed Repairs and verifying the completion of the Repairs and the value
of the completed Repairs; and (e) for disbursement requests in excess of
$10,000.00, delivery to Mortgagee of a new certificate of occupancy for the
portion of the Improvements covered by such Repairs, if said new certificate of
occupancy is required by law, or a certification by Mortgagor that no new
certificate of occupancy is required. Mortgagee shall not be required to make
advances from the Replacement Reserve more frequently than once in any thirty
(30) day period. In making any payment from the Replacement Reserve, Mortgagee
shall be entitled to rely on such request from Mortgagor without any inquiry
into the accuracy, validity or contestability of any such amount. Mortgagee may,
at Mortgagor's expense, make or cause to be made during the term of this
Mortgage an annual inspection of the Mortgaged Property to determine the need,
as determined by Mortgagee in its reasonable judgment, for further Repairs of
the Mortgaged Property. In the event that such inspection reveals that further
Repairs of the Mortgaged Property are required, Mortgagee shall provide
Mortgagor with a written description of the required Repairs and Mortgagor shall
complete such Repairs to the reasonable satisfaction of Mortgagee within ninety
(90) days after the receipt of such description from Mortgagee, or such later
date as may be approved by Mortgagee in its sole discretion. Interest on the
funds contained in the Replacement Reserve shall be credited to Mortgagor as
provided in Section 4.31 hereof.
(b) As additional security for the payment
and performance by Mortgagor of all duties, responsibilities and
obligations under the Note and the other Loan Documents, Mortgagor hereby
unconditionally and irrevocably assigns, conveys, pledges, mortgages, transfers,
delivers, deposits, sets over and confirms unto Mortgagee, and hereby grants to
Mortgagee a security interest in, (i) the Impound Account, the Replacement
Reserve, the Repair and Remediation Reserve (as hereinafter defined) and any
other reserve or escrow account established pursuant to the terms hereof or of
any other Loan Document (collectively, the "Reserves"), (ii) the accounts into
which the Reserves have been deposited, (iii) all insurance on said accounts,
(iv) all accounts, contract rights and general intangibles or other rights and
interests pertaining thereto, (v) all sums now or hereafter therein or
represented thereby, (vi) all replacements, substitutions or proceeds thereof,
(vii) all instruments and documents now or hereafter evidencing the Reserves or
such accounts, (viii) all powers, options, rights, privileges and immunities
pertaining to the Reserves (including the right to make withdrawals therefrom),
and (ix) all proceeds of the foregoing. Mortgagor hereby authorizes and consents
to the account into which the Reserves have been deposited being held in
Mortgagee's name or the name of any entity servicing the Note for Mortgagee and
hereby acknowledges and agrees that Mortgagee, or at Mortgagee's election, such
servicing agent, shall have exclusive control over said account. Notice of the
assignment and security interest granted to Mortgagee herein may be delivered by
Mortgagee at any time to the financial institution wherein the Reserves have
been established, and Mortgagee, or such servicing entity, shall have possession
of all passbooks or other evidences of such accounts. Mortgagor hereby assumes
all risk of loss with respect to amounts on deposit in the Reserves. Mortgagor
hereby knowingly, voluntarily and intentionally stipulates, acknowledges and
agrees that the advancement of the funds from the Reserves as set forth herein
is at Mortgagor's direction and is not the exercise by Mortgagee of any right of
set-off or other remedy upon a Default or an Event of Default. Mortgagor hereby
waives all right to withdraw funds from the Reserves except as provided for in
this Mortgage. If an Event of Default shall occur hereunder or under any other
of the Loan Documents Mortgagee may, without notice or demand on Mortgagor, at
its option: (A) withdraw any or all of the funds (including, without limitation,
interest) then remaining in the Reserves and apply the same, after deducting all
costs and expenses of safekeeping, collection and delivery (including, but not
limited to, reasonable attorneys' fees, costs and expenses) to the Debt or any
other obligations of Mortgagor under the other Loan Documents in such manner as
Mortgagee shall deem appropriate in its sole discretion, and the excess, if any,
shall be paid to Mortgagor, (B) exercise any and all rights and remedies of a
secured party under any applicable Uniform Commercial Code, or (C) exercise any
other remedies available at law or in equity. No such use or application of the
funds contained in the Reserves shall be deemed to cure any Default or Event of
Default.
(c) The Reserves shall not, unless otherwise
explicitly required by applicable law, be or be deemed to be escrow or
trust funds, but, at Mortgagee's option and in Mortgagee's discretion, may
either be held in a separate account or be commingled by Mortgagee with the
general funds of Mortgagee. The Reserves are solely for the protection of
Mortgagee and entail no responsibility on Mortgagee's part beyond the payment of
the respective items for which they are held following receipt of bills,
invoices or statements therefor in accordance with the terms hereof and beyond
the allowing of due credit for the sums actually received. Upon assignment of
this Mortgage by Mortgagee, any funds in the Reserves shall be turned over to
the assignee and any responsibility of Mortgagee, as assignor, with respect
thereto shall terminate. If the funds in the applicable Reserve shall exceed the
amount of payments actually applied by Mortgagee for the purposes and items for
which the applicable Reserve is held, such excess may be credited by Mortgagee
on subsequent payments to be made hereunder or, at the option of Mortgagee,
refunded to Mortgagor. If, however, the applicable Reserve shall not contain
sufficient funds to pay the sums required by the dates on which such sums are
required to be on deposit in such account, Mortgagor shall, within ten (10) days
after receipt of written notice thereof, deposit with Mortgagee the full amount
of any such deficiency. If Mortgagor shall fail to deposit with Mortgagee the
full amount of such deficiency as provided above, Mortgagee shall have the
option, but not the obligation, to make such deposit, and all amounts so
deposited by Mortgagee, together with interest thereon at the Default Interest
Rate from the date so deposited by Mortgagee until actually paid by Mortgagor,
shall be immediately paid by Mortgagor on demand and shall be secured by this
Mortgage and by all of the other Loan Documents securing all or any part of the
Debt. If there is an Event of Default under this Mortgage, Mortgagee may, but
shall not be obligated to, apply at any time the balance then remaining in any
or all of the Reserves against the Debt in whatever order Mortgagee shall
subjectively determine. No such application of any or all of the Reserves shall
be deemed to cure any Event of Default. Upon full payment of the Debt in
accordance with its terms or at such earlier time as Mortgagee may elect, the
balance of any or all of the Reserves then in Mortgagee's possession shall be
paid over to Mortgagor and no other party shall have any right or claim thereto.
1.9 Casualty and Condemnation. Mortgagor shall give Mortgagee
prompt written notice of the occurrence of any casualty affecting, or the
institution of any proceedings for eminent domain or for the condemnation of,
the Mortgaged Property or any portion thereof. All insurance proceeds on the
Mortgaged Property, and all causes of action, claims, compensation, awards and
recoveries for any damage, condemnation or taking of all or any part of the
Mortgaged Property or for any damage or injury to it for any loss or diminution
in value of the Mortgaged Property, are hereby assigned to and shall be paid to
Mortgagee. Mortgagee may participate in any suits or proceedings relating to any
such proceeds, causes of action, claims, compensation, awards or recoveries, and
Mortgagee is hereby authorized, in its own name or in Mortgagor's name, to
adjust any loss covered by insurance or any condemnation claim or cause of
action, and to settle or compromise any claim or cause of action in connection
therewith, and Mortgagor shall from time to time deliver to Mortgagee any
instruments required to permit such participation; provided, however, that, so
long as no Default or Event of Default shall have occurred, Mortgagee shall not
have the right to participate in the adjustment of any loss which is not in
excess of the lesser of (i) five percent (5%) of the then outstanding principal
balance of the Note and (ii) $100,000. Mortgagee shall apply any sums received
by it under this Section first to the payment of all of its costs and expenses
(including, but not limited to, reasonable legal fees and disbursements)
incurred in obtaining those sums, and then, as follows:
(a) In the event that less than seventy percent
(70%) of the Improvements located on the Premises have been taken or destroyed,
then if and so long as:
(i) no Default or Event of Default has
occurred hereunder or under any of the other Loan Documents, and
(ii) the Mortgaged Property can, in Mortgagee's
judgment, with diligent restoration or repair, be returned to a
condition at least equal to the condition thereof that existed prior to
the casualty or partial taking causing the loss or damage within the
earlier to occur of (i) six (6) months after the receipt of insurance
proceeds or condemnation awards by either Mortgagor or Mortgagee, and
(ii) sixty (60) days prior to the stated maturity date of the Note, and
(iii) all necessary governmental approvals can be
obtained to allow the rebuilding and reoccupancy of the Mortgaged
Property as described in Section (a)(2) above, and
(iv) there are sufficient sums available (through
insurance proceeds or condemnation awards and contributions by
Mortgagor, the full amount of which shall, at Mortgagee's option, have
been deposited with Mortgagee) for such restoration or repair
(including, without limitation, for any costs and expenses of Mortgagee
to be incurred in administering said restoration or repair) and for
payment of principal and interest to become due and payable under the
Note during such restoration or repair, and
(v) the economic feasibility of the Improvements
after such restoration or repair will be such that income from their
operation is reasonably anticipated to be sufficient to pay operating
expenses of the Mortgaged Property and debt service on the Debt in full
with the same coverage ratio considered by Mortgagee in its
determination to make the loan secured hereby, and
(vi) in the event that the insurance proceeds or
condemnation awards received as a result of such casualty or partial
taking exceed the lesser of (i) five percent (5%) of the then
outstanding principal balance of the Note and (ii) $150,000, Mortgagor
shall have delivered to Mortgagee, at Mortgagor's sole cost and
expense, an appraisal report in form and substance satisfactory to
Mortgagee appraising the value of the Mortgaged Property as proposed to
be restored or repaired to be not less than the appraised value of the
Mortgaged Property considered by Mortgagee in its determination to make
the loan secured hereby, and
(vii) Mortgagor so elects by written notice delivered
to Mortgagee within five (5) days after settlement of the aforesaid
insurance or condemnation claim,
then, Mortgagee shall, solely for the purposes of such restoration or repair,
advance so much of the remainder of such sums as may be required for such
restoration or repair, and any funds deposited by Mortgagor therefor, to
Mortgagor in the manner and upon such terms and conditions as would be required
by a prudent interim construction lender, including, but not limited to, the
prior approval by Mortgagee of plans and specifications, contractors and form of
construction contracts and the furnishing to Mortgagee of permits, bonds, lien
waivers, invoices, receipts and affidavits from contractors and subcontractors,
in form and substance satisfactory to Mortgagee in its discretion, with any
remainder being applied by Mortgagee for payment of the Debt in whatever order
Mortgagee directs in its absolute discretion.
(b) In all other cases, namely, in the event that seventy
percent (70%) or more of the Improvements located on the Premises have been
taken or destroyed or Mortgagor does not elect to restore or repair the
Mortgaged Property pursuant to clause (a) above or otherwise fails to meet the
requirements of clause (a) above, then, in any of such events, Mortgagee shall
elect, in Mortgagee's absolute discretion and without regard to the adequacy of
Mortgagee's security, to do either of the following: (1) accelerate the maturity
date of the Note and declare any and all of the Debt to be immediately due and
payable and apply the remainder of such sums received pursuant to this Section
to the payment of the Debt in whatever order Mortgagee directs in its absolute
discretion, with any remainder being paid to Mortgagor, or (2) notwithstanding
that Mortgagor may have elected not to restore or repair the Mortgaged Property
pursuant to the provisions of Section 1.9(a)(vii) above, require Mortgagor to
restore or repair the Mortgaged Property in the manner and upon such terms and
conditions as would be required by a prudent interim construction lender,
including, but not limited to, the deposit by Mortgagor with Mortgagee, within
thirty (30) days after demand therefor, of any deficiency reasonably determined
by Mortgagee to be necessary in order to assure the availability of sufficient
funds to pay for such restoration or repair, including Mortgagee's costs and
expenses to be incurred in connection therewith, the prior approval by Mortgagee
of plans and specifications, contractors and form of construction contracts and
the furnishing to Mortgagee of permits, bonds, lien waivers, invoices, receipts
and affidavits from contractors and subcontractors, in form and substance
satisfactory to Mortgagee in its discretion, and apply the remainder of such
sums toward such restoration and repair, with any balance thereafter remaining
being applied by Mortgagee for payment of the Debt in whatever order Mortgagee
directs in its absolute discretion.
Any reduction in the Debt resulting from Mortgagee's application of any sums
received by it hereunder shall take effect only when Mortgagee actually receives
such sums and elects to apply such sums to the Debt and, in any event, the
unpaid portion of the Debt shall remain in full force and effect and Mortgagor
shall not be excused in the payment thereof. Partial payments received by
Mortgagee, as described in the preceding sentence, shall be without any
prepayment penalty or premium and shall be applied first to the final payment
due under the Note and thereafter to installments due under the Note in the
inverse order of their due date. If Mortgagor elects or Mortgagee directs
Mortgagor to restore or repair the Mortgaged Property after the occurrence of a
casualty or partial taking of the Mortgaged Property as provided above,
Mortgagor shall promptly and diligently, at Mortgagor's sole cost and expense
and regardless of whether the insurance proceeds or condemnation award, as
appropriate, shall be sufficient for the purpose, restore, repair, replace and
rebuild the Mortgaged Property as nearly as possible to its value, condition and
character immediately prior to such casualty or partial taking in accordance
with the foregoing provisions and Mortgagor shall pay to Mortgagee all costs and
expenses of Mortgagee incurred in administering said rebuilding, restoration or
repair, provided that Mortgagee makes such proceeds or award available for such
purpose. Mortgagor agrees to execute and deliver from time to time such further
instruments as may be requested by Mortgagee to confirm the foregoing assignment
to Mortgagee of any award, damage, insurance proceeds, payment or other
compensation. Mortgagee is hereby irrevocably constituted and appointed the
attorney-in-fact of Mortgagor (which power of attorney shall be irrevocable so
long as any portion of the Debt is outstanding, shall be deemed coupled with an
interest, shall survive the voluntary or involuntary dissolution of Mortgagor
and shall not be affected by any disability or incapacity suffered by Mortgagor
subsequent to the date hereof), with full power of substitution, subject to the
terms of this Section, to settle for, collect and receive any such awards,
damages, insurance proceeds, payments or other compensation from the parties or
authorities making the same, to appear in and prosecute any proceedings therefor
and to give receipts and acquittances therefor.
1.10 Construction Liens. Mortgagor shall pay when due all
claims and demands of mechanics, materialmen, laborers and others for any work
performed or materials delivered for the Premises or the Improvements; provided,
however, that, Mortgagor shall have the right to contest in good faith any such
claim or demand, so long as it does so diligently, by appropriate proceedings
and without prejudice to Mortgagee and provided that neither the Mortgaged
Property nor any interest therein would be in any danger of sale, loss or
forfeiture as a result of such proceeding or contest. In the event Mortgagor
shall contest any such claim or demand, Mortgagor shall promptly notify
Mortgagee of such contest and thereafter shall, upon Mortgagee's request,
promptly provide a bond, cash deposit or other security satisfactory to
Mortgagee to protect Mortgagee's interest and security should the contest be
unsuccessful. If Mortgagor shall fail to immediately discharge or provide
security against any such claim or demand as aforesaid, Mortgagee may do so and
any and all expenses incurred by Mortgagee, together with interest thereon at
the Default Interest Rate from the date incurred by Mortgagee until actually
paid by Mortgagor, shall be immediately paid by Mortgagor on demand and shall be
secured by this Mortgage and by all of the other Loan Documents securing all or
any part of the Debt.
1.11 Rents and Profits. As additional and collateral security
for the payment of the Debt and cumulative of any and all rights and remedies
herein provided for, Mortgagor hereby absolutely and presently assigns to
Mortgagee all existing and future Rents and Profits. Mortgagor hereby grants to
Mortgagee the sole, exclusive and immediate right, without taking possession of
the Mortgaged Property, to demand, collect (by suit or otherwise), receive and
give valid and sufficient receipts for any and all of said Rents and Profits,
for which purpose Mortgagor does hereby irrevocably make, constitute and appoint
Mortgagee its attorney-in-fact with full power to appoint substitutes or a
trustee to accomplish such purpose (which power of attorney shall be irrevocable
so long as any portion of the Debt is outstanding, shall be deemed to be coupled
with an interest, shall survive the voluntary or involuntary dissolution of
Mortgagor and shall not be affected by any disability or incapacity suffered by
Mortgagor subsequent to the date hereof). Mortgagee shall be without liability
for any loss which may arise from a failure or inability to collect Rents,
proceeds or other payments. However, until the occurrence of an Event of Default
under this Mortgage or under any other of the Loan Documents, Mortgagor shall
have a license to receive (subject to the terms of that certain (1) Lock Box
Agreement between Mortgagor and Mortgagee and (2) Assignment (as hereinafter
defined), each dated of even date herewith), use and enjoy the Rents and Profits
when due and prepayments thereof for not more than one (1) month prior to due
date thereof. Upon the occurrence of an Event of Default, Mortgagor's license
shall automatically terminate without notice to Mortgagor and Mortgagee may
thereafter, without taking possession of the Mortgaged Property, collect the
Rents and Profits itself or by an agent or receiver. Upon the cure of such Event
of Default and provided that no other Event of Default then exists hereunder or
under any of the other Loan Documents, such license shall be automatically
reinstated. From and during the termination of such license, Mortgagor shall be
the agent of Mortgagee in collection of the Rents and Profits, and all of the
Rents and Profits so collected by Mortgagor shall be held in trust by Mortgagor
for the sole and exclusive benefit of Mortgagee, and Mortgagor shall, within one
(1) business day after receipt of any Rents and Profits, pay the same to
Mortgagee to be applied by Mortgagee as hereinafter set forth. Neither the
demand for or collection of Rents and Profits by Mortgagee shall constitute any
assumption by Mortgagee of any obligations under any agreement relating thereto.
Mortgagee is obligated to account only for such Rents and Profits as are
actually collected or received by Mortgagee. Mortgagor irrevocably agrees and
consents that the respective payors of the Rents and Profits shall, upon demand
and notice from Mortgagee of an Event of Default, pay said Rents and Profits to
Mortgagee without liability to determine the actual existence of any Event of
Default claimed by Mortgagee. Mortgagor hereby waives any right, claim or demand
which Mortgagor may now or hereafter have against any such payor by reason of
such payment of Rents and Profits to Mortgagee, and any such payment shall
discharge such payor's obligation to make such payment to Mortgagor. All Rents
collected or received by Mortgagee may be applied against all expenses of
collection, including, without limitation, reasonable attorneys' fees, against
costs of operation and management of the Mortgaged Property and against the
Debt, in whatever order or priority as to any of the items so mentioned as
Mortgagee directs in its sole subjective discretion and without regard to the
adequacy of its security. Neither the exercise by Mortgagee of any rights under
this Section nor the application of any Rents to the Debt shall cure or be
deemed a waiver of any Event of Default. The assignment of Rents and Profits
hereinabove granted shall continue in full force and effect during any period of
foreclosure or redemption with respect to the Mortgaged Property. Mortgagor has
executed an Assignment of Leases and Rents dated of even date herewith (the
"Assignment") in favor of Mortgagee covering all of the right, title and
interest of Mortgagor, as landlord, lessor or licensor, in and to the Lease and
any and all Other Leases. All rights and remedies granted to Mortgagee under the
Assignment shall be in addition to and cumulative of all rights and remedies
granted to Mortgagee hereunder.
1.12 Leases.
(a) Mortgagor, by this Mortgage and the
Assignment, has absolutely and unconditionally assigned to Mortgagee all of
Mortgagor's right, title and interest in the Lease, the Other Leases (if any)
and the Rents and Profits, it being intended by Mortgagor that this assignment
constitutes a present, absolute assignment.
(b) Mortgagor shall at all times promptly and
faithfully perform or cause to be performed all of the covenants,
conditions and agreements contained in the Lease on the part of the landlord
thereunder to be kept and performed. Mortgagor shall not do or suffer to be done
any act that might result in a default by the landlord under the Lease or allow
the Tenant to withhold payment or rent and, except as otherwise expressly
permitted by the terms of Section 1.13 hereof, shall not further assign the
Lease or the Rents and Profits. Mortgagor, at no cost or expense to Mortgagee,
shall enforce, short of termination, the performance and observance of each and
every condition and covenant of each of the parties under the Lease. Mortgagor
shall not, without the prior written consent of Mortgagee, modify the Lease,
terminate or accept the surrender of the Lease, or waive or release any other
party from the performance or observance of any obligation or condition under
the Lease. Mortgagor shall not permit the prepayment of any Rents and Profits
under the Lease for more than one month prior to the due date thereof.
(c) The Lease provides, among other things, that
the Tenant will recognize as its landlord and attorn to any person
succeeding to the interest of Mortgagor upon any foreclosure of this Mortgage or
deed in lieu of foreclosure. The Lease also provides that, upon request of said
successor in interest, the tenant thereunder shall execute and deliver an
instrument or instruments confirming its attornment as provided for in this
Section and Section 17 of the Lease; provided, however, that neither Mortgagee
nor any successor-in-interest shall be bound by any payment of rental for more
than one (1) month in advance, or any amendment or modification of the Lease or
rental agreement made without the express written consent of Mortgagee or said
successor-in-interest.
(d) Upon the occurrence of an Event of Default
under this Mortgage, whether before or after the whole principal sum
secured hereby is declared to be immediately due or whether before or after the
institution of legal proceedings to foreclose this Mortgage, forthwith, upon
demand of Mortgagee, Mortgagor shall surrender to Mortgagee, and Mortgagee shall
be entitled to take actual possession of, the Mortgaged Property or any part
thereof personally, or by its agent or attorneys. In such event, Mortgagee shall
have, subject to the terms of the Lease, and Mortgagor hereby gives and grants
to Mortgagee, the right, power and authority to make and enter into Other Leases
with respect to the Mortgaged Property or portions thereof for such rents and
for such periods of occupancy and upon conditions and provisions as Mortgagee
may deem desirable in its sole discretion, and Mortgagor expressly acknowledges
and agrees that the term of any such Other Lease may extend beyond the date of
any foreclosure sale of the Mortgaged Property, it being the intention of
Mortgagor that in such event Mortgagee shall be deemed to be and shall be the
attorney-in-fact of Mortgagor for the purpose of making and entering into Other
Leases of parts or portions of the Mortgaged Property for the rents and upon the
terms, conditions and provisions deemed desirable to Mortgagee in its sole
discretion and with like effect as if such Other Leases had been made by
Mortgagor as the owner in fee simple of the Mortgaged Property free and clear of
any conditions or limitations established by this Mortgage. The power and
authority hereby given and granted by Mortgagor to Mortgagee shall be deemed to
be coupled with an interest, shall not be revocable by Mortgagor so long as any
portion of the Debt is outstanding, shall survive the voluntary or involuntary
dissolution of Mortgagor and shall not be affected by any disability or
incapacity suffered by Mortgagor subsequent to the date hereof. In connection
with any action taken by Mortgagee pursuant to this Section, Mortgagee shall not
be liable for any loss sustained by Mortgagor resulting from any failure to let
the Mortgaged Property, or any part thereof, or from any other act or omission
of Mortgagee in managing the Mortgaged Property, nor shall Mortgagee be
obligated to perform or discharge any obligation, duty or liability under the
Lease or any Other Lease covering the Mortgaged Property or any part thereof or
under or by reason of this instrument or the exercise of rights or remedies
hereunder. Mortgagor shall, and does hereby, indemnify Mortgagee for, and hold
Mortgagee harmless from, any and all claims, actions, demands, liabilities, loss
or damage which may or might be incurred by Mortgagee under the Lease and/or any
such Other Lease or under this Mortgage or by the exercise of rights or remedies
hereunder and from 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 the Lease and/or any such Other Lease other than those finally
determined by a court of competent jurisdiction to have resulted solely from the
gross negligence or willful misconduct of Mortgagee. Should Mortgagee incur any
such liability, the amount thereof, including, without limitation, costs,
expenses and reasonable attorneys' fees, together with interest thereon at the
Default Interest Rate from the date incurred by Mortgagee until actually paid by
Mortgagor, shall be immediately due and payable to Mortgagee by Mortgagor on
demand and shall be secured hereby and by all of the other Loan Documents
securing all or any part of the Debt. Nothing in this Section shall impose on
Mortgagee any duty, obligation or responsibility for the control, care,
management or repair of the Mortgaged Property, or for the carrying out of any
of the terms and conditions of the Lease and/or any such Other Lease, nor shall
it operate to make Mortgagee responsible or liable for any waste committed on
the Mortgaged Property by the Tenants or by any other parties or for any
dangerous or defective condition of the Mortgaged Property, or for any
negligence in the management, upkeep, repair or control of the Mortgaged
Property. Mortgagor hereby assents to, ratifies and confirms any and all actions
of Mortgagee with respect to the Mortgaged Property taken under this Section.
1.13 Alienation and Further Encumbrances.
(a) Mortgagor acknowledges that Mortgagee has
relied upon the principals of Mortgagor and their experience in owning and
operating the Mortgaged Property and properties similar to the Mortgaged
Property in connection with the closing of the loan evidenced by the Note.
Accordingly, except as specifically allowed hereinbelow in this Section and
notwithstanding anything to the contrary contained in Section 4.6 hereof, in the
event that the Mortgaged Property or any part thereof or interest therein shall
be sold, conveyed, disposed of, alienated, hypothecated, leased (except pursuant
to the Lease), assigned, pledged, mortgaged, further encumbered or otherwise
transferred or Mortgagor shall be divested of its title to the Mortgaged
Property or any interest therein, in any manner or way, whether voluntarily or
involuntarily, without the prior written consent of Mortgagee being first
obtained, which consent may be withheld in Mortgagee's sole discretion, then the
same shall constitute an Event of Default and Mortgagee shall have the right, at
its option, to declare any or all of the Debt, irrespective of the maturity date
specified in the Note, immediately due and payable and to otherwise exercise any
of its other rights and remedies contained in Article III hereof. For the
purposes of this Section: (i) in the event either Mortgagor or any of its
general partners or members is a corporation or trust, the sale, conveyance,
transfer or disposition of more than 10% of the issued and outstanding capital
stock of Mortgagor or any of its general partners or members or of the
beneficial interest of such trust (or the issuance of new shares of capital
stock in Mortgagor or any of its general partners or managing members so that
immediately after such issuance (in one or a series of transactions) the total
capital stock then issued and outstanding is more than 110% of the total
immediately prior to such issuance) shall be deemed to be a transfer of an
interest in the Mortgaged Property; and (ii) in the event Mortgagor or any
general partner or managing member of Mortgagor is a limited or general
partnership, a joint venture or a limited liability company, a change in the
ownership interests in any general partner, any joint venturer or any managing
member, either voluntarily, involuntarily or otherwise, or the sale, conveyance,
transfer, disposition, alienation, hypothecation or encumbering of all or any
portion of the interest of any such general partner, joint venturer or managing
member in Mortgagor or such general partner or managing member (whether in the
form of a beneficial or partnership interest or in the form of a power of
direction, control or management, or otherwise), shall be deemed to be a
transfer of an interest in the Mortgaged Property. Notwithstanding the
foregoing, however, (i) limited partnership interests in Mortgagor or in any
general partner or member of Mortgagor shall be freely transferable without the
consent of Mortgagee, (ii) any involuntary transfer caused by the death of
Mortgagor or any general partner, shareholder, joint venturer, member or
beneficial owner of a trust shall not be an Event of Default under this Mortgage
so long as Mortgagor is reconstituted, if required, following such death and so
long as those persons responsible for the management of the Mortgaged Property
and Mortgagor remain unchanged as a result of such death or any replacement
management is approved by Mortgagee, and (iii) gifts for estate planning
purposes of any individual's interests in Mortgagor or in any of Mortgagor's
general partners, managing members or joint venturers to the spouse or any
lineal descendant of such individual, or to a trust for the benefit of any one
or more of such individual, spouse or lineal descendant, shall not be an Event
of Default under this Mortgage so long as Mortgagor is reconstituted, if
required, following such gift and so long as those persons responsible for the
management of the Mortgaged Property and Mortgagor remain unchanged following
such gift or any replacement management is approved by Mortgagee.
(b) Notwithstanding the foregoing provisions
of this Section, Mortgagee shall consent to a sale, conveyance or transfer of
the Mortgaged Property in its entirety (hereinafter, "Sale") to any person or
entity provided that each of the following terms and conditions are
satisfied:
1. No Default and no Event of Default
is then continuing hereunder or under any of the other Loan
Documents;
2. Mortgagor gives Mortgagee written
notice of the terms of such prospective Sale not less than sixty (60)
days before the date on which such Sale is scheduled to close and,
concurrently therewith, gives Mortgagee all such information
concerning the proposed transferee of the Mortgaged Property
(hereinafter, "Buyer") as Mortgagee would require in evaluating an
initial extension of credit to a borrower and pays to Mortgagee a
non-refundable application fee in the amount of $5,000. Mortgagee
shall have the right to approve or disapprove the proposed Buyer. In
determining whether to give or withhold its approval of the proposed
Buyer, Mortgagee shall consider the Buyer's experience and track
record in owning and operating facilities similar to the Mortgaged
Property, the Buyer's financial strength, the Buyer's general business
standing and the Buyer's relationships and experience with
contractors, vendors, tenants, lenders and other business entities;
provided, however, that, notwithstanding Mortgagee's agreement to
consider the foregoing factors in determining whether to give or
withhold such approval, such approval shall be given or withheld based
on what Mortgagee determines to be commercially reasonable in
Mortgagee's sole discretion and, if given, may be given subject to
such conditions as Mortgagee may deem appropriate;
3. Mortgagor pays Mortgagee,
concurrently with the closing of such Sale, a non-refundable
assumption fee in an amount equal to all out-of-pocket costs and
expenses, including, without limitation, reasonable attorneys' fees,
incurred by Mortgagee in connection with the Sale, plus an amount
equal to one percent (1.0%) of the then outstanding principal balance
of the Note;
4. The Buyer assumes and agrees to
pay the Debt subject to the
provisions of Section 4.27 hereof and, prior to or concurrently with
the closing of such Sale, the Buyer executes, without any cost or
expense to Mortgagee, such documents and agreements as Mortgagee shall
reasonably require to evidence and effectuate said assumption and
delivers such legal opinions as Mortgagee may require;
5. A party associated with the Buyer
approved by Mortgagee in its sole
discretion assumes the obligations of the current Indemnitor under its
guaranty or indemnity agreement and such party associated with the
Buyer executes, without any cost or expense to Mortgagee, a new
guaranty or indemnity agreement in form and substance satisfactory to
Mortgagee and delivers such legal opinions as Mortgagee may require;
6. Mortgagor and the Buyer execute,
without any cost or expense to Mortgagee, new financing statements or
financing statement amendments and any additional documents reasonably
requested by Mortgagee;
7. Mortgagor delivers to Mortgagee,
without any cost or expense to
Mortgagee, such endorsements to Mortgagee's title insurance policy,
hazard insurance policy endorsements or certificates and other similar
materials as Mortgagee may deem necessary at the time of the Sale, all
in form and substance satisfactory to Mortgagee, including, without
limitation, an endorsement or endorsements to Mortgagee's title
insurance policy insuring the lien of this Mortgage, extending the
effective date of such policy to the date of execution and delivery
(or, if later, of recording) of the assumption agreement referenced
above in subparagraph (4) of this Section, with no additional
exceptions added to such policy, and insuring that fee simple title to
the Mortgaged Property is vested in the Buyer;
8. Mortgagor executes and delivers
to Mortgagee, without any cost or
expense to Mortgagee, a release of Mortgagee, its officers, directors,
employees and agents, from all claims and liability relating to the
transactions evidenced by the Loan Documents, through and including the
date of the closing of the Sale, which agreement shall be in form and
substance satisfactory to Mortgagee and shall be binding upon the
Buyer;
9. Subject to the provisions of
Section 4.27 hereof, such Sale is not
construed so as to relieve Mortgagor of any personal liability under
the Note or any of the other Loan Documents for any acts or events
occurring or obligations arising prior to or simultaneously with the
closing of such Sale, whether or not same is discovered prior or
subsequent to the closing of such Sale, and Mortgagor executes, without
any cost or expense to Mortgagee, such documents and agreements as
Mortgagee shall reasonably require to evidence and effectuate the
ratification of said personal liability. Mortgagor shall be released
from and relieved of any personal liability under the Note or any of
the other Loan Documents for any acts or events occurring or
obligations arising after the closing of such Sale which are not caused
by or arising out of any acts or events occurring or obligations
arising prior to or simultaneously with the closing of such Sale; and
10. Such Sale is not construed so as to
relieve any current Indemnitor of
its obligations under any guaranty or indemnity agreement for any acts
or events occurring or obligations arising prior to or simultaneously
with the closing of such Sale, and each such current Indemnitor
executes, without any cost or expense to Mortgagee, such documents and
agreements as Mortgagee shall reasonably require to evidence and
effectuate the ratification of each such guaranty and indemnity
agreement. Each such current Indemnitor shall be released from and
relieved of any of its obligations under any guaranty or indemnity
agreement executed in connection with the loan secured hereby for any
acts or events occurring or obligations arising after the closing of
such Sale which are not caused by or arising out of any acts or events
occurring or obligations arising prior to or simultaneously with the
closing of such Sale.
1.14 Payment of Utilities, Assessments, Charges, Etc.
Mortgagor shall pay when due all utility charges which are incurred by Mortgagor
or which may become a charge or lien against any portion of the Mortgaged
Property for gas, electricity, water and sewer services furnished to the
Premises and/or the Improvements and all other assessments or charges of a
similar nature, or assessments payable pursuant to any restrictive covenants,
whether public or private, affecting the Premises and/or the Improvements or any
portion thereof, whether or not such assessments or charges are or may become
liens thereon.
1.15 Access Privileges and Inspections. Mortgagee and the
agents, representatives and employees of Mortgagee shall, subject to the rights
of Tenant and any other tenants, have full and free access to the Premises and
the Improvements and any other location where books and records concerning the
Mortgaged Property are kept at all reasonable times and, except in the event of
an emergency, upon not less than 24 hours prior notice (which notice may be
telephonic) for the purposes of inspecting the Mortgaged Property and of
examining, copying and making extracts from the books and records of Mortgagor
relating to the Mortgaged Property. Mortgagor shall lend assistance to all such
agents, representatives and employees of Mortgagee.
1.16 Waste; Alteration of Improvements. Mortgagor shall not
commit, suffer or permit any waste on the Mortgaged Property nor take any
actions that might invalidate any insurance carried on the Mortgaged Property.
Mortgagor shall maintain the Mortgaged Property in good condition and repair. No
part of the Improvements may be removed, demolished or materially altered,
without the prior written consent of Mortgagee. Without the prior written
consent of Mortgagee, Mortgagor shall not commence construction of any
improvements on the Premises other than improvements required for the
maintenance or repair of the Mortgaged Property.
1.17 Zoning. Without the prior written consent of Mortgagee,
Mortgagor shall not seek, make, suffer, consent to or acquiesce in any change in
the zoning or conditions of use of the Premises or the Improvements. Mortgagor
shall comply with and make all payments required under the provisions of any
covenants, conditions or restrictions affecting the Premises or the
Improvements. Mortgagor shall comply with all existing and future requirements
of all governmental authorities having jurisdiction over the Mortgaged Property.
Mortgagor shall keep all licenses, permits, franchises and other approvals
necessary for the operation of the Mortgaged Property in full force and effect.
Mortgagor shall operate the Mortgaged Property in compliance with all applicable
zoning regulations and provisions. If, under applicable zoning provisions, the
current use of all or any part of the Premises or the Improvements is or becomes
a nonconforming use, Mortgagor shall not cause or permit such use to be
discontinued or abandoned without the prior written consent of Mortgagee.
Further, without Mortgagee's prior written consent, Mortgagor shall not file or
subject any part of the Premises or the Improvements to any declaration of
condominium or co-operative or convert any part of the Premises or the
Improvements to a condominium, co-operative or other form of multiple ownership
and governance.
1.18 Financial Statements and Books and Records. Mortgagor
shall keep accurate books and records of account of the Mortgaged Property and
its own financial affairs sufficient to permit the preparation of financial
statements therefrom in accordance with generally accepted accounting
principles. Mortgagee and its duly authorized representatives shall have the
right to examine, copy and audit Mortgagor's records and books of account at all
reasonable times. So long as this Mortgage continues in effect, Mortgagor shall
provide to Mortgagee, in addition to any other financial statements required
hereunder or under any of the other Loan Documents, the following financial
statements and information, all of which must be certified to Mortgagee as being
true and correct by Mortgagor or the person or entity to which they pertain, as
applicable:
<TABLE>
<S> <C> <C>
(a) copies of all tax returns filed by Mortgagor, within thirty (30) days after
the date of filing;
(b) monthly operating statements for the Mortgaged Property, within fifteen (15)
days after the end of each of the first (1st) twelve (12) accounting periods
(each of which ends on the Saturday closest to the end of the calendar month);
(c) Tenant's 10-Q reports within ten (10) days after each such report is required
to be filed with the Securities and Exchange Commission;
(d) Tenant's 10-K reports within ten (10) days after each such report is required
to be filed with the Securities and Exchange Commission; and
(e) such other information with respect to the Mortgaged Property, Mortgagor, the
principals or general partners in Mortgagor, and each Indemnitor, which may be
reasonably requested from time to time by Mortgagee, within a reasonable time
after the applicable request.
</TABLE>
If any of the aforementioned materials are not furnished to Mortgagee
within the applicable time periods or Mortgagee is dissatisfied with the
contents of any of the foregoing and has notified Mortgagor of its
dissatisfaction, in addition to any other rights and remedies of Mortgagee
contained herein, Mortgagee shall have the right, but not the obligation, to
obtain the same by means of an audit by an independent certified public
accountant selected by Mortgagee, in which event Mortgagor agrees to pay, or to
reimburse Mortgagee for, any expense of such audit and further agrees to provide
all necessary information to said accountant and to otherwise cooperate in the
making of such audit.
1.19 Further Documentation. Mortgagor shall, on the request of
Mortgagee and at the expense of Mortgagor: (a) promptly correct any defect,
error or omission which may be discovered in the contents of this Mortgage or in
the contents of any of the other Loan Documents; (b) promptly execute,
acknowledge, deliver and record or file such further instruments (including,
without limitation, further mortgages, deeds of trust, security deeds, security
agreements, financing statements, continuation statements and assignments of
rents or leases) and promptly do such further acts as may be necessary,
desirable or proper to carry out more effectively the purposes of this Mortgage
and the other Loan Documents and to subject to the liens and security interests
hereof and thereof any property intended by the terms hereof and thereof to be
covered hereby and thereby, including specifically, but without limitation, any
renewals, additions, substitutions, replacements or appurtenances to the
Mortgaged Property; (c) promptly execute, acknowledge, deliver, procure and
record or file any document or instrument (including specifically, without
limitation, any financing statement) deemed advisable by Mortgagee to protect,
continue or perfect the liens or the security interests hereunder against the
rights or interests of third persons; and (d) promptly furnish to Mortgagee,
upon Mortgagee's request, a duly acknowledged written statement and estoppel
certificate addressed to such party or parties as directed by Mortgagee and in
form and substance supplied by Mortgagee, setting forth all amounts due under
the Note, stating whether any Default or Event of Default has occurred
hereunder, stating whether any offsets or defenses exist against the Debt and
containing such other matters as Mortgagee may reasonably require.
1.20 Payment of Costs; Reimbursement to Mortgagee. Mortgagor
shall pay all costs and expenses of every character reasonably incurred in
connection with the closing of the loan evidenced by the Note and secured hereby
or otherwise attributable or chargeable to Mortgagor as the owner of the
Mortgaged Property, including, without limitation, appraisal fees, recording
fees, documentary, stamp, mortgage or intangible taxes, brokerage fees and
commissions, title policy premiums and title search fees, uniform commercial
code/tax lien/litigation search fees, escrow fees and reasonable attorneys'
fees. If Mortgagor defaults in any such payment, which default is not cured
within any applicable grace or cure period, Mortgagee may pay the same and
Mortgagor shall reimburse Mortgagee on demand for all such costs and expenses
incurred or paid by Mortgagee, together with such interest thereon at the
Default Interest Rate from and after the date of Mortgagee's making such payment
until reimbursement thereof by Mortgagor. Any such sums disbursed by Mortgagee,
together with such interest thereon, shall be additional indebtedness of
Mortgagor secured by this Mortgage and by all of the other Loan Documents
securing all or any part of the Debt. Further, Mortgagor shall promptly notify
Mortgagee in writing of any litigation or threatened litigation affecting the
Mortgaged Property, or any other demand or claim which, if enforced, could
impair or threaten to impair Mortgagee's security hereunder. Without limiting or
waiving any other rights and remedies of Mortgagee hereunder, if Mortgagor fails
to perform any of its covenants or agreements contained in this Mortgage or in
any of the other Loan Documents and such failure is not cured within any
applicable grace or cure period, or if any action or proceeding of any kind
(including, but not limited to, any bankruptcy, insolvency, arrangement,
reorganization or other debtor relief proceeding) is commenced which might
affect Mortgagee's interest in the Mortgaged Property or Mortgagee's right to
enforce its security, then Mortgagee may, at it option, with or without notice
to Mortgagor, make any appearances, disburse any sums and take any actions as
may be necessary or desirable to protect or enforce the security of this
Mortgage or to remedy the failure of Mortgagor to perform its covenants and
agreements (without, however, waiving any default of Mortgagor). Mortgagor
agrees to pay on demand all expenses of Mortgagee incurred with respect to the
foregoing (including, but not limited to, reasonable fees and disbursements of
counsel), together with interest thereon at the Default Interest Rate from and
after the date on which Mortgagee incurs such expenses until reimbursement
thereof by Mortgagor. Any such expenses so incurred by Mortgagee, together with
interest thereon as provided above, shall be additional indebtedness of
Mortgagor secured by this Mortgage and by all of the other Loan Documents
securing all or any part of the Debt. The necessity for any such actions and of
the amounts to be paid shall be determined by Mortgagee in its discretion.
Mortgagee is hereby empowered to enter and to authorize others to enter upon the
Mortgaged Property or any part thereof for the purpose of performing or
observing any such defaulted term, covenant or condition without thereby
becoming liable to Mortgagor or any person in possession holding under
Mortgagor. Mortgagor hereby acknowledges and agrees that the remedies set forth
in this Section 1.20 shall be exercisable by Mortgagee, and any and all payments
made or costs or expenses incurred by Mortgagee in connection therewith shall be
secured hereby and shall be, without demand, immediately repaid by Mortgagor
with interest thereon at the Default Interest Rate, notwithstanding the fact
that such remedies were exercised and such payments made and costs incurred by
Mortgagee after the filing by Mortgagor of a voluntary case or the filing
against Mortgagor of an involuntary case pursuant to or within the meaning of
the Bankruptcy Reform Act of 1978, as amended, Title 11 U.S.C., or after any
similar action pursuant to any other debtor relief law (whether statutory,
common law, case law or otherwise) of any jurisdiction whatsoever, now or
hereafter in effect, which may be or become applicable to Mortgagor, Mortgagee,
any Indemnitor, the Debt or any of the Loan Documents. Mortgagor hereby
indemnifies and holds Mortgagee harmless from and against all loss, cost and
expenses with respect to any Event of Default hereof, any liens (i.e.,
judgments, mechanics' and materialmen's liens, or otherwise), charges and
encumbrances filed against the Mortgaged Property, and from any claims and
demands for damages or injury, including claims for property damage, personal
injury or wrongful death, arising out of or in connection with any accident or
fire or other casualty on the Premises or the Improvements or any nuisance made
or suffered thereon, except those that are due to Mortgagee's gross negligence
or willful misconduct as finally determined by a court of competent
jurisdiction, including, without limitation, in any case, reasonable attorneys'
fees, costs and expenses as aforesaid, whether at pretrial, trial or appellate
level, and such indemnity shall survive payment in full of the Debt. This
Section shall not be construed to require Mortgagee to incur any expenses, make
any appearances or take any actions.
1.21 Security Interest. This Mortgage is also intended to
encumber and create a security interest in, and Mortgagor hereby grants to
Mortgagee a security interest in, all sums on deposit with Mortgagee pursuant to
the provisions of Section 1.6, Section 1.7, Section 1.8 and Section 1.34 hereof
or any other Section hereof or of any other Loan Document and all fixtures,
chattels, accounts, equipment, inventory, contract rights, general intangibles
and other personal property of Mortgagor included within the Mortgaged Property,
all renewals, replacements of any of the aforementioned items, or articles in
substitution therefor or in addition thereto or the proceeds thereof (said
property is hereinafter referred to collectively as the "Collateral"), whether
or not the same shall be attached to the Premises or the Improvements in any
manner. It is hereby agreed that to the extent permitted by law, all of the
foregoing property is to be deemed and held to be a part of and affixed to the
Premises and the Improvements. The foregoing security interest shall also cover
Mortgagor's leasehold interest in any of the foregoing property which is leased
by Mortgagor. Notwithstanding the foregoing, all of the foregoing property shall
be owned by Mortgagor and no leasing or installment sales or other financing or
title retention agreement in connection therewith shall be permitted without the
prior written approval of Mortgagee. Mortgagor shall, from time to time upon the
request of Mortgagee, supply Mortgagee with a current inventory of all of the
property in which Mortgagee is granted a security interest hereunder, in such
detail as Mortgagee may reasonably require. Mortgagor shall promptly replace all
of the Collateral subject to the lien or security interest of this Mortgage when
worn or obsolete with Collateral comparable to the worn out or obsolete
Collateral when new and will not, without the prior written consent of
Mortgagee, remove from the Premises or the Improvements any of the Collateral
subject to the lien or security interest of this Mortgage except such as is
replaced by an article of equal suitability and value as above provided, owned
by Mortgagor free and clear of any lien or security interest except that created
by this Mortgage and the other Loan Documents. All of the Collateral shall be
kept at the location of the Premises except as otherwise required by the terms
of the Loan Documents. Mortgagor shall not use any of the Collateral in
violation of any applicable statute, ordinance or insurance policy.
Notwithstanding anything to the contrary herein provided, neither the Mortgaged
Property nor the Collateral shall include any inventory, equipment or trade
fixtures of Tenant (or any other tenant of the Mortgaged Property) or the
proceeds thereof.
1.22 Security Agreement. This Mortgage constitutes a security
agreement between Mortgagor and Mortgagee with respect to the Collateral in
which Mortgagee is granted a security interest hereunder, and, cumulative of all
other rights and remedies of Mortgagee hereunder, Mortgagee shall have all of
the rights and remedies of a secured party under any applicable Uniform
Commercial Code. Mortgagor hereby agrees to execute and deliver on demand and
hereby irrevocably constitutes and appoints Mortgagee the attorney-in-fact of
Mortgagor to execute and deliver and, if appropriate, to file with the
appropriate filing officer or office, such security agreements, financing
statements, continuation statements or other instruments as Mortgagee may
request or require in order to impose, perfect or continue the perfection of the
lien or security interest created hereby. To the extent specifically provided
herein, Mortgagee shall have the right of possession of all cash, securities,
instruments, negotiable instruments, documents, certificates and any other
evidences of cash or other property or evidences of rights to cash rather than
property, which are now or hereafter a part of the Mortgaged Property, and
Mortgagor shall promptly deliver the same to Mortgagee, endorsed to Mortgagee,
without further notice from Mortgagee. Mortgagor agrees to furnish Mortgagee
with notice of any change in the name, identity, organizational structure,
residence, or principal place of business or mailing address of Mortgagor within
ten (10) days of the effective date of any such change. Upon the occurrence of
any Event of Default, Mortgagee shall have the rights and remedies as prescribed
in this Mortgage, or as prescribed by general law, or as prescribed by any
applicable Uniform Commercial Code, all at Mortgagee's election. Any disposition
of the Collateral may be conducted by an employee or agent of Mortgagee. Any
person, including both Mortgagor and Mortgagee, shall be eligible to purchase
any part or all of the Collateral at any such disposition. Expenses of retaking,
holding, preparing for sale, selling or the like (including, without limitation,
Mortgagee's reasonable attorneys' fees and legal expenses), together with
interest thereon at the Default Interest Rate from the date incurred by
Mortgagee until actually paid by Mortgagor, shall be paid by Mortgagor on demand
and shall be secured by this Mortgage and by all of the other Loan Documents
securing all or any part of the Debt. Mortgagee shall have the right to enter
upon the Premises and the Improvements or any real property where any of the
property which is the subject of the security interest granted herein is located
to take possession of, assemble and collect the same or to render it unusable,
or Mortgagor, upon demand of Mortgagee, shall assemble such property and make it
available to Mortgagee at the Premises, or at a place which is mutually agreed
upon or, if no such place is agreed upon, at a place reasonably designated by
Mortgagee to be reasonably convenient to Mortgagee and Mortgagor. If notice is
required by law, Mortgagee shall give Mortgagor at least ten (10) days' prior
written notice of the time and place of any public sale of such property, or
adjournments thereof, or of the time of or after which any private sale or any
other intended disposition thereof is to be made, and if such notice is sent to
Mortgagor, as the same is provided for the mailing of notices herein, it is
hereby deemed that such notice shall be and is reasonable notice to Mortgagor.
No such notice is necessary for any such property which is perishable, threatens
to decline speedily in value or is of a type customarily sold on a recognized
market. Any sale made pursuant to the provisions of this Section shall be deemed
to have been a public sale conducted in a commercially reasonable manner if held
contemporaneously with a foreclosure sale as provided in Section 3.1(e) hereof
upon giving the same notice with respect to the sale of the Mortgaged Property
hereunder as is required under said Section 3.1(e). Furthermore, to the extent
permitted by law, in conjunction with, in addition to or in substitution for the
rights and remedies available to Mortgagee pursuant to any applicable Uniform
Commercial Code:
<TABLE>
<S> <C> <C>
(a) In the event of a foreclosure sale, the Mortgaged Property may, at the option
of Mortgagee, be sold as a whole; and
(b) It shall not be necessary that Mortgagee take possession of the aforementioned
Collateral, or any part thereof, prior to the time that any sale pursuant to the
provisions of this Section is conducted and it shall not be necessary that said
Collateral, or any part thereof, be present at the location of such sale; and
(c) Mortgagee may appoint or delegate any one or more persons as agent to perform
any act or acts necessary or incident to any sale held by Mortgagee, including
the sending of notices and the conduct of the sale, but in the name and on
behalf of Mortgagee. The name and address of Mortgagor (as Debtor under any
applicable Uniform Commercial Code) are:
</TABLE>
ONE PRICE REALTY, INC.
Hwy. 290 - Commerce Park
Duncan, South Carolina 29334
The name and address of Mortgagee (as Secured Party under any applicable Uniform
Commercial Code) are:
FIRST UNION NATIONAL BANK
One First Union Center DC6
Charlotte, North Carolina 28288-0166
1.23 Easements and Rights-of-Way.
Mortgagor shall not grant any easement or
right-of-way with respect to all or any portion of
the Premises or the Improvements without the prior
written consent of Mortgagee. The purchaser at any
foreclosure sale hereunder may, at its discretion,
disaffirm any easement or right-of-way granted in
violation of any of the provisions of this Mortgage
and may take immediate possession of the Mortgaged
Property free from, and despite the terms of, such
grant of easement or right-of-way. If Mortgagee
consents to the grant of an easement or right-of-way,
Mortgagee agrees to grant such consent without charge
to Mortgagor other than expenses, including, without
limitation, reasonable attorneys' fees, incurred by
Mortgagee in the review of Mortgagor's request and in
the preparation of documents effecting the
subordination.
1.24 Compliance with Laws. Mortgagor
shall at all times comply with all statutes,
ordinances, regulations and other governmental or
quasi-governmental requirements and private covenants
now or hereafter relating to the ownership,
construction, use or operation of the Mortgaged
Property, including, but not limited to, those
concerning employment and compensation of persons
engaged in operation and maintenance of the Mortgaged
Property and any environmental or ecological
requirements, even if such compliance shall require
structural changes to the Mortgaged Property;
provided, however, that, Mortgagor may, upon
providing Mortgagee with security satisfactory to
Mortgagee, proceed diligently and in good faith to
contest the validity or applicability of any such
statute, ordinance, regulation or requirement so long
as during such contest the Mortgaged Property shall
not be subject to any lien, charge, fine or other
liability and shall not be in danger of being
forfeited, lost or closed. Mortgagor shall not use or
occupy, or allow the use or occupancy of, the
Mortgaged Property in any manner which violates the
Lease or any Other Lease of or any other agreement
applicable to the Mortgaged Property or any
applicable law, rule, regulation or order or which
constitutes a public or private nuisance or which
makes void, voidable or cancelable, or increases the
premium of, any insurance then in force with respect
thereto.
1.25 Additional Taxes. In the event
of the enactment after the date hereof of any law of
the state in which the Mortgaged Property is located
or of any other governmental entity deducting from
the value of the Mortgaged Property for the purpose
of taxing any lien or security interest thereon, or
imposing upon Mortgagee the payment of the whole or
any part of the taxes or assessments or charges or
liens herein required to be paid by Mortgagor, or
changing in any way the laws relating to the taxation
of deeds of trust, mortgages or security agreements
or debts secured by deeds of trust, mortgages or
security agreements or the interest of the
beneficiary, mortgagee or secured party in the
property covered thereby, or the manner of collection
of such taxes, so as to adversely affect this
Mortgage or the Debt or Mortgagee, then, and in any
such event, Mortgagor, upon demand by Mortgagee,
shall pay such taxes, assessments, charges or liens,
or reimburse Mortgagee therefor; provided, however,
that if in the opinion of counsel for Mortgagee (a)
it might be unlawful to require Mortgagor to make
such payment, or (b) the making of such payment might
result in the imposition of interest beyond the
maximum amount permitted by law, then and in either
such event, Mortgagee may elect, by notice in writing
given to Mortgagor, to declare all of the Debt to be
and become due and payable in full thirty (30) days
from the giving of such notice, and, in connection
with the payment of such Debt, no prepayment premium
or fee shall be due unless, at the time of such
payment, an Event of Default or a Default shall have
occurred, which Default or Event of Default is
unrelated to the provisions of this Section 1.25, in
which event any applicable prepayment premium or fee
in accordance with the terms of the Note shall be due
and payable.
1.26 Secured Indebtedness. It is
understood and agreed that this Mortgage shall secure
payment of not only the indebtedness evidenced by the
Note but also any and all substitutions,
replacements, renewals and extensions of the Note,
any and all indebtedness and obligations arising
pursuant to the terms hereof and any and all
indebtedness and obligations arising pursuant to the
terms of any of the other Loan Documents, all of
which indebtedness is equally secured with and has
the same priority as any amounts advanced as of 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 other
Loan Documents and whether or not such advances are
obligatory or are made at the option of Mortgagee, or
otherwise, made for any purpose, within twenty (20)
years from the date hereof, and all interest accruing
thereon, shall be equally secured by this Mortgage
and shall have the same priority as all amounts, if
any, advanced as of the date hereof and shall be
subject to all of the terms and provisions of this
Mortgage.
1.27 Mortgagor's Waivers. To the
full extent permitted by law, Mortgagor agrees that
Mortgagor shall not at any time insist upon, plead,
claim or take the benefit or advantage of any law now
or hereafter in force providing for any appraisement,
valuation, stay, moratorium or extension, or any law
now or hereafter in force providing for the
reinstatement of the Debt prior to any sale of the
Mortgaged Property to be made pursuant to any
provisions contained herein or prior to the entering
of any decree, judgment or order of any court of
competent jurisdiction, or any right under any
statute to redeem all or any part of the Mortgaged
Property so sold. Mortgagor, for Mortgagor and
Mortgagor's successors and assigns, and for any and
all persons ever claiming any interest in the
Mortgaged Property, to the full extent permitted by
law, hereby knowingly, intentionally and voluntarily,
with and upon the advice of competent counsel: (a)
waives, releases, relinquishes and forever forgoes
all rights of valuation, appraisement, stay of
execution, reinstatement and notice of election or
intention to mature or declare due the Debt (except
such notices as are specifically provided for
herein); (b) waives, releases, relinquishes and
forever forgoes all right to a marshaling of the
assets of Mortgagor, including the Mortgaged
Property, to a sale in the inverse order of
alienation, or to direct the order in which any of
the Mortgaged Property shall be sold in the event of
foreclosure of the liens and security interests
hereby created and agrees that any court having
jurisdiction to foreclose such liens and security
interests may order the Mortgaged Property sold as an
entirety; and (c) waives, releases, relinquishes and
forever forgoes all rights and periods of redemption
provided under applicable law. To the full extent
permitted by law, Mortgagor shall not have or assert
any right under any statute or rule of law pertaining
to the exemption of homestead or other exemption
under any federal, state or local law now or
hereafter in effect, the administration of estates of
decedents or other matters whatever to defeat, reduce
or affect the right of Mortgagee under the terms of
this Mortgage to a sale of the Mortgaged Property,
for the collection of the Debt without any prior or
different resort for collection, or the right of
Mortgagee under the terms of this Mortgage to the
payment of the Debt out of the proceeds of sale of
the Mortgaged Property in preference to every other
claimant whatever. Furthermore, Mortgagor hereby
knowingly, intentionally and voluntarily, with and
upon the advice of competent counsel, waives,
releases, relinquishes and forever forgoes all
present and future statutes of limitations as a
defense to any action to enforce the provisions of
this Mortgage or to collect any of the Debt to the
fullest extent permitted by law. Mortgagor covenants
and agrees that upon the commencement of a voluntary
or involuntary bankruptcy proceeding by or against
Mortgagor, Mortgagor shall not seek a supplemental
stay or otherwise shall not seek pursuant to 11
U.S.C. '105 or any other provision of the Bankruptcy
Reform Act of 1978, as amended, or any other debtor
relief law (whether statutory, common law, case law,
or otherwise) of any jurisdiction whatsoever, now or
hereafter in effect, which may be or become
applicable, to stay, interdict, condition, reduce or
inhibit the ability of Mortgagee to enforce any
rights of Mortgagee against any guarantor or
indemnitor of the secured obligations or any other
party liable with respect thereto by virtue of any
indemnity, guaranty or otherwise.
1.28 SUBMISSION TO JURISDICTION; WAIVER OF
JURY TRIAL.
(a) MORTGAGOR, TO THE
FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE
ADVICE OF COMPETENT COUNSEL, (i) SUBMITS TO PERSONAL
JURISDICTION IN THE STATE IN WHICH THE PREMISES IS
LOCATED OVER ANY SUIT, ACTION OR PROCEEDING BY ANY
PERSON ARISING FROM OR RELATING TO THE NOTE, THIS
MORTGAGE OR ANY OTHER OF THE LOAN DOCUMENTS, (ii)
AGREES THAT ANY SUCH ACTION, SUIT OR PROCEEDING MAY
BE BROUGHT IN ANY STATE OR FEDERAL COURT OF COMPETENT
JURISDICTION SITTING IN THE COUNTY IN WHICH THE
PREMISES IS LOCATED, (iii) SUBMITS TO THE
JURISDICTION OF SUCH COURTS, AND (iv) TO THE FULLEST
EXTENT PERMITTED BY LAW, AGREES THAT IT WILL NOT
BRING ANY ACTION, SUIT OR PROCEEDING IN ANY OTHER
FORUM (BUT NOTHING HEREIN SHALL AFFECT THE RIGHT OF
MORTGAGEE TO BRING ANY ACTION, SUIT OR PROCEEDING IN
ANY OTHER FORUM).
(b) MORTGAGOR, TO THE
FULL EXTENT PERMITTED BY LAW, HEREBY KNOWINGLY,
INTENTIONALLY AND VOLUNTARILY, WITH AND UPON THE
ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND
FOREVER FORGOES THE RIGHT TO A TRIAL BY JURY IN ANY
ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR
IN ANY WAY RELATING TO THE DEBT OR ANY CONDUCT, ACT
OR OMISSION OF MORTGAGEE OR MORTGAGOR, OR ANY OF
THEIR RESPECTIVE DIRECTORS, OFFICERS, PARTNERS,
MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER
PERSONS AFFILIATED WITH MORTGAGEE OR MORTGAGOR, IN
EACH OR THE FOREGOING CASES, WHETHER SOUNDING IN
CONTRACT, TORT OR OTHERWISE.
1.29 Attorney-in-Fact Provisions.
With respect to any provision of this Mortgage or any
other Loan Document whereby Mortgagor grants to
Mortgagee a power-of-attorney, provided no Default or
Event of Default has occurred under this Mortgage,
Mortgagee shall first give Mortgagor written notice
at least three (3) days prior to acting under such
power, which notice shall demand that Mortgagor first
take the proposed action within such period and
advising Mortgagor that if it fails to do so,
Mortgagee will so act under the power; provided,
however, that, in the event that a Default or an
Event of Default has occurred, or if necessary to
prevent imminent death, serious injury, damage, loss,
forfeiture or diminution in value to the Mortgaged
Property or any surrounding property or to prevent
any adverse affect on Mortgagee's interest in the
Mortgaged Property, Mortgagee may act immediately and
without first giving such notice. In such event,
Mortgagee will give Mortgagor notice of such action
as soon thereafter as reasonably
practical.
1.30 Management of Property. All
Rents and Profits generated by or derived from the
Mortgaged Property shall first be utilized solely for
current expenses directly attributable to the
ownership and operation of the Mortgaged Property,
including, without limitation, current expenses
relating to Mortgagor's liabilities and obligations
with respect to this Mortgage and the other Loan
Documents, and none of the Rents and Profits
generated by or derived from the Mortgaged Property
shall be diverted by Mortgagor and utilized for any
other purposes unless all such current expenses
attributable to the ownership and operation of the
Mortgaged Property have been fully paid and
satisfied.
1.31 Hazardous Waste and Other
Substances.
(a) Mortgagor hereby
represents and warrants to
Mortgagee that, as of the date hereof: (i) to the
best of Mortgagor's knowledge, information and
belief, none of Mortgagor nor the Mortgaged Property
nor any Tenant at the Premises nor the operations
conducted thereon is in direct or indirect violation
of or otherwise exposed to any liability under any
local, state or federal law, rule or regulation or
common law duty pertaining to human health, natural
resources or the environment, including, without
limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980 (42 U.S.C.
'9601 et seq.), the Resource Conservation and
Recovery Act of 1976 (42 U.S.C. '6901 et seq.), the
Federal Water Pollution Control Act (33 U.S.C. '1251
et seq.), the Clean Air Act (42 U.S.C. '7401 et
seq.), the Emergency Planning and
Community-Right-to-Know Act (42 U.S.C. '11001 et
seq.), the Endangered Species Act (16 U.S.C. '1531 et
seq.), the Toxic Substances Control Act (15 U.S.C.
'2601 et seq.), the Occupational Safety and Health
Act (29 U.S.C. '651 et seq.) and the Hazardous
Materials Transportation Act (49 U.S.C. '1801 et
seq.), regulations promulgated pursuant to said laws,
all as amended from time to time or otherwise exposed
to any liability under any Environmental Law relating
to or affecting the Mortgaged Property, whether or
not used by or within the control of Mortgagor; (ii)
no hazardous, toxic or harmful substances, wastes,
materials, pollutants or contaminants (including,
without limitation, asbestos or asbestos-containing
materials, lead based paint, polychlorinated
biphenyls, petroleum or petroleum products or
byproducts, flammable explosives, radioactive
materials, infectious substances or raw materials
which include hazardous constituents) or any other
substances or materials which are included under or
regulated by Environmental Laws (collectively,
"Hazardous Substances") are located on, in or under
or have been handled, generated, stored, processed or
disposed of on or released or discharged from the
Mortgaged Property (including underground
contamination), except for those substances used by
Mortgagor or any Tenant in the ordinary course of
their respective businesses and in compliance with
all Environmental Statutes and where such could not
reasonably be expected to give rise to liability
under Environmental Laws; (iii) the Mortgaged
Property is not subject to any private or
governmental lien or judicial or administrative
notice or action arising under Environmental Laws;
(iv) there is no pending, nor, to Mortgagor's
knowledge, information or belief, threatened
litigation arising under Environmental Laws affecting
Mortgagor or the Mortgaged Property; there are no and
have been no existing or closed underground storage
tanks or other underground storage receptacles for
Hazardous Substances or landfills or dumps on the
Mortgaged Property; (v) Mortgagor has received no
notice of, and to the best of Mortgagor's knowledge
and belief, there exists no investigation, action,
proceeding or claim by any agency, authority or unit
of government or by any third party which could
result in any liability, penalty, sanction or
judgment under any Environmental Laws with respect to
any condition, use or operation of the Mortgaged
Property, nor does Mortgagor know of any basis for
such an investigation, action, proceeding or claim;
vi) Mortgagor has received no notice of and, to the
best of Mortgagor's knowledge and belief, there has
been no claim by any party that any use, operation or
condition of the Mortgaged Property has caused any
nuisance or any other liability or adverse condition
on any other property, nor does Mortgagor know of any
basis for such an investigation, action, proceeding
or claim.
(b) Mortgagor has not
received nor to the best of
Mortgagor's knowledge, information and belief has
there been issued, any notice, notification, demand,
request for information, citation, summons, or order
in any way relating to any actual, alleged or
potential violation or liability arising under
Environmental Laws; and
(c) Neither the
Mortgaged Property, nor to the best of Mortgagor's
knowledge, information and belief, any property to
which Mortgagor has, in connection with the
maintenance or operation of the Mortgaged Property,
directly or indirectly transported or arranged for
the transportation of any Hazardous Substances is
listed or, to the best of Mortgagor's knowledge,
information and belief, proposed for listing on the
National Priorities List promulgated pursuant to
CERCLA, on CERCLIS (as defined in CERCLA) or on any
similar federal or state list of sites requiring
environmental investigation or clean-up.
(d) Mortgagor shall
comply with all applicable
Environmental Laws. Mortgagor shall keep or cause the
Mortgaged Property to be kept free from Hazardous
Substances (except those substances used by Mortgagor
or any Tenant in the ordinary course of their
respective businesses and except in compliance with
all Environmental Laws and where such could not
reasonably be expected to give rise to liability
under Environmental Laws) and in compliance with all
Environmental Laws, Mortgagor shall not install or
use any underground storage tanks, shall expressly
prohibit the use, generation, handling, storage,
production, processing and disposal of Hazardous
Substances by all Tenants in quantities or conditions
that would violate or give rise to any obligation to
take remedial or other action under any applicable
Environmental Laws. Without limiting the generality
of the foregoing, during the term of this Mortgage,
Mortgagor shall not install in the Improvements or
permit to be installed in the Improvements any
asbestos or asbestos-containing asbestos.
(e) Mortgagor shall
promptly notify Mortgagee if Mortgagor shall become
aware of (i) the actual or potential existence of any
Hazardous Substances on the Mortgaged Property other
than those occurring in the ordinary course of
Mortgagor's business and which do not violate, or
would not otherwise give rise to liability under
Environmental Laws, (ii) any direct or indirect
violation of, or other exposure to liability under,
any Environmental Laws, (iii) any lien, action or
notice affecting the Mortgaged Property or Mortgagor
resulting from any violation or alleged violation of
or liability or alleged liability under any
Environmental Laws, (iv) the institution of any
investigation, inquiry or proceeding concerning
Mortgagor or the Mortgaged Property pursuant to any
Environmental Laws or otherwise relating to Hazardous
Substances, or (v) the discovery of any occurrence,
condition or state of facts which would render any
representation or warranty contained in this Mortgage
incorrect in any respect if made at the time of such
discovery. Immediately upon receipt of same,
Mortgagor, shall deliver to Mortgagee copies of any
and all requests for information, complaints,
citations, summonses, orders, notices, reports or
other communications, documents or instruments in any
way relating to any actual, alleged or potential
violation or liability of any nature whatsoever
arising under Environmental Laws and relating to the
Mortgaged Property or to Mortgagor. Indemnitors shall
remedy or cause to be remedied in a timely manner
(and in any event within the time period permitted by
applicable Environmental Laws) any violation of
Environmental Laws or any condition that could give
rise liability under Environmental Laws. Without
limiting the foregoing, Mortgagor shall, promptly and
regardless of the source of the contamination or
threat to the environment or human health, at its own
expense, take all actions as shall be necessary or
prudent, for the clean-up of any and all portions of
the Mortgaged Property or other affected property,
including, without limitation, all investigative,
monitoring, removal, containment and remedial actions
in accordance with all applicable Environmental Laws
(and in all events in a manner satisfactory to
Mortgagee) and shall further pay or cause to be paid,
at no expense to Mortgagee, all clean-up,
administrative and enforcement costs of applicable
governmental agencies which may be asserted against
the Mortgaged Property. In the event Mortgagor fails
to do so, Mortgagee may, but shall not be obligated
to, cause the Mortgaged Property or other affected
property to be freed from any Hazardous Substances or
otherwise brought into conformance with Environmental
Laws and any and all costs and expenses incurred by
Mortgagee in connection therewith, together with
interest thereon at the Default Interest Rate from
the date incurred by Mortgagee until actually paid by
Mortgagor, shall be immediately paid by Mortgagor on
demand and shall be secured by this Mortgage and by
all of the other Loan Documents securing all or any
part of the Debt. Mortgagor hereby grants to
Mortgagee and its agents and employees access to the
Mortgaged Property and a license to remove any items
deemed by Mortgagee to be Hazardous Substances and to
do all things Mortgagee shall deem necessary to bring
the Mortgaged Property into conformance with
Environmental Laws.
(f) Mortgagor covenants
and agrees, at Mortgagor's sole
cost and expense, to indemnify, defend (at trial and
appellate levels, and with attorneys, consultants and
experts acceptable to Mortgagee), and hold Mortgagee
harmless from and against any and all liens, damages
(including without limitation, punitive or exemplary
damages), losses, liabilities (including, without
limitation, strict liability), obligations,
settlement payments, penalties, fines, assessments,
citations, directives, claims, litigation, demands,
defenses, judgments, suits, proceedings, costs,
disbursements or expenses of any kind or of any
nature whatsoever (including, without limitation,
reasonable attorneys', consultants' and experts' fees
and disbursements actually incurred in investigating,
defending, settling or prosecuting any claim,
litigation or proceeding) which may at any time be
imposed upon, incurred by or asserted or awarded
against Mortgagee or the Mortgaged Property, and
arising directly or indirectly from or out of: (i)
any violation or alleged violation of, or liability
or alleged liability under, any Environmental Law;
(ii) the presence, release or threat of release of or
exposure to any Hazardous Substances on, in, under or
affecting all or any portion of the Mortgaged
Property or any surrounding areas, regardless of
whether or not caused by or within the control of
Mortgagor; (iii) any transport, treatment, recycling,
storage, disposal or arrangement therefor of
Hazardous Substances whether on the Mortgaged
Property, originating from the Mortgaged Property, or
otherwise associated with Mortgagor or any operations
conducted on the Mortgaged Property at any time; (iv)
the failure by Mortgagor to comply fully with the
terms and conditions of this Section 1.31; (v) the
breach of any representation or warranty contained in
this Section 1.31; (vi) the enforcement of this
Section 1.31, including, without limitation, the cost
of assessment, investigation, containment, removal
and/or remediation of any and all Hazardous
Substances from all or any portion of the Mortgaged
Property or any surrounding areas, the cost of any
actions taken in response to the presence, release or
threat of release of any Hazardous Substances on, in,
under or affecting any portion of the Mortgaged
Property or any surrounding areas to prevent or
minimize such release or threat of release so that it
does not migrate or otherwise cause or threaten
danger to present or future public health, safety,
welfare or the environment, and costs incurred to
comply with Environmental Laws in connection with all
or any portion of the Mortgaged Property or any
surrounding areas. The indemnity set forth in this
Section 1.31 shall also include any diminution in the
value of the security afforded by the Mortgaged
Property or any future reduction in the sales price
of the Mortgaged Property by reason of any matter set
forth in this Section 1.31. The foregoing indemnity
shall specifically not include any such costs
relating to Hazardous Substances which are initially
placed on, in or under the Mortgaged Property after
foreclosure or other taking of title to the Mortgaged
Property by Mortgagee or its successor or assigns.
Mortgagee's rights under this Section shall survive
payment in full of the Debt and shall be in addition
to all other rights of Mortgagee under this Mortgage,
the Note and the other Loan Documents.
(g) Upon Mortgagee's
request, at any time after the occurrence of an Event
of Default or at such other time as Mortgagee has
reasonable grounds to believe that Hazardous
Substances are or have been released, stored or
disposed of on the Mortgaged Property, or on property
contiguous with the Mortgaged Property, or that the
Mortgaged Property may be in violation of the
Environmental Laws, Mortgagor shall perform or cause
to be performed, at Mortgagor's sole cost and expense
and in scope, form and substance satisfactory to
Mortgagee, an inspection or audit of the Mortgaged
Property prepared by a hydrogeologist or
environmental engineer or other appropriate
consultant approved by Mortgagee indicating the
presence or absence of Hazardous Substances on the
Mortgaged Property, the compliance or non-compliance
status of the Mortgaged Property and the operations
conducted thereon with applicable Environmental Laws,
or an inspection or audit of the Mortgaged Property
prepared by an engineering or consulting firm
approved by Mortgagee indicating the presence or
absence of friable asbestos or substances containing
asbestos or lead or substances containing lead or
lead based paint ("Lead Based Paint") on the
Mortgaged Property. If Mortgagor fails to provide
reports of such inspection or audit within thirty
(30) days after such request, Mortgagee may order the
same, and Mortgagor hereby grants to Mortgagee and
its employees and agents access to the Mortgaged
Property and an irrevocable license to undertake such
inspection or audit. The cost of such inspection or
audit, together with interest thereon at the Default
Interest Rate from the date incurred by Mortgagee
until actually paid by Mortgagor, shall be
immediately paid by Mortgagor on demand and shall be
secured by this Mortgage and by all of the other Loan
Documents securing all or any part of the
Debt.
(h) Reference is made
to that certain Environmental
Indemnity Agreement of even date herewith by and
among Mortgagor, Tenant and Mortgagee (the
"Environmental Indemnity Agreement"). The provisions
of this Mortgage and the Environmental Indemnity
Agreement shall be read together to maximize the
coverage with respect to the subject matter thereof,
as determined by Mortgagee.
(i) Mortgagor covenants
and agrees to institute, within
thirty (30) days after the discovery of any asbestos
containing materials ("ACM") in the Improvements and
written request from Mortgagee, an operations and
maintenance program (the "Maintenance Program")
designed by an environmental consultant, satisfactory
to Mortgagee, with respect to ACM's, consistent with
"Guidelines for Controlling Asbestos-Containing
Materials in Buildings" (USEPA, 1985) and other
relevant guidelines, and such Maintenance Program
will thereafter continuously remain in effect until
the Debt secured hereby is repaid in full. In
furtherance of the foregoing, Mortgagor shall
thereafter inspect and maintain all ACM's on a
regular basis and ensure that all ACM's shall be
maintained in a condition that prevents exposure of
residents to ACM's at all times. Without limiting the
generality of the preceding sentence, Mortgagee may
require (i) periodic notices or reports to Mortgagee
in form, substance and at such intervals as Mortgagee
may specify, (ii) an amendment to such operations and
maintenance program to address changing
circumstances, laws or other matters, (iii) at
Mortgagor's sole expense, supplemental examination of
the Mortgaged Property by consultants specified by
Mortgagee, and (iv) variation of the operations and
maintenance program in response to the reports
provided by any such consultants.
(j) Intentionally omitted.
(k) Intentionally omitted.
1.32 Indemnification; Subrogation.
(a) Mortgagor shall
indemnify, defend and hold Mortgagee harmless
against: (i) any and all claims for brokerage,
leasing, finders or similar fees which may be made
relating to the Mortgaged Property or the Debt, and
(ii) any and all liability, obligations, losses,
damages, penalties, claims, actions, suits, costs and
expenses (including Mortgagee's reasonable attorneys'
fees) of whatever kind or nature which may be
asserted against, imposed on or incurred by Mortgagee
in connection with the Debt, this Mortgage, the
Mortgaged Property, or any part thereof, or the
exercise by Mortgagee of any rights or remedies
granted to it under this Mortgage; provided, however,
that nothing herein shall be construed to obligate
Mortgagor to indemnify, defend and hold harmless
Mortgagee from and against any and all liabilities,
obligations, losses, damages, penalties, claims,
actions, suits, costs and expenses enacted against,
imposed on or incurred by Mortgagee by reason of
Mortgagee's willful misconduct or gross
negligence.
(b) If Mortgagee is
made a party defendant to any litigation or any claim
is threatened or brought against Mortgagee concerning
the Debt, this Mortgage, the Mortgaged Property, or
any part thereof, or any interest therein, or the
construction, maintenance, operation or occupancy or
use thereof, then Mortgagor shall indemnify, defend
and hold Mortgagee harmless from and against all
liability by reason of said litigation or claims,
including reasonable attorneys' fees and expenses
incurred by Mortgagee in any such litigation or
claim, whether or not any such litigation or claim is
prosecuted to judgment. If Mortgagee commences an
action against Mortgagor to enforce any of the terms
hereof or to prosecute any breach by Mortgagor of any
of the terms hereof or to recover any sum secured
hereby, Mortgagor shall pay to Mortgagee its
reasonable attorneys' fees and expenses. The right to
such attorneys' fees and expenses shall be deemed to
have accrued on the commencement of such action, and
shall be enforceable whether or not such action is
prosecuted to judgment. If Mortgagor breaches any
term of this Mortgage, Mortgagee may engage the
services of an attorney or attorneys to protect its
rights hereunder, and in the event of such engagement
following any breach by Mortgagor, Mortgagor shall
pay Mortgagee reasonable attorneys' fees and expenses
incurred by Mortgagee, whether or not an action is
actually commenced against Mortgagor by reason of
such breach. All references to "attorneys" in this
Subsection and elsewhere in this Mortgage shall
include, without limitation, any attorney or law firm
engaged by Mortgagee and Mortgagee's in-house
counsel, and all references to "fees and expenses" in
this Subsection and elsewhere in this Mortgage shall
include, without limitation, any fees of such
attorney or law firm, any appellate counsel fees, if
applicable, and any allocation charges and allocation
costs of Mortgagee's in-house counsel.
(c) A waiver of
subrogation shall be obtained by Mortgagor from its
insurance carrier and, consequently, Mortgagor waives
any and all right to claim or recover against
Mortgagee, its officers, employees, agents and
representatives, for loss of or damage to Mortgagor,
the Mortgaged Property, Mortgagor's property or the
property of others under Mortgagor's control from any
cause insured against or required to be insured
against by the provisions of this Mortgage.
1.33 Covenants with Respect to
Indebtedness, Operations, Fundamental Changes of
Mortgagor. Mortgagor hereby represents, warrants and
covenants as of the date hereof and until such time
as the Debt is paid in full, that Mortgagor:
(a) will not amend,
modify or otherwise change its partnership
certificate, partnership agreement, articles of
incorporation, by-laws, operating agreement, articles
of organization, or other formation agreement or
document, as applicable, in any material term or
manner, or in a manner which adversely affects
Mortgagor's existence as a single purpose entity;
(b) will not liquidate
or dissolve (or suffer any
liquidation or dissolution), or enter into any
transaction of merger or consolidation, or acquire by
purchase or otherwise all or substantially all the
business or assets of, or any stock or other evidence
of beneficial ownership of any entity;
(c) has not and will
not guarantee, pledge its assets
for the benefit of, or otherwise become liable
on or in connection with, any
obligation of any other person or entity;
(d) does not own and
will not own any asset other than (i) the Mortgaged
Property, and (ii) incidental personal property
necessary for the operation of the Mortgaged
Property;
(e) is not engaged and
will not engage, either directly or indirectly, in
any business other than the ownership, management and
operation of the Mortgaged Property;
(f) will not enter
into any contract or agreement with any general
partner, principal, affiliate or member of Mortgagor,
as applicable, or any affiliate of any general
partner, principal or member of Mortgagor, except
upon terms and conditions that are intrinsically fair
and substantially similar to those that would be
available on an arms-length basis with third parties
other than an affiliate;
(g) has not incurred
and will not incur any debt, secured or unsecured,
direct or contingent (including guaranteeing any
obligation), other than (i) the Debt, and (ii)
affiliate advances or trade payables or accrued
expenses incurred in the ordinary course of business
of operating the Mortgaged Property, and no other
debt will be secured (senior, subordinate or pari
passu) by the Mortgaged Property;
(h) has not made
and will not make any loans or advances to
any third party (including any affiliate);
(i) is and will be
solvent and pay its debts from its
assets as the same shall become due;
(j) has done or
caused to be done and will do all
things necessary to preserve its existence,
and will observe all formalities
applicable to it;
(k) will conduct and
operate its business in its own
name and as presently conducted and operated;
(l) will maintain
financial statements, books and records and bank
accounts separate from those of its affiliates,
including, without limitation, its general partners
or members, as applicable;
(m) will be, and at
all times will hold itself out to the public as, a
legal entity separate and distinct from any other
entity (including, without limitation, any affiliate,
general partner, or member, as applicable, or any
affiliate of any general partner or member of
Mortgagor, as applicable);
(n) Intentionally omitted;
(o) will maintain
adequate capital for the normal
obligations reasonably foreseeable in a business
of its size and character and in
light of its contemplated business operations;
(p) will establish
and maintain an office through which its business
will be conducted separate and apart from those of
its affiliates and shall allocate fairly and
reasonably any overhead and expense for shared office
space;
(q) will not commingle
the funds and other assets of
Mortgagor with those of any general partner, member,
affiliate, principal or any other
person;
(r) has and will
maintain its assets in such a manner that it is not
costly or difficult to segregate, ascertain or
identify its individual assets from those of any
affiliate or any other person;
(s) does not and
will not hold itself out to be
responsible for the debts or obligations of any other
person;
(t) will pay any
liabilities out of its own funds,
including salaries of its employees, not funds of any
affiliate; and
(u) will use
stationery, invoices, and checks separate
from its affiliates.
1.34 Repair and Remediation Reserve.
Prior to the execution of this Mortgage, Mortgagee
has caused the Mortgaged Property to be inspected and
such inspection has revealed that the Mortgaged
Property is in need of certain maintenance, repairs
and/or remedial or corrective work. Contemporaneously
with the execution hereof, Mortgagor has established
with the Mortgagee a reserve in the amount of
$26,275.00 (the "Repair and Remediation Reserve") by
depositing such amount with Mortgagee. Mortgagor
shall cause each of the items described in that
certain Engineering Report (the "Engineering Report")
entitled Property Condition Report, dated June 5,
1997 and prepared by Inspection and Valuation
International (the "Deferred Maintenance") to be
completed, performed, remediated and corrected to the
satisfaction of Mortgagee and as necessary to bring
the Mortgaged Property into compliance with all
applicable laws, ordinances, rules and regulations on
or before the expiration of six (6) months after the
effective date hereof, as such time period may be
extended by Mortgagee in its sole discretion. So long
as no Event of Default has occurred, all sums in the
Repair and Remediation Reserve shall be held by
Mortgagee in the Repair and Remediation Reserve to
pay the costs and expenses of completing the Deferred
Maintenance. So long as no Event of Default has
occurred, Mortgagee shall, to the extent funds are
available for such purpose in the Repair and
Remediation Reserve, disburse to Mortgagor the amount
paid or incurred by Mortgagor in completing,
performing, remediating or correcting the Deferred
Maintenance upon (a) the receipt by Mortgagee of a
written request from Mortgagor for disbursement from
the Repair and Remediation Reserve and a
certification by Mortgagor in a form as may be
required by Mortgagee that the applicable item of
Deferred Maintenance has been completed in accordance
with the terms of this Mortgage, (b) delivery to
Mortgagee of invoices, receipts or other evidence
satisfactory to Mortgagee verifying the costs of the
Deferred Maintenance to be reimbursed, (c) delivery
to Mortgagee of a certification from an inspecting
architect, engineer or other consultant reasonably
acceptable to Mortgagee describing the completed
work, verifying the completion of the work and the
value of the completed work and, if applicable,
certifying that the Mortgaged Property is, as a
result of such work, in compliance with all
applicable laws, ordinances, rules and regulations
relating to the Deferred Maintenance so performed,
and (d) delivery to Mortgagee of affidavits, lien
waivers or other evidence reasonably satisfactory to
Mortgagee showing that all materialmen, laborers,
subcontractors and any other parties who might or
could claim statutory or common law liens and are
furnishing or have furnished materials or labor to
the Mortgaged Property have been paid all amounts due
for such labor and materials furnished to the
Mortgaged Property. Mortgagee shall not be required
to make advances from the Repair and Remediation
Reserve more frequently than once in any ninety (90)
day period. In making any payment from the Repair and
Remediation Reserve, Mortgagee shall be entitled to
rely on such request from Mortgagor without any
inquiry into the accuracy, validity or contestability
of any such amount. No interest on the funds
contained in the Repair and Remediation Reserve shall
be paid by Mortgagee to Mortgagor. Mortgagor hereby
grants to Mortgagee a power-of-attorney, coupled with
an interest, to cause the Deferred Maintenance to be
completed, performed, remediated and corrected to the
satisfaction of Mortgagee upon Mortgagor's failure to
do so in accordance with the terms and conditions of
this Section 1.34, and to apply the amounts on
deposit in the Repair and Remediation Reserve to the
costs associated therewith, all as Mortgagee may
determine in its sole and absolute discretion but
without obligation to do so.
ARTICLE II
EVENTS OF DEFAULT
2.1 Events of Default. The
occurrence of any of the following
events shall be an Event of Default hereunder:
(a) Mortgagor fails
to pay any money to Mortgagee required hereunder at
the time or within any applicable grace period set
forth herein, or if no grace period is set forth
herein, then within seven (7) days of the date such
payment is due (except those regarding payments to be
made under the Note, which failure is subject to any
grace periods set forth in the Note).
(b) Mortgagor fails
to provide insurance as required by Section 1.4
hereof or fails to perform any covenant, agreement,
obligation, term or condition set forth in Section
1.31 or Section 1.33 hereof.
(c) Mortgagor fails
to perform any other covenant, agreement, obligation,
term or condition set forth herein, other than those
otherwise described in this Section 2.1, and, to the
extent such failure or default is susceptible of
being cured, the continuance of such failure or
default for thirty (30) days after written notice
thereof from Mortgagee to Mortgagor; provided,
however, that if such default is susceptible of cure
but such cure cannot be accomplished with reasonable
diligence within said period of time, and if
Mortgagor commences to cure such default promptly
after receipt of notice thereof from Mortgagee, and
thereafter prosecutes the curing of such default with
reasonable diligence, such period of time shall be
extended for such period of time as may be necessary
to cure such default with reasonable diligence, but
not to exceed an additional sixty (60) days.
(d) Any representation
or warranty made herein, in or
in connection with any application or commitment
relating to the loan evidenced by the Note, or in any
of the other Loan Documents to Mortgagee by
Mortgagor, by any principal, general partner, manager
or member in Mortgagor, or by any Indemnitor is
determined by Mortgagee to have been false or
misleading in any material respect at the time made.
(e) There shall be
a sale, conveyance, disposition, alienation,
hypothecation, leasing, assignment, pledge, mortgage,
granting of a security interest in or other transfer
or further encumbrancing of the Mortgaged Property,
Mortgagor or its general partners or managing
members, or any portion thereof or any interest
therein, in violation of Section 1.13 hereof.
(f) A default occurs
under any of the other Loan
Documents which has not been cured within any
applicable grace or cure period therein provided.
(g) Mortgagor, any
principal, general partner or managing member in
Mortgagor or any Indemnitor becomes insolvent, or
makes a transfer in fraud of creditors, or makes an
assignment for the benefit of creditors, or files a
petition in bankruptcy, or is voluntarily adjudicated
insolvent or bankrupt or admits in writing the
inability to pay its debts as they mature, or
petitions or applies to any tribunal for or consents
to or fails to contest the appointment of a receiver,
trustee, custodian or similar officer for Mortgagor,
for any such principal, general partner or managing
member of Mortgagor or for any Indemnitor or for a
substantial part of the assets of Mortgagor, of any
such principal, general partner or managing member of
Mortgagor or of any Indemnitor, or commences any
case, proceeding or other action under any
bankruptcy, reorganization, arrangement, readjustment
or debt, dissolution or liquidation law or statute of
any jurisdiction, whether now or hereafter in effect.
(h) A petition is
filed or any case, proceeding or other action is
commenced against Mortgagor, against any principal,
general partner or managing member of Mortgagor or
against any Indemnitor seeking to have an order for
relief entered against it as debtor or seeking
reorganization, arrangement, adjustment, liquidation,
dissolution or composition of it or its debts or
other relief under any law relating to bankruptcy,
insolvency, arrangement, reorganization, receivership
or other debtor relief under any law or statute of
any jurisdiction, whether now or hereafter in effect,
or a court of competent jurisdiction enters an order
for relief against Mortgagor, against any principal,
general partner or managing member of Mortgagor or
against any Indemnitor, as debtor, or an order,
judgment or decree is entered appointing, with or
without the consent of Mortgagor, of any such
principal, general partner or managing member of
Mortgagor or of any Indemnitor, a receiver, trustee,
custodian or similar officer for Mortgagor, for any
such principal, general partner or managing member of
Mortgagor or for any Indemnitor, or for any
substantial part of any of the properties of
Mortgagor, of any such principal, general partner or
managing member of Mortgagor or of any Indemnitor,
and if any such event shall occur, such petition,
case, proceeding, action, order, judgment or decree
is not dismissed within sixty (60) days after being
commenced.
(i) The Mortgaged
Property or any part thereof is taken on execution or
other process of law in any action against Mortgagor.
(j) Mortgagor abandons
all or a portion of the Mortgaged Property.
(k) The holder of any
lien or security interest on the Mortgaged Property
(without implying the consent of Mortgagee to the
existence or creation of any such lien or security
interest), whether superior or subordinate to this
Mortgage or any of the other Loan Documents, declares
a default and such default is not cured within any
applicable grace or cure period set forth in the
applicable document or such holder institutes
foreclosure or other proceedings for the enforcement
of its remedies thereunder.
(l) The Mortgaged
Property, or any part thereof, is subjected to waste
or to removal, demolition or material alteration so
that the value of the Mortgaged Property is
materially diminished thereby and Mortgagee
determines that it is not adequately protected from
any loss, damage or risk associated therewith.
(m) Any dissolution,
termination, partial or complete liquidation, merger
or consolidation of Mortgagor, any of its principals,
any general partner or any managing member, or any
Indemnitor.
ARTICLE III
REMEDIES
3.1 Remedies Available. If there
shall occur an Event of Default under this Mortgage,
then this Mortgage is subject to foreclosure as
provided by law and Mortgagee may, at its option and
by or through a trustee, nominee, assignee or
otherwise, to the fullest extent permitted by law,
exercise any or all of the following rights, remedies
and recourses, either successively or
concurrently:
(a) Acceleration.
Accelerate the maturity date of the Note and declare
any or all of the Debt to be immediately due and
payable without any presentment, demand, protest,
notice or action of any kind whatever (each of which
is hereby expressly waived by Mortgagor), whereupon
the same shall become immediately due and payable.
Upon any such acceleration, payment of such
accelerated amount shall constitute a prepayment of
the principal balance of the Note and any applicable
prepayment fee provided for in the Note shall then be
immediately due and payable.
(b) Entry on the
Mortgaged Property. Either in person or by agent,
with or without bringing any action or proceeding, or
by a receiver appointed by a court and without regard
to the adequacy of its security, enter upon and take
possession of the Mortgaged Property, or any part
thereof, without force or with such force as is
permitted by law and without notice or process or
with such notice or process as is required by law,
unless such notice and process is waivable, in which
case Mortgagor hereby waives such notice and process,
and do any and all acts and perform any and all work
which may be desirable or necessary in Mortgagee's
judgment to complete any unfinished construction on
the Premises, to preserve the value, marketability or
rentability of the Mortgaged Property, to increase
the income therefrom, to manage and operate the
Mortgaged Property or to protect the security hereof,
and all sums expended by Mortgagee therefor, together
with interest thereon at the Default Interest Rate,
shall be immediately due and payable to Mortgagee by
Mortgagor on demand and shall be secured hereby and
by all of the other Loan Documents securing all or
any part of the Debt.
(c) Collect Rents.
With or without taking possession of the Mortgaged
Property, sue or otherwise collect the Rents,
including those past due and unpaid.
(d) Appointment of
Receiver. Upon, or at any time prior or after,
initiating the exercise of any power of sale,
instituting any judicial foreclosure or instituting
any other foreclosure of the liens and security
interests provided for herein or any other legal
proceedings hereunder, make application to a court of
competent jurisdiction for appointment of a receiver
for all or any part of the Mortgaged Property, as a
matter of strict right and without notice to
Mortgagor and without regard to the adequacy of the
Mortgaged Property for the repayment of the Debt or
the solvency of Mortgagor or any person or persons
liable for the payment of the Debt, and Mortgagor
does hereby irrevocably consent to such appointment,
waive any and all notices of and defenses to such
appointment and agree not to oppose any application
therefor by Mortgagee, but nothing herein is to be
construed to deprive Mortgagee of any other right,
remedy or privilege Mortgagee may now have under the
law to have a receiver appointed, provided, however,
that the appointment of such receiver, trustee or
other appointee by virtue of any court order, statute
or regulation shall not impair or in any manner
prejudice the rights of Mortgagee to receive payment
of the Rents pursuant to other terms and provisions
hereof. Any such receiver shall have all of the usual
powers and duties of receivers in similar cases,
including, without limitation, the full power to
hold, develop, rent, lease, manage, maintain, operate
and otherwise use or permit the use of the Mortgaged
Property upon such terms and conditions as said
receiver may deem to be prudent and reasonable under
the circumstances as more fully set forth in Section
3.3 below. Such receivership shall, at the option of
Mortgagee, continue until full payment of all of the
Debt or until title to the Mortgaged Property shall
have passed by foreclosure sale under this Mortgage
or deed in lieu of foreclosure.
(e) Foreclosure.
Immediately commence an action to foreclose this
Mortgage or to specifically enforce its provisions
with respect to any of the Debt, pursuant to the
statutes in such case made and provided, and sell the
Mortgaged Property or cause the Mortgaged Property to
be sold in accordance with the requirements and
procedures provided by said statutes in a single
parcel or in several parcels at the option of
Mortgagee. In the event foreclosure proceedings are
instituted by Mortgagee, all expenses incident to
such proceedings, including, but not limited to,
reasonable attorneys' fees and costs, shall be paid
by Mortgagor and secured by this Mortgage and by all
of the other Loan Documents securing all or any part
of the Debt. The Debt and all other obligations
secured by this Mortgage, including, without
limitation, interest at the Default Interest Rate any
prepayment charge, fee or premium required to be paid
under the Note in order to prepay principal (to the
extent permitted by applicable law), reasonable
attorneys' fees and any other amounts due and unpaid
to Mortgagee under the Loan Documents, may be bid by
Mortgagee in the event of a foreclosure sale
hereunder. In the event of a judicial sale pursuant
to a foreclosure decree, it is understood and agreed
that Mortgagee or its assigns may become the
purchaser of the Mortgaged Property or any part
thereof.
(f) Judicial Remedies.
Proceed by suit or suits, at
law or in equity, instituted by or on behalf of
Mortgagee, upon written request of Mortgagee, to
enforce the payment of the Debt or the other
obligations of Mortgagor hereunder or pursuant to the
Loan Documents, to foreclose the liens and security
interests of this Mortgage as against all or any part
of the Mortgaged Property, and to have all or any
part of the Mortgaged Property sold under the
judgment or decree of a court of competent
jurisdiction. This remedy shall be cumulative of any
other non-judicial remedies available to Mortgagee
with respect to the Loan Documents. Proceeding with
the request or receiving a judgment for legal relief
shall not be or be deemed to be an election of
remedies or bar any available non-judicial remedy of
Mortgagee.
(g) Intentionally
omitted.
(h) Other.
Exercise any other right or remedy available
hereunder, under any of the other Loan Documents or
at law or in equity.
3.2 Application of Proceeds. To the
fullest extent permitted by law, the proceeds of any
sale under this Mortgage shall be applied, to the
extent funds are so available, to the following items
in such order as Mortgagee in its discretion may
determine:
(i) To payment of the
reasonable costs, expenses and fees of taking
possession of the Mortgaged Property, and of holding,
operating, maintaining, using, leasing, repairing,
improving, marketing and selling the same and of
otherwise enforcing Mortgagee's rights and remedies
hereunder and under the other Loan Documents,
including, but not limited to, receivers' fees, court
costs, attorneys', accountants', appraisers',
managers' and other professional fees, title charges
and transfer taxes.
(j) To payment of all
sums expended by Mortgagee under the terms of any of
the Loan Documents and not yet repaid, together with
interest on such sums at the Default Interest Rate.
(k) To payment of the
Debt and all other obligations
secured by this Mortgage, including, without
limitation, interest at the Default Interest Rate
and, to the extent permitted by applicable law, any
prepayment fee, charge or premium required to be paid
under the Note in order to prepay principal, in any
order that Mortgagee chooses in its sole discretion.
(l) The remainder,
if any, of such funds shall be
disbursed to Mortgagor or to the person or persons
legally entitled thereto.
3.3 Right and Authority of Receiver
or Mortgagee in the Event of Default; Power of
Attorney. Upon the occurrence of an Event of Default,
and entry upon the Mortgaged Property pursuant to
Section 3.1(b) hereof or appointment of a receiver
pursuant to Section 3.1(d) hereof, and under such
terms and conditions as may be prudent and reasonable
under the circumstances in Mortgagee's or the
receiver's sole discretion, all at Mortgagor's
expense, Mortgagee or said receiver, or such other
persons or entities as they shall hire, direct or
engage, as the case may be, may do or permit one or
more of the following, successively or concurrently:
(a) enter upon and take possession and control of any
and all of the Mortgaged Property; (b) take and
maintain possession of all documents, books, records,
papers and accounts relating to the Mortgaged
Property; (c) exclude Mortgagor and its agents,
servants and employees wholly from the Mortgaged
Property; (d) manage and operate the Mortgaged
Property; (e) preserve and maintain the Mortgaged
Property; (f) make repairs and alterations to the
Mortgaged Property; (g) complete any construction or
repair of the Improvements, with such changes,
additions or modifications of the plans and
specifications or intended disposition and use of the
Improvements as Mortgagee may in its sole discretion
deem appropriate or desirable to place the Mortgaged
Property in such condition as will, in Mortgagee's
sole discretion, make it or any part thereof readily
marketable or rentable; (h) conduct a marketing or
leasing program with respect to the Mortgaged
Property, or employ a marketing or leasing agent or
agents to do so, directed to the leasing or sale of
the Mortgaged Property under such terms and
conditions as Mortgagee may in its sole discretion
deem appropriate or desirable; (i) employ such
contractors, subcontractors, materialmen, architects,
engineers, consultants, managers, brokers, marketing
agents, or other employees, agents, independent
contractors or professionals, as Mortgagee may in its
sole discretion deem appropriate or desirable to
implement and effectuate the rights and powers herein
granted; (j) execute and deliver, in the name of
Mortgagee as attorney-in-fact and agent of Mortgagor
or in its own name as Mortgagee, such documents and
instruments as are necessary or appropriate to
consummate authorized transactions; (k) enter such
leases, whether of real or personal property, or
tenancy agreements, under such terms and conditions
as Mortgagee may in its sole discretion deem
appropriate or desirable; (1) collect and receive the
Rents from the Mortgaged Property; (m) eject tenants
or repossess personal property, as provided by law,
for breaches of the conditions of their leases or
other agreements; (n) sue for unpaid Rents, payments,
income or proceeds in the name of Mortgagor or
Mortgagee; (o) maintain actions in forcible entry and
detainer, ejectment for possession and actions in
distress for rent; (p) compromise or give acquittance
for Rents, payments, income or proceeds that may
become due; (q) delegate or assign any and all rights
and powers given to Mortgagee by this Mortgage; and
(r) do any acts which Mortgagee in its sole
discretion deems appropriate or desirable to protect
the security hereof and use such measures, legal or
equitable, as Mortgagee may in its sole discretion
deem appropriate or desirable to implement and
effectuate the provisions of this Mortgage. This
Mortgage shall constitute a direction to and full
authority to any lessee, or other third party who has
heretofore dealt or contracted or may hereafter deal
or contract with Mortgagor or Mortgagee, at the
request of Mortgagee, to pay all amounts owing under
any lease, contract, concession, license or other
agreement to Mortgagee without proof of the Event of
Default relied upon. Any such lessee or third party
is hereby irrevocably authorized to rely upon and
comply with (and shall be fully protected by
Mortgagor in so doing) any request, notice or demand
by Mortgagee for the payment to Mortgagee of any
Rents or other sums which may be or thereafter become
due under its lease, contract, concession, license or
other agreement, or for the performance of any
undertakings under any such lease, contract,
concession, license or other agreement, and shall
have no right or duty to inquire whether any Event of
Default under this Mortgage or under any of the other
Loan Documents has actually occurred or is then
existing. Mortgagor hereby constitutes and appoints
Mortgagee, its assignees, successors, transferees and
nominees, as Mortgagor's true and lawful
attorney-in-fact and agent, with full power of
substitution in the Mortgaged Property, in
Mortgagor's name, place and stead, to do or permit
any one or more of the foregoing described rights,
remedies, powers and authorities, successively or
concurrently, and said power of attorney shall be
deemed a power coupled with an interest and
irrevocable so long as any portion of the Debt is
outstanding. Any money advanced by Mortgagee in
connection with any action taken under this Section
3.3, together with interest thereon at the Default
Interest Rate from the date of making such
advancement by Mortgagee until actually paid by
Mortgagor, shall be a demand obligation owing by
Mortgagor to Mortgagee and shall be secured by this
Mortgage and by every other instrument securing all
or any portion of the Debt.
a)
3.4 Occupancy After Foreclosure. In
the event there is a foreclosure sale hereunder and
at the time of such sale, Mortgagor or Mortgagor's
representatives, successors or assigns, or any other
persons claiming any interest in the Mortgaged
Property by, through or under Mortgagor (except
tenants of space in the Improvements subject to
leases entered into prior to the date hereof), are
occupying or using the Mortgaged Property, or any
part thereof, then, to the extent not prohibited by
applicable law, each and all shall, at the option of
Mortgagee or the purchaser at such sale, as the case
may be, immediately become the tenant of the
purchaser at such sale, which tenancy shall be a
tenancy from day-to-day, terminable at the will of
either landlord or tenant, at a reasonable rental per
day based upon the value of the Mortgaged Property
occupied or used, such rental to be due daily to the
purchaser. Further, to the extent permitted by
applicable law, in the event the tenant fails to
surrender possession of the Mortgaged Property upon
the termination of such tenancy, the purchaser shall
be entitled to institute and maintain an action for
unlawful detainer of the Mortgaged Property in the
appropriate court of the county in which the Premises
is located.
3.5 Notice to Account Debtors.
Mortgagee may, at any time after an Event of Default,
notify the account debtors and obligors of any
accounts, chattel paper, negotiable instruments or
other evidences of indebtedness to Mortgagor included
in the Mortgaged Property to pay Mortgagee directly.
Mortgagor shall at any time or from time to time upon
the request of Mortgagee provide to Mortgagee a
current list of all such account debtors and obligors
and their addresses.
3.6 Cumulative Remedies. All
remedies contained in this Mortgage are cumulative
and Mortgagee shall also have all other remedies
provided at law and in equity or in any other Loan
Documents. Such remedies may be pursued separately,
successively or concurrently at the sole subjective
direction of Mortgagee and may be exercised in any
order and as often as occasion therefor shall arise.
No act of Mortgagee shall be construed as an election
to proceed under any particular provisions of this
Mortgage to the exclusion of any other provision of
this Mortgage or as an election of remedies to the
exclusion of any other remedy which may then or
thereafter be available to Mortgagee. No delay or
failure by Mortgagee to exercise any right or remedy
under this Mortgage shall be construed to be a waiver
of that right or remedy or of any Event of Default.
Mortgagee may exercise any one or more of its rights
and remedies at its option without regard to the
adequacy of its security.
3.7 Payment of Expenses. Mortgagor
shall pay on demand all of Mortgagee's expenses
incurred in any efforts to enforce any terms of this
Mortgage, whether or not any lawsuit is filed and
whether or not foreclosure is commenced but not
completed, including, but not limited to, reasonable
legal fees and disbursements, foreclosure costs and
title charges, together with interest thereon from
and after the date incurred by Mortgagee until
actually paid by Mortgagor at the Default Interest
Rate, and the same shall be secured by this Mortgage
and by all of the other Loan Documents securing all
or any part of the Debt.
ARTICLE IV
MISCELLANEOUS TERMS AND CONDITIONS
4.1 Time of Essence. Time is of the
essence with respect to all provisions of this
Mortgage.
4.2 Release of Mortgage. If all of
the Debt be paid, then and in that event only, all
rights under this Mortgage, except for those
provisions hereof which by their terms survive, shall
terminate and the Mortgaged Property shall become
wholly clear of the liens, security interests,
conveyances and assignments evidenced hereby, which
shall be promptly released of record by Mortgagee in
due form at Mortgagor's cost. No release of this
Mortgage or the lien hereof shall be valid unless
executed by Mortgagee.
4.3 Certain Rights of Mortgagee.
Without affecting Mortgagor's liability for the
payment of any of the Debt, Mortgagee may from time
to time and without notice to Mortgagor: (a) release
any person liable for the payment of the Debt; (b)
extend or modify the terms of payment of the Debt;
(c) accept additional real or personal property of
any kind as security or alter, substitute or release
any property securing the Debt; (d) recover any part
of the Mortgaged Property; (e) consent in writing to
the making of any subdivision map or plat thereof;
(f) join in granting any easement therein; or (g)
join in any extension agreement of this Mortgage or
any agreement subordinating the lien hereof.
4.4 Waiver of Certain Defenses. No
action for the enforcement of the lien hereof or of
any provision hereof shall be subject to any defense
which would not be good and available to the party
interposing the same in an action at law upon the
Note or any of the other Loan Documents.
4.5 Notices. All notices, demands,
requests or other communications to be sent by one
party to the other hereunder or required by law shall
be in writing and shall be deemed to have been
validly given or served by delivery of the same in
person to the intended addressee, or by depositing
the same with Federal Express or another reputable
private courier service for next business day
delivery, or by depositing the same in the United
States mail, postage prepaid, registered or certified
mail, return receipt requested, in any event
addressed to the intended addressee at its address
set forth on the first page of this Mortgage or at
such other address as may be designated by such party
as herein provided. All notices, demands and requests
shall be effective upon such personal delivery, or
one (1) business day after being deposited with the
private courier service, or two (2) business days
after being deposited in the United States mail as
required above. Rejection or other refusal to accept
or the inability to deliver because of changed
address of which no notice was given as herein
required shall be deemed to be receipt of the notice,
demand or request sent. By giving to the other party
hereto at least fifteen (15) days' prior written
notice thereof in accordance with the provisions
hereof, the parties hereto shall have the right from
time to time to change their respective addresses and
each shall have the right to specify as its address
any other address within the United States of
America.
4.6 Successors and Assigns; Joint
and Several Liability. The terms, provisions,
indemnities, covenants and conditions hereof shall be
binding upon Mortgagor and the successors and assigns
of Mortgagor, including all successors in interest of
Mortgagor in and to all or any part of the Mortgaged
Property, and shall inure to the benefit of
Mortgagee, its directors, officers, shareholders,
employees and agents and their respective successors
and assigns and shall constitute covenants running
with the land. All references in this Mortgage to
Mortgagor or Mortgagee shall be deemed to include all
such parties' successors and assigns, and the term
"Mortgagee" as used herein shall also mean and refer
to any lawful holder or owner, including pledgees and
participants, of any of the Debt. If Mortgagor
consists of more than one person or entity, each is
jointly and severally liable to perform the
obligations of Mortgagor hereunder and all
representations, warranties, covenants and agreements
made by Mortgagor hereunder are joint and
several.
4.7 Severability. A determination
that any provision of this Mortgage is unenforceable
or invalid shall not affect the enforceability or
validity of any other provision, and any
determination that the application of any provision
of this Mortgage to any person or circumstance is
illegal or unenforceable shall not affect the
enforceability or validity of such provision as it
may apply to any other persons or
circumstances.
4.8 Gender. Within this Mortgage,
words of any gender shall be held and construed to
include any other gender, and words in the singular
shall be held and construed to include the plural,
and vice versa, unless the context otherwise
requires.
4.9 Waiver; Discontinuance of
Proceedings. Mortgagee may waive any single Event of
Default by Mortgagor hereunder without waiving any
other prior or subsequent Event of Default. Mortgagee
may remedy any Event of Default by Mortgagor
hereunder without waiving the Event of Default
remedied. Neither the failure by Mortgagee to
exercise, nor the delay by Mortgagee in exercising,
any right, power or remedy upon any Event of Default
by Mortgagor hereunder shall be construed as a waiver
of such Event of Default or as a waiver of the right
to exercise any such right, power or remedy at a
later date. No single or partial exercise by
Mortgagee of any right, power or remedy hereunder
shall exhaust the same or shall preclude any other or
further exercise thereof, and every such right, power
or remedy hereunder may be exercised at any time and
from time to time. No modification or waiver of any
provision hereof nor consent to any departure by
Mortgagor therefrom shall in any event be effective
unless the same shall be in writing and signed by
Mortgagee, and then such waiver or consent shall be
effective only in the specific instance and for the
specific purpose given. No notice to nor demand on
Mortgagor in any case shall of itself entitle
Mortgagor to any other or further notice or demand in
similar or other circumstances. Acceptance by
Mortgagee of any payment in an amount less than the
amount then due on any of the Debt shall be deemed an
acceptance on account only and shall not in any way
affect the existence of an Event of Default. In case
Mortgagee shall have proceeded to invoke any right,
remedy or recourse permitted hereunder or under the
other Loan Documents and shall thereafter elect to
discontinue or abandon the same for any reason,
Mortgagee shall have the unqualified right to do so
and, in such an event, Mortgagor and Mortgagee shall
be restored to their former positions with respect to
the Debt, the Loan Documents, the Mortgaged Property
and otherwise, and the rights, remedies, recourses
and powers of Mortgagee shall continue as if the same
had never been invoked.
4.10 Section Headings. The headings
of the sections and paragraphs of this Mortgage are
for convenience of reference only, are not to be
considered a part hereof and shall not limit or
otherwise affect any of the terms hereof.
4.11 GOVERNING LAW. THIS Mortgage
WILL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE IN WHICH THE PREMISES IS
LOCATED, PROVIDED THAT TO THE EXTENT THAT ANY OF SUCH
LAWS MAY NOW OR HEREAFTER BE PREEMPTED BY FEDERAL
LAW, SUCH FEDERAL LAW SHALL SO GOVERN AND BE
CONTROLLING, AND PROVIDED FURTHER THAT THE LAWS OF
THE STATE IN WHICH THE PREMISES IS LOCATED SHALL
GOVERN AS TO THE CREATION, PRIORITY AND ENFORCEMENT
OF LIENS AND SECURITY INTERESTS IN THE MORTGAGED
PROPERTY LOCATED IN SUCH STATE.
4.12 Counting of Days. The term
"days" when used herein shall mean calendar days. If
any time period ends on a Saturday, Sunday or holiday
officially recognized by the state within which the
Premises is located, the period shall be deemed to
end on the next succeeding business day. The term
"business day" when used herein shall mean a weekday,
Monday through Friday, except a legal holiday or a
day on which banking institutions in Greenville,
South Carolina are authorized by law to be closed.
4.13 Relationship of the Parties.
The relationship between Mortgagor and Mortgagee is
that of a borrower and a lender only and neither of
those parties is, nor shall it hold itself out to be,
the agent, employee, joint venturer or partner of the
other party.
4.14 Application of the Proceeds of
the Note. To the extent that proceeds of the Note are
used to pay indebtedness secured by any outstanding
lien, security interest, charge or prior encumbrance
against the Mortgaged Property, such proceeds have
been advanced by Mortgagee at Mortgagor's request and
Mortgagee shall be subrogated to any and all rights,
security interests and liens owned by any owner or
holder of such outstanding liens, security interests,
charges or encumbrances, irrespective of whether said
liens, security interests, charges or encumbrances
are released.
4.15 Unsecured Portion of
Indebtedness. If any part of the Debt cannot be
lawfully secured by this Mortgage or if any part of
the Mortgaged Property cannot be lawfully subject to
the lien and security interest hereof to the full
extent of such indebtedness, then all payments made
shall be applied on said indebtedness first in
discharge of that portion thereof which is unsecured
by this Mortgage.
4.16 Cross Default. An Event of
Default hereunder which has not been cured within any
applicable grace or cure period shall be a default
under each of the other Loan Documents.
4.17 Interest After Sale. In the
event the Mortgaged Property or any part thereof
shall be sold upon foreclosure as provided hereunder,
to the extent permitted by law, the sum for which the
same shall have been sold shall, for purposes of
redemption (pursuant to the laws of the State of in
which the Premises is located), bear interest at the
Default Interest Rate.
4.18 Inconsistency with Other Loan
Documents. In the event of any inconsistency between
the provisions hereof and the provisions in any of
the other Loan Documents, it is intended that the
provisions of the Note shall control over the
provisions of this Mortgage, and that the provisions
of this Mortgage shall control over the provisions of
the Assignment of Leases and Rents, the Guaranty and
Indemnity Agreement, the Environmental Indemnity
Agreement, and the other Loan Documents.
4.19 Construction of this Document.
This document may be construed as a mortgage,
security deed, deed of trust, chattel mortgage,
conveyance, assignment, security agreement, pledge,
financing statement, hypothecation or contract, or
any one or more of the foregoing, in order to fully
effectuate the liens and security interests created
hereby and the purposes and agreements herein set
forth.
4.20 No Merger. It is the desire and
intention of the parties hereto that this Mortgage
and the lien hereof do not merge in fee simple title
to the Mortgaged Property. It is hereby understood
and agreed that should Mortgagee acquire any
additional or other interests in or to the Mortgaged
Property or the ownership thereof, then, unless a
contrary intent is manifested by Mortgagee as
evidenced by an appropriate document duly recorded,
this Mortgage and the lien hereof shall not merge in
such other or additional interests in or to the
Mortgaged Property, toward the end that this Mortgage
may be foreclosed as if owned by a stranger to said
other or additional interests.
4.21 Rights With Respect to Junior
Encumbrances. Any person or entity purporting to have
or to take a junior mortgage or other lien upon the
Mortgaged Property or any interest therein shall be
subject to the rights of Mortgagee to amend, modify,
increase, vary, alter or supplement this Mortgage,
the Note or any of the other Loan Documents, and to
extend the maturity date of the Debt, and to increase
the amount of the Debt, and to waive or forebear the
exercise of any of its rights and remedies hereunder
or under any of the other Loan Documents and to
release any collateral or security for the Debt, in
each and every case without obtaining the consent of
the holder of such junior lien and without the lien
or security interest of this Mortgage losing its
priority over the rights of any such junior
lien.
4.22 Mortgagee May File Proofs of
Claim. In the case of any receivership, insolvency,
bankruptcy, reorganization, arrangement, adjustment,
composition or other proceedings affecting Mortgagor
or the principals, general partners or managing
members in Mortgagor, or their respective creditors
or property, Mortgagee, to the extent permitted by
law, shall be entitled to file such proofs of claim
and other documents as may be necessary or advisable
in order to have the claims of Mortgagee allowed in
such proceedings for the entire Debt at the date of
the institution of such proceedings and for any
additional amount which may become due and payable by
Mortgagor hereunder after such date.
4.23 Fixture Filing. This Mortgage
shall be effective from the date of its recording as
a financing statement filed as a fixture filing with
respect to all goods constituting part of the
Mortgaged Property which are or are to become
fixtures. This Mortgage shall also be effective as a
financing statement covering minerals or the like
(including oil and gas) and is to be filed for record
in the real estate records of the county where the
Premises is situated. The mailing address of
Mortgagor and the address of Mortgagee from which
information concerning the security interests may be
obtained are set forth in Section 1.22 above.
4.24 After-Acquired Mortgaged
Property. All property acquired by Mortgagor after
the date of this Mortgage which by the terms of this
Mortgage shall be subject to the lien and the
security interest created hereby, shall immediately
upon the acquisition thereof by Mortgagor and without
further mortgage, conveyance or assignment become
subject to the lien and security interest created by
this Mortgage. Nevertheless, Mortgagor shall execute,
acknowledge, deliver and record or file, as
appropriate, all and every such further mortgages,
security agreements, financing statements,
assignments and assurances as Mortgagee shall require
for accomplishing the purposes of this
Mortgage.
4.25 No Representation. By accepting
delivery of any item required to be observed,
performed or fulfilled or to be given to Mortgagee
pursuant to the Loan Documents, including, but not
limited to, 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, legality,
effectiveness or legal effect of the same, or of any
term, provision or condition thereof, and such
acceptance of delivery thereof shall not be or
constitute any warranty, consent or affirmation with
respect thereto by Mortgagee.
4.26 Counterparts. This Mortgage may
be executed in any number of counterparts, each of
which shall be effective only upon delivery and
thereafter shall be deemed an original, and all of
which shall be taken to be one and the same
instrument, for the same effect as if all parties
hereto had signed the same signature page. Any
signature page of this Mortgage may be detached from
any counterpart of this Mortgage without impairing
the legal effect of any signatures thereon and may be
attached to another counterpart of this Mortgage
identical in form hereto but having attached to it
one or more additional signature pages.
4.27 Personal Liability.
Notwithstanding anything to the contrary contained in
this Mortgage, the liability of Mortgagor and its
officers, directors, general partners, managers,
members and principals for the Debt and for the
performance of the other agreements, covenants and
obligations contained herein and in the Loan
Documents shall be limited as set forth in Section
3.6 of the Note.
4.28 Recording and Filing. Mortgagor
will cause the Loan Documents and all amendments and
supplements thereto and substitutions therefor to be
recorded, filed, re-recorded and re-filed in such
manner and in such places as Mortgagee shall
reasonably request, and will pay on demand all such
recording, filing, re-recording and re-filing taxes,
fees and other charges. Mortgagor shall reimburse
Mortgagee, or its servicing agent, for the costs
incurred in obtaining a tax service company to verify
the status of payment of taxes and assessments on the
Mortgaged Property.
4.29 Entire Agreement and
Modifications. This Mortgage and the other Loan
Documents contain the entire agreements between the
parties relating to the subject matter hereof and
thereof and all prior agreements relative hereto and
thereto which are not contained herein or therein are
terminated. This Mortgage and the other Loan
Documents may not be amended, revised, waived,
discharged, released or terminated orally but only by
a written instrument or instruments executed by the
party against which enforcement of the amendment,
revision, waiver, discharge, release or termination
is asserted. Any alleged amendment, revision, waiver,
discharge, release or termination which is not so
documented shall not be effective as to any
party.
<PAGE>
4.30 Maximum Interest. The provisions of this Mortgage and of
all agreements between Mortgagor and Mortgagee, whether now existing or
hereafter arising and whether written or oral, are hereby expressly limited so
that in no contingency or event whatsoever, whether by reason of demand or
acceleration of the maturity of the Note or otherwise, shall the amount paid, or
agreed to be paid ("Interest") to Mortgagee for the use, forbearance or
retention of the money loaned under the Note exceed the maximum amount
permissible under applicable law. If, from any circumstance whatsoever,
performance or fulfillment of any provision hereof or of any agreement between
Mortgagor and Mortgagee shall, at the time performance or fulfillment of such
provision shall be due, exceed the limit for Interest prescribed by law or
otherwise transcend the limit of validity prescribed by applicable law, then,
ipso facto, the obligation to be performed or fulfilled shall be reduced to such
limit, and if, from any circumstance whatsoever, Mortgagee shall ever receive
anything of value deemed Interest by applicable law in excess of the maximum
lawful amount, an amount equal to any excessive Interest shall be applied to the
reduction of the principal balance owing under the Note in the inverse order of
its maturity (whether or not then due) or, at the option of Mortgagee, be paid
over to Mortgagor, and not to the payment of Interest. All Interest (including
any amounts or payments deemed to be Interest) paid or agreed to be paid to
Mortgagee shall, to the extent permitted by applicable law, be amortized,
prorated, allocated and spread throughout the full period until payment in full
of the principal balance of the Note so that the Interest thereon for such full
period will not exceed the maximum amount permitted by applicable law. This
Section will control all agreements between Mortgagor and Mortgagee.
4.31 Interest Payable by Mortgagor. Mortgagee shall cause
funds in the Replacement Reserve to be deposited into interest bearing accounts
of the type customarily maintained by Mortgagee or its servicing agent for the
investment of similar reserves, which accounts may not yield the highest
interest rate then available. Interest payable on such amounts shall be computed
based on the daily outstanding balance in the Replacement Reserve. Such interest
shall be calculated on a simple, non-compounded interest basis based solely on
contributions made to the Replacement Reserve by Mortgagor. All interest earned
on amounts contributed to the Replacement Reserve shall be retained by Mortgagee
and accumulated for the benefit of Mortgagor and added to the balance in the
Replacement Reserve and shall be disbursed for payment of the items for which
other funds in the Replacement Reserve are to be disbursed.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
-3-
IN WITNESS WHEREOF, Mortgagor has executed this Mortgage on the day and
year first written above.
<TABLE>
<S> <C>
MORTGAGOR:
WITNESS: ONE PRICE REALTY, INC.,
a South Carolina corporation
/s/ Kimber Frank
By: /s/ C. Burt Duren
Name: C. Burt Duren
/s/ Abby Wenzel Title: Treasurer
</TABLE>
<PAGE>
STATE OF NEW YORK )
)
COUNTY OF NEW YORK )
I, Felicia Dell'Olio, a Notary Public for New York, do hereby certify that C.
Burt Duren personally appeared before me this day and acknowledged the due
execution of the foregoing instrument.
Witness my hand and (where an official seal is required by law) official seal
this 17th day of June, 1997.
/s/ Felicia Dell'Olio (SEAL)
Signature of Notary Public
My commission expires:
Felicia Dell'Olio
Notary Public, State of New York
Qualification New York County
Commission Expires June 23, 1998
<PAGE>
EXHIBIT A
Legal Description
EXHIBIT 10(e) - Promissory Note by and between First Union National Bank and One
Price Realty, Inc. dated June 17, 1997
<PAGE>
Loan No. 19-5113985
PROMISSORY NOTE
$8,125,000.00 June 17, 1997
FOR VALUE RECEIVED, the undersigned, ONE PRICE REALTY, INC., a
South Carolina corporation, ("Maker"), having an address at HWY. 290 - Commerce
Park 1875 East Main Street, Suite B, P.O. Box 147, Duncan, South Carolina 29334,
promises to pay to the order of FIRST UNION NATIONAL BANK, a national banking
association ("Payee"), at the office of Payee at One First Union Center, 301
South College Street, DC-6, Charlotte, North Carolina 28288-0166, or at such
other place as Payee may designate to Maker in writing from time to time, the
principal sum of ONE MILLION EIGHT HUNDRED TWENTY-FIVE THOUSAND AND NO/100
DOLLARS ($8,125,000.00), together with interest on so much thereof as is from
time to time outstanding and unpaid, from the date of the advance of the
principal evidenced hereby, at the rate of 9.125 percent (9.125%) per annum (the
"Note Rate"), together with all other amounts due hereunder or under the other
Loan Documents (as defined herein), in lawful money of the United States of
America, which shall at the time of payment be legal tender in payment of all
debts and dues, public and private.
ARTICLE I
TERMS AND CONDITIONS
1.1 Computation of Interest. Interest shall be computed hereunder
based on a 360-day year and based on the actual number of days elapsed for any
month in which interest is being calculated. Interest shall accrue from the date
on which funds are advanced hereunder (regardless of the time of day) through
and including the day on which funds are credited pursuant to Section 1.2
hereof.
<PAGE>
1.2 Payment of Principal and Interest. Payments in federal funds
immediately available at the place designated for payment received by Payee
prior to 2:00 p.m. local time on a day on which Payee is open for business at
said place of payment shall be credited prior to close of business, while other
payments, at the option of Payee, may not be credited until immediately
available to Payee in federal funds at the place designated for payment prior to
2:00 p.m. local time on a day on which Payee is open for business. Such
principal and interest shall be payable in equal consecutive monthly
installments of $73,757.19 each, beginning on the first day of the second full
calendar month following the date of this Note (or on the first day of the first
full calendar month following the date hereof, in the event the advance of the
principal amount evidenced by this Note is the first day of a calendar month)
(the "First Payment Date"), and continuing on the first day of each and every
month thereafter through and including June 1, 2017 (each, a "Payment Date"). On
July 1, 2017 (the "Maturity Date"), the entire outstanding principal balance
hereof, together with all accrued but unpaid interest thereon, shall be due and
payable in full.
1.3 Application of Payments. So long as no Event of Default (as
hereinafter defined) exists hereunder or under any other Loan Document, each
such monthly installment shall be applied first, to any amounts hereafter
advanced by Payee hereunder or under any other Loan Document, second, to any
late fees and other amounts payable to Payee, third, to the payment of accrued
interest and last to reduction of principal.
1.4 Payment of ShortInterest. If the advance of the principal
amount evidenced by this Note is made on a date other than the first day of a
calendar month, Maker shall pay to Payee contemporaneously with the execution
hereof interest at the Note Rate for a period from the date hereof through and
including the last day of this calendar month.
1.5 Prepayment. (a) This Note may be prepaid in whole but not
in part
(except as otherwise specifically provided herein) at any time after the seventh
(7th) anniversary of the First Payment Date (the "Lock-out Expiration Date")
provided (i) written notice of such prepayment is received by Payee not more
than ninety (90) days and not less than sixty (60) days prior to the date of
such prepayment, (ii) such prepayment is made on a Payment Date, (iii) such
prepayment is accompanied by all interest accrued hereunder through and
including the date of such prepayment and all other sums due hereunder or under
the other Loan Documents, and (iii) if such prepayment occurs after the Lock-out
Expiration Date but on or before the date that is seventeen (17) years after the
date of this Note, Payee is paid a prepayment fee in an amount equal to the
greater of (A) one percent (1.0%) of the principal amount being prepaid, and (B)
the positive excess of (1) the present value ("PV"), as of the date of such
prepayment, of all future installments of principal and interest due under this
Note absent any such prepayment including the principal amount due at maturity
(collectively, "All Future Payments"), discounted at an interest rate per annum
equal to the Treasury Constant Maturity Yield Index (as hereinafter defined)
published during the second full week preceding the date on which such premium
is payable for instruments having a maturity coterminous with the remaining term
of this Note, over (2) the then outstanding principal balance hereof immediately
before such prepayment [(PV of All Future Payments) - (principal balance at time
of prepayment) = prepayment fee. "Treasury Constant Maturity Yield Index" shall
mean the average yield for "This Week" as reported by the Federal Reserve Board
in Federal Reserve Statistical Release H.15(519). If there is no Treasury
Constant Maturity Yield Index for instruments having a maturity coterminous with
the remaining term of this Note, then the index shall be equal to the weighted
average yield to maturity of the Treasury Constant Maturity Yield Indices with
maturities next longer and shorter than such remaining average life to maturity,
calculated by averaging (and rounding upward to the nearest whole multiple of
1/100 of 1% per annum, if the average is not such a multiple) the yields of the
relevant Treasury Constant Maturity Yield Indices (rounded, if necessary, to the
nearest 1/100 of 1% with any figure of 1/200 of 1% or above rounded upward). In
the event that any prepayment fee is due hereunder, Payee shall deliver to Maker
a statement setting forth the amount and determination of the prepayment fee,
and, provided that Payee shall have in good faith applied the formula described
above, Maker shall not have the right to challenge the calculation or the method
of calculation set forth in any such statement in the absence of manifest error,
which calculation may be made by Payee on any day during the fifteen (15) day
period preceding the date of such prepayment. Payee shall not be obligated or
required to have actually reinvested the prepaid principal balance at the
Treasury Constant Maturity Yield Index or otherwise as a condition to receiving
the prepayment fee. No prepayment fee or premium shall be due or payable in
connection with any prepayment of the indebtedness evidenced by this Note made
after the date that is seventeen (17) years after the date of this Note. In
addition to the aforesaid prepayment fee, if, upon any such permitted or
required prepayment (whether prior to or after the date that is seventeen (17)
years after the date of this Note), the aforesaid prior written notice has not
been timely received by Payee, the prepayment fee shall be increased by, or if
no prepayment fee is otherwise due, there shall be due a prepayment fee equal
to, an amount equal to the lesser of (i) thirty (30) days' interest computed at
the Note Rate on the outstanding principal balance of this Note so prepaid and
(ii) interest computed at the Note Rate on the outstanding principal balance of
this Note so prepaid that would have been payable for the period from, and
including, the date of prepayment through the Maturity Date of this Note as
though such prepayment had not occurred.
(b) Partial prepayments of this Note shall not be permitted,
except for partial prepayments resulting from Payee's election to apply
insurance or condemnation proceeds to reduce the outstanding principal balance
of this Note as provided in the Security Instrument (as hereinafter defined), in
which event no prepayment fee or premium shall be due unless, at the time of
either Payee's receipt of such proceeds or the application of such proceeds to
the outstanding principal balance of this Note, an Event of Default, or an event
which, with notice or the passage of time, or both, would constitute an Event of
Default, shall have occurred, which default or Event of Default is unrelated to
the applicable casualty or condemnation, in which event the applicable
prepayment fee or premium shall be due and payable based upon the amount of the
prepayment. No notice of prepayment shall be required under the circumstances
specified in the preceding sentence. No principal amount repaid may be
reborrowed. Any such partial prepayments of principal shall be applied to the
unpaid principal balance evidenced hereby but such application shall not reduce
the amount of the fixed monthly installments required to be paid pursuant to
Section 1.2 above.
(c) Except as otherwise expressly provided in Section 1.5(b)
above, the prepayment fees provided above shall be due, to the extent permitted
by applicable law, under any and all circumstances where all or any portion of
this Note is paid prior to the Maturity Date, whether such prepayment is
voluntary or involuntary, including, without limitation, if such prepayment
results from Payee's exercise of its rights upon Maker's default and
acceleration of the Maturity Date of this Note (irrespective of whether
foreclosure proceedings have been commenced), and shall be in addition to any
other sums due hereunder or under any of the other Loan Documents. No tender of
a prepayment of this Note with respect to which a prepayment fee is due shall be
effective unless such prepayment is accompanied by the applicable prepayment
fee. If, prior to the Lock-out Expiration Date, the indebtedness evidenced by
this Note shall have been declared due and payable by Payee pursuant to Article
II hereof or the provisions of any other Loan Document due to a default by
Maker, then there shall also then be immediately due and payable a sum equal to
the interest which would have accrued on the principal balance of this Note at
the Note Rate from the date of such acceleration to the Lock-out Expiration
Date, together with a prepayment fee in an amount equal to the prepayment fee
that would have been due and payable on the Lock-out Expiration Date as though
Maker were prepaying the entire indebtedness evidenced hereby on the first (1st)
day on which a prepayment would have been permitted pursuant to the provisions
set forth in this Note. If such acceleration is during any period when a
prepayment fee is payable pursuant to the provisions set forth in this Note,
then, in addition to all of the foregoing, such prepayment fee shall also then
be immediately due and payable as though Maker were prepaying the entire
indebtedness on the date of such acceleration. In addition to the amounts
described in the two preceding sentences, in the event of any tender of payment
of such indebtedness made on or prior to the first (1st) anniversary of the date
of this Note, there shall also then be immediately due and payable an additional
prepayment fee of three percent (3%) of the principal balance of this Note.
(d) (i) Notwithstanding any provision of this Section 1.5 to the
contrary, at any time after the date which (I) is two years after the "startup
day," within the meaning of Section 860G(a)(9) of the Internal Revenue Code of
1986, as amended from time to time or any successor statute (the "Code"), of a
"real estate mortgage investment conduit," within the meaning of Section 860D of
the Code, that holds this Note or (II) five years after the date hereof,
whichever shall first occur, and provided no Event of Default has occurred
hereunder or under any of the Loan Documents, Maker may cause the release of the
Security Property (as hereinafter defined) from the lien of the Security
Instrument and the other Loan Documents upon the satisfaction of the following
conditions:
(A) not less than thirty (30) days prior written notice
shall be given to Payee specifying a date (the "Release Date") on
which the Defeasance Collateral (as hereinafter defined) is to be
delivered, such date being a Payment Date;
(B) all accrued and unpaid interest and all other sums due
under this Note and under the other Loan Documents up to the
Release Date, including, without limitation, all costs and
expenses incurred by Payee or its agents in connection with such
release (including, without limitation, the review of the proposed
Defeasance Collateral and the preparation of the Defeasance
Security Agreement (as hereinafter defined) and related
documentation), shall be paid in full on or prior to the Release
Date; and
(C) Maker shall deliver to Payee on or prior to the
Release Date:
(1) a pledge and security agreement, in form and
substance satisfactory to Payee in its sole discretion,
creating a first priority security interest in favor of
Payee in the Defeasance Collateral (as hereinafter
defined) (the "Defeasance Security Agreement"), which
shall provide, among other things, that any excess
received by Payee from the Defeasance Collateral over the
amounts payable by Maker hereunder shall be refunded to
Maker promptly after each monthly Payment Date;
(2) direct, non-callable obligations of the
United States of America that provide for payments prior,
but as close as possible, to all successive monthly Debt
Service Payment Dates occurring after the Release Date,
with each such payment being equal to or greater than the
amount of the corresponding installment of principal and
interest required to be paid under this Note (including
all amounts due on the Maturity Date) for the balance of
the term hereof (the "Defeasance Collateral"), each of
which shall be duly endorsed by the holder thereof as
directed by Payee or accompanied by a written instrument
of transfer in form and substance satisfactory to Payee in
its sole discretion (including, without limitation, such
instruments as may be required by the depository
institution holding such securities or the issuer thereof,
as the case may be, to effectuate book-entry transfers and
pledges through the book-entry facilities of such
institution) in order to perfect upon the delivery of the
Defeasance Security Agreement the first priority security
interest in the Defeasance Collateral in favor of Payee in
conformity with all applicable state and federal laws
governing granting of such security interests;
(3) a certificate of Maker certifying
that all of the requirements set forth in this
subsection 1.5(d)(i) have been satisfied;
(4) an opinion of counsel for Maker in form and
substance and delivered by counsel satisfactory to Payee
in its sole discretion stating, among other things, that
Payee has a perfected first priority security interest in
the Defeasance Collateral and that the Defeasance Security
Agreement is enforceable against Maker in accordance with
its terms; and
(5) such other certificates, documents or
instruments as Payee may reasonably require.
(ii) Upon compliance with the requirements of subsection
1.5(d)(i), the Security Property shall be released from the lien
of the Security Instrument and the other Loan Documents, and the
Defeasance Collateral shall constitute collateral which shall
secure this Note and all other obligations under the Loan
Documents. Payee will, at Maker's expense, execute and deliver any
agreements reasonably requested by Maker to release the lien of
the Security Instrument from the Security Property.
(iii) Upon the release of the Security Property in
accordance with this Section 1.5(d), Maker may assign all its
obligations and rights under this Note, together with the pledged
Defeasance Collateral, to a successor entity designated by Maker
and approved by Payee in its sole discretion. Such successor
entity shall execute an assumption agreement in form and substance
satisfactory to Payee in its sole discretion pursuant to which it
shall assume Maker's obligations under this Note and the
Defeasance Security Agreement. As conditions to such assignment
and assumption, Maker shall (x) deliver to Payee an opinion of
counsel in form and substance and delivered by counsel
satisfactory to Payee in its sole discretion stating, among other
things, that such assumption agreement is enforceable against
Maker and such successor entity in accordance with its terms and
that this Note, the Defeasance Security Agreement and the other
Loan Documents, as so assumed, are enforceable against such
successor entity in accordance with their respective terms, and
(y) pay all costs and expenses incurred by Payee or its agents in
connection with such assignment and assumption (including, without
limitation, the review of the proposed transferee and the
preparation of the assumption agreement and related
documentation). Upon such assumption, Maker shall be relieved of
its obligations hereunder, under the other Loan Documents and
under the Defeasance Security Agreement.
(iv) Upon the release of the Security Property in
accordance with this Section 1.5(d), Maker shall have no further
right to prepay this Note pursuant to the other provisions of this
Section 1.5 or otherwise.
1.6 Security. The indebtedness evidenced by this Note and the
obligations created hereby are secured by, among other things, that certain
mortgage, deed of trust or deed to secure debt and security agreement (the
"Security Instrument") from Maker for the benefit of Payee, dated of even date
herewith, covering property located in Spartanburg County, South Carolina. The
Security Instrument, together with this Note and all other documents to or of
which Payee is a party or beneficiary now or hereafter evidencing, securing,
guarantying, modifying or otherwise relating to the indebtedness evidenced
hereby, are herein referred to collectively as the "Loan Documents". All of the
terms and provisions of the Loan Documents are incorporated herein by reference.
Some of the Loan Documents are to be filed for record on or about the date
hereof in the appropriate public records.
ARTICLE II
ARTICLE II DEFAULT
2.1 Events of Default. It is hereby expressly agreed that should
any default occur in the payment of principal or interest as stipulated above
and such payment is not made within seven (7) days of the date such payment is
due (provided that no grace period is provided for the payment of principal and
interest due on the Maturity Date), or should any other default occur and
continue beyond any applicable notice and/or cure period under any other Loan
Document, then an Event of Default (an "Event of Default") shall exist
hereunder, and in such event the indebtedness evidenced hereby, including all
sums advanced or accrued hereunder or under any other Loan Document, and all
unpaid interest accrued thereon, shall, at the option of Payee and without
notice to Maker, at once become due and payable and may be collected forthwith,
whether or not there has been a prior demand for payment and regardless of the
stipulated date of maturity.
2.2 Late Charges. In the event that any payment is not received by
Payee on the date when due (subject to any applicable grace period), then, in
addition to any default interest payments due hereunder, Maker shall also pay to
Payee a late charge in an amount equal to five percent (5%) of the amount of
such overdue payment.
2.3 Default Interest Rate. So long as any Event of Default exists
hereunder, regardless of whether or not there has been an acceleration of the
indebtedness evidenced hereby, and at all times after maturity of the
indebtedness evidenced hereby (whether by acceleration or otherwise), interest
shall accrue on the outstanding principal balance of this Note, from the date
due until the date credited, at a rate per annum equal to four percent (4%) in
excess of the Note Rate, or, if such increased rate of interest may not be
collected under applicable law, then at the maximum rate of interest, if any,
which may be collected from Maker under applicable law (the "Default Interest
Rate"), and such default interest shall be immediately due and payable.
2.4 Maker's Agreements. Maker acknowledges that it would be
extremely difficult or impracticable to determine Payee's actual damages
resulting from any late payment or default, and such late charges and default
interest are reasonable estimates of those damages and do not constitute a
penalty. The remedies of Payee in this Note or in the Loan Documents, or at law
or in equity, shall be cumulative and concurrent, and may be pursued singly,
successively or together, in Payee's discretion.
2.5 Maker to Pay Costs. In the event that this Note, or any part
hereof, is collected by or through an attorney-at-law, Maker agrees to pay all
costs of collection, including, but not limited to, reasonable attorneys' fees.
2.6 Exculpation. Notwithstanding anything in this Note or the
Loan Documents to the contrary, but subject to
the qualifications hereinbelow set forth, Payee agrees that:
(a) Maker shall be liable upon the indebtedness evidenced hereby
and for the other obligations arising under the Loan Documents to the full
extent (but only to the extent) of the security therefor, the same being all
properties (whether real or personal), rights, estates and interests now or at
any time hereafter securing the payment of this Note and/or the other
obligations of Maker under the Loan Documents (collectively, the "Security
Property");
(b) if a default occurs in the timely and proper payment of all or
any part of such indebtedness evidenced hereby or in the timely and proper
performance of the other obligations of Maker under the Loan Documents, any
judicial proceedings brought by Payee against Maker shall be limited to the
preservation, enforcement and foreclosure, or any thereof, of the liens,
security titles, estates, assignments, rights and security interests now or at
any time hereafter securing the payment of this Note and/or the other
obligations of Maker under the Loan Documents, and no attachment, execution or
other writ of process shall be sought, issued or levied upon any assets,
properties or funds of Maker other than the Security Property, except with
respect to the liability described below in this section; and
(c) in the event of a foreclosure of such liens, security titles,
estates, assignments, rights or security interests securing the payment of this
Note and/or the other obligations of Maker under the Loan Documents, no judgment
for any deficiency upon the indebtedness evidenced hereby shall be sought or
obtained by Payee against Maker, except with respect to the liability described
below in this section; provided, however, that, notwithstanding the foregoing
provisions of this section, Maker shall be fully and personally liable and
subject to legal action (i) for proceeds paid under any insurance policies (or
paid as a result of any other claim or cause of action against any person or
entity) by reason of damage, loss or destruction to all or any portion of the
Security Property, to the full extent of such proceeds not previously delivered
to Payee, but which, under the terms of the Loan Documents, should have been
delivered to Payee, (ii) for proceeds or awards resulting from the condemnation
or other taking in lieu of condemnation of all or any portion of the Security
Property, to the full extent of such proceeds or awards not previously delivered
to Payee, but which, under the terms of the Loan Documents, should have been
delivered to Payee, (iii) for all tenant security deposits or other refundable
deposits paid to or held by Maker or any other person or entity in connection
with leases of all or any portion of the Security Property which are not applied
in accordance with the terms of the applicable lease or other agreement, (iv)
for rent and other payments received from tenants under leases of all or any
portion of the Security Property paid more than one (1) month in advance, (v)
for rents, issues, profits and revenues of all or any portion of the Security
Property received or applicable to a period after the occurrence of any Event of
Default or any event which, with notice or the passage of time, or both, would
constitute an Event of Default, hereunder or under the Loan Documents which are
not either applied to the ordinary and necessary expenses of owning and
operating the Security Property or paid to Payee, (vi) for waste committed on
the Security Property, damage to the Security Property as a result of the
intentional misconduct or gross negligence of Maker or any of its principals,
officers, general partners or members, any guarantor, any indemnitor, or any
agent or employee of any such person, or any removal of all or any portion of
the Security Property in violation of the terms of the Loan Documents, to the
full extent of the losses or damages incurred by Payee on account of such
occurrence, (vii) for failure to pay any valid taxes, assessments, mechanic's
liens, materialmen's liens or other liens which could create liens on any
portion of the Security Property which would be superior to the lien or security
title of the Security Instrument or the other Loan Documents, to the full extent
of the amount claimed by any such lien claimant except, with respect to any such
taxes or assessments, to the extent that funds have been deposited with Payee
pursuant to the terms of the Security Instrument specifically for the applicable
taxes or assessments and not applied by Payee to pay such taxes and assessments,
(viii) for all obligations and indemnities of Maker under the Loan Documents
relating to hazardous or toxic substances or compliance with environmental laws
and regulations to the full extent of any losses or damages (including those
resulting from diminution in value of any Security Property) incurred by Payee
as a result of the existence of such hazardous or toxic substances or failure to
comply with environmental laws or regulations, and (ix) for fraud, material
misrepresentation or failure to disclose a material fact by Maker or any of its
principals, officers, general partners or members, any guarantor, any indemnitor
or any agent, employee or other person authorized or apparently authorized to
make statements, representations or disclosures on behalf of Maker, any
principal, officer, general partner or member of Maker, any guarantor or any
indemnitor, to the full extent of any losses, damages and expenses of Payee on
account thereof. References herein to particular sections of the Loan Documents
shall be deemed references to such sections as affected by other provisions of
the Loan Documents relating thereto. Nothing contained in this section shall (1)
be deemed to be a release or impairment of the indebtedness evidenced by this
Note or the other obligations of Maker under the Loan Documents or the lien of
the Loan Documents upon the Security Property, or (2) preclude Payee from
foreclosing the Loan Documents in case of any default or from enforcing any of
the other rights of Payee except as stated in this section, or (3) limit or
impair in any way whatsoever (A) the Indemnity and Guaranty Agreement (the
"Indemnity Agreement") or (B) the Environmental Indemnity Agreement (the
"Environmental Indemnity Agreement"), each of even date herewith executed and
delivered in connection with the indebtedness evidenced by this Note or release,
relieve, reduce, waive or impair in any way whatsoever, any obligation of any
party to the Indemnity Agreement or the Environmental Indemnity Agreement.
Notwithstanding anything to the contrary in this Note, the Security Instrument
or any of the other Loan Documents, Payee shall not be deemed to have waived any
right which Payee may have under Section 506(a), 506(b), 1111(b) or any other
provisions of the U.S. Bankruptcy Code to file a claim for the full amount of
the indebtedness evidenced hereby or secured by the Security Instrument or any
of the other Loan Documents or to require that all collateral shall continue to
secure all of the indebtedness owing to Payee in accordance with this Note, the
Security Instrument and the other Loan Documents.
ARTICLE III
ARTICLE III GENERAL CONDITIONS
3.1 No Waiver; Amendment. No failure to accelerate the
indebtedness evidenced hereby by reason of default hereunder, acceptance of a
partial or past due payment, or indulgences granted from time to time shall be
construed (i) as a novation of this Note or as a reinstatement of the
indebtedness evidenced hereby or as a waiver of such right of acceleration or of
the right of Payee thereafter to insist upon strict compliance with the terms of
this Note, or (ii) to prevent the exercise of such right of acceleration or any
other right granted hereunder or by any applicable laws; and Maker hereby
expressly waives the benefit of any statute or rule of law or equity now
provided, or which may hereafter be provided, which would produce a result
contrary to or in conflict with the foregoing. No extension of the time for the
payment of this Note or any installment due hereunder made by agreement with any
person now or hereafter liable for the payment of this Note shall operate to
release, discharge, modify, change or affect the original liability of Maker
under this Note, either in whole or in part, unless Payee agrees otherwise in
writing. This Note may not be changed orally, but only by an agreement in
writing signed by the party against whom enforcement of any waiver, change,
modification or discharge is sought.
3.2 Waivers. Presentment for payment, demand, protest and notice
of demand, protest and nonpayment and all other notices are hereby waived by
Maker. Maker hereby further waives and renounces, to the fullest extent
permitted by law, all rights to the benefits of any moratorium, reinstatement,
marshaling, forbearance, valuation, stay, extension, redemption, appraisement,
exemption and homestead now or hereafter provided by the Constitution and laws
of the United States of America and of each state thereof, both as to itself and
in and to all of its property, real and personal, against the enforcement and
collection of the obligations evidenced by this Note or the other Loan
Documents.
3.3 Limit of Validity. The provisions of this Note and of all
agreements between Maker and Payee, whether now existing or hereafter arising
and whether written or oral, including, but not limited to, the Loan Documents,
are hereby expressly limited so that in no contingency or event whatsoever,
whether by reason of demand or acceleration of the maturity of this Note or
otherwise, shall the amount contracted for, charged, taken, reserved, paid or
agreed to be paid ("Interest") to Payee for the use, forbearance or detention of
the money loaned under this Note exceed the maximum amount permissible under
applicable law. If, from any circumstance whatsoever, performance or fulfillment
of any provision hereof or of any agreement between Maker and Payee shall, at
the time performance or fulfillment of such provision shall be due, exceed the
limit for Interest prescribed by law or otherwise transcend the limit of
validity prescribed by applicable law, then, ipso facto, the obligation to be
performed or fulfilled shall be reduced to such limit, and if, from any
circumstance whatsoever, Payee shall ever receive anything of value deemed
Interest by applicable law in excess of the maximum lawful amount, an amount
equal to any excessive Interest shall be applied to the reduction of the
principal balance owing under this Note in the inverse order of its maturity
(whether or not then due) or, at the option of Payee, be paid over to Maker, and
not to the payment of Interest. All Interest (including any amounts or payments
judicially or otherwise under the law deemed to be Interest) contracted for,
charged, taken, reserved, paid or agreed to be paid to Payee shall, to the
extent permitted by applicable law, be amortized, prorated, allocated and spread
throughout the full term of this Note, including any extensions and renewals
hereof until payment in full of the principal balance of this Note so that the
Interest thereon for such full term will not exceed at any time the maximum
amount permitted by applicable law. To the extent United States federal law
permits a greater amount of interest than is permitted under the law of the
State in which the Security Property is located, Payee will rely on United
States federal law for the purpose of determining the maximum amount permitted
by applicable law. Additionally, to the extent permitted by applicable law now
or hereafter in effect, Payee may, at its option and from time to time,
implement any other method of computing the maximum lawful rate under the law of
the State in which the Security Property is located or under other applicable
law by giving notice, if required, to Maker as provided by applicable law now or
hereafter in effect. This Section 3.3 will control all agreements between Maker
and Payee.
3.4 Use of Funds. Maker hereby warrants, represents and covenants
that no funds disbursed hereunder shall be used for personal, family or
household purposes.
3.5 Unconditional Payment. Maker is and shall be obligated to pay
principal, interest and any and all other amounts which become payable hereunder
or under the other Loan Documents absolutely and unconditionally and without any
abatement, postponement, diminution or deduction and without any reduction for
counterclaim or setoff. In the event that at any time any payment received by
Payee hereunder shall be deemed by a court of competent jurisdiction to have
been a voidable preference or fraudulent conveyance under any bankruptcy,
insolvency or other debtor relief law, then the obligation to make such payment
shall survive any cancellation or satisfaction of this Note or return thereof to
Maker and shall not be discharged or satisfied with any prior payment thereof or
cancellation of this Note, but shall remain a valid and binding obligation
enforceable in accordance with the terms and provisions hereof, and such payment
shall be immediately due and payable upon demand.
3.6 Governing Law. THIS NOTE SHALL BE INTERPRETED, CONSTRUED
AND ENFORCED ACCORDING TO THE LAWS OF THE STATE IN WHICH THE SECURITY PROPERTY
IS LOCATED.
ARTICLE IV
MISCELLANEOUS PROVISIONS
4.1 The terms and provisions hereof shall be binding upon and
inure to the benefit of Maker and Payee and their respective heirs, executors,
legal representatives, successors, successors-in-title and assigns, whether by
voluntary action of the parties or by operation of law. As used herein, the
terms "Maker" and "Payee" shall be deemed to include their respective heirs,
executors, legal representatives, successors, successors-in-title and assigns,
whether by voluntary action of the parties or by operation of law. If Maker
consists of more than one person or entity, each shall be jointly and severally
liable to perform the obligations of Maker under this Note. All personal
pronouns used herein, whether used in the masculine, feminine or neuter gender,
shall include all other genders; the singular shall include the plural and vice
versa. Titles of articles and sections are for convenience only and in no way
define, limit, amplify or describe the scope or intent of any provisions hereof.
Time is of the essence with respect to all provisions of this Note. This Note
and the other Loan Documents contain the entire agreements between the parties
hereto relating to the subject matter hereof and thereof and all prior
agreements relative hereto and thereto which are not contained herein or therein
are terminated.
4.2 Maker's Tax Identification Number is 58-2320787.
[THE BALANCE OF THIS PAGE IS INTENTIONALLY LEFT BLANK]
<PAGE>
Borrower's Tax Identification Number:
58-2320787
IN WITNESS WHEREOF, Maker has executed this Note as of the date first
written above.
<TABLE>
<S> <C> <C>
MAKER:
WITNESS: ONE PRICE REALTY, INC.
a South Carolina corporation
/s/ Kimber Frank
By: /s/ C. Burt Duren
/s/ Abby Wenzel Name: C. Burt Duren
Title: Treasurer
</TABLE>
<PAGE>
EXHIBIT 10(f) - Lease Agreement by and between One Price Clothing Stores, Inc.,
as Tenant and One Price Realty, Inc., as Landlord dated June 17,
1997
<PAGE>
<PAGE>
LEASE
between
ONE PRICE CLOTHING STORES, INC.,
as Tenant
and
ONE PRICE REALTY, INC.,
as Landlord
dated as of June 17, 1997
<PAGE>
Table of Contents
<TABLE>
<S> <C> <C>
1. Certain Definitions..................................................................................... 1
2. Demise of Leased Premises............................................................................... 6
3. Term.................................................................................................... 6
4. Rent.................................................................................................... 6
5. Net Lease; True Lease................................................................................... 7
6. Title and Condition..................................................................................... 8
7. Taxes................................................................................................... 8
8. Compliance with Legal Requirements...................................................................... 11
9. Use..................................................................................................... 12
10. Maintenance and Repair.................................................................................. 13
11. Liens................................................................................................... 14
12. Alterations............................................................................................. 15
13. Condemnation............................................................................................ 15
14. Insurance............................................................................................... 17
15. Damage, Destruction..................................................................................... 20
16. Disbursement of the Restoration Fund.................................................................... 21
17. Subordination to Financing.............................................................................. 22
18. Assignment, Subleasing.................................................................................. 23
19. Conditional Limitations--Default Provisions............................................................. 24
20. Landlord's Remedies..................................................................................... 25
21. Notices................................................................................................. 27
22. Memorandum of Lease: Estoppel Certificates.............................................................. 28
23. Surrender and Holding Over.............................................................................. 28
24. No Merger of Title...................................................................................... 29
25. Landlord Exculpation.................................................................................... 29
26. Hazardous Substances.................................................................................... 30
27. Entry by Landlord....................................................................................... 31
28. Statements.............................................................................................. 31
29. No Usury................................................................................................ 31
30. Broker.................................................................................................. 31
31. Waiver of Landlord's Lien............................................................................... 31
32. No Waiver............................................................................................... 32
33. Separability............................................................................................ 32
34. Indemnification......................................................................................... 32
35. Landlord's Right to Perform Tenant's Covenants.......................................................... 33
36. Representations......................................................................................... 34
37. Headings................................................................................................ 34
38. Modifications........................................................................................... 34
39. Successors, Assigns..................................................................................... 34
40. Counterparts............................................................................................ 34
41. Governing Law........................................................................................... 34
42. Attorneys' Fees......................................................................................... 34
</TABLE>
<PAGE>
THIS LEASE AGREEMENT is made as of the 17th day of June, 1997, by and
between One Price Realty, Inc., a South Carolina corporation, having an office
at Highway 290 - Commerce Park, 1875 E. Main Street, Suite B, P.O. Box 147,
Duncan, SC 29334 ("Landlord"), and One Price Clothing Stores, Inc., a Delaware
corporation, having its principal office at Highway 290 - Commerce Park, Duncan,
South Carolina 29334("Tenant").
In consideration of the rents and provisions herein stipulated to be
paid and performed, Landlord and Tenant, intending to be legally bound, hereby
covenant and agree as follows:
1. Certain Definitions
(a) "Act" as defined in Section 26(a).
(b) "Additional Rent" shall mean all sums required to be paid
by Tenant to Landlord hereunder other than Basic Rent, which sums shall
constitute rental hereunder.
(c) "Alteration" or "Alterations" shall mean any or all
changes, additions, improvements, reconstructions or replacements of any of the
Improvements, both interior and exterior, structural and non-structural, and
ordinary and extraordinary.
(d) "Bankruptcy Law": as defined in Section 20(e).
(e) "Basic Rent": as defined in Section 4(a).
(f) "Basic Rent Payment Dates": as defined in Section 4(a).
(g) "Building Systems" shall mean the mechanical, gas,
electrical, sanitary, heating, air conditioning, ventilating, elevator,
plumbing, life-safety and other service systems of the Improvements.
(h) "Business Day" shall mean any day other than a Saturday,
Sunday or any other day on which national banks in North Carolina are not open
for business.
(i) "Casualty": as defined in Section 15 (a).
(j) "Commencement Date": as defined in Section 3.
(k) "Condemnation" shall mean a Taking and/or a Requisition.
(l) "Default Rate" shall mean an annual rate of interest equal
to the lesser of (a) the sum of (i) the Note Rate plus (ii) four percent (4%),
or (b) the highest interest rate permitted to be charged to Tenant by the law of
the State.
<PAGE>
(m) "Equipment" shall mean all fixtures, equipment, and other
personal property owned by Landlord and now or hereafter located on, or attached
to or used in and about the Improvements, including, but not limited to, all
machines, engines, boilers, dynamos, elevators, stokers, tanks, cabinets,
awnings, screens, shades, blinds, carpets, draperies, lawn mowers, and all
appliances, plumbing, heating, air conditioning, lighting, ventilating,
refrigerating, disposal and incinerating equipment, and all fixtures and
appurtenances thereto, and such other chattels and personal property owned by
Landlord as are now or hereafter used in maintaining the Improvements, and all
additions thereto and substitutions and replacements therefor.
(n) "Event of Default": as defined in Section 20.
(o) "Expiration Date": as defined in Section 3.
(p) "Governmental Authority" or "Governmental Authorities"
shall mean all federal, state, county, municipal and local governments, and all
departments, commissions, boards, bureaus, agencies and offices thereof, having
jurisdiction over all or any part of the Leased Premises or the use thereof.
(q) "Guarantor" shall mean any guarantor under the Guaranty.
(r) "Guaranty" shall mean a guaranty, if any, of the
obligations of Tenant under this Lease.
(s) "Improvements" shall mean all buildings, structures and
improvements now erected or in the course of construction or hereafter
constructed on, over or under the Land, and all replacements thereof, all
walkway and road improvements of whatever nature, utility and sewage lines and
all apparatus, machinery, devices, fixtures, appurtenances and equipment
necessary for the proper operation and maintenance of the foregoing.
(t) "Insurance Boards": as defined in Section 1(x).
(u) "Insurance Requirement" or "Insurance Requirements" shall
mean, as the case may be, any one or more of the following, to the extent
applicable to, or to the extent that the same impose obligations on Landlord or
Tenant with respect to, the Leased Premises or the use, manner of use, occupancy
possession, operation, maintenance, alteration, repair or reconstruction of the
Leased Premises: the terms of each insurance policy required to be carried by
Tenant under this Lease and the requirements of the issuer of such policy.
(v) "Land" shall mean all those certain lots, parcels or
pieces of land situate, lying and being in the State, more particularly
described in Exhibit "A" annexed hereto and made a part hereof, together with
all easements, rights and appurtenances thereunto belonging or appertaining.
(w) "Leased Premises" shall mean the Land, the
Improvements and the Equipment.
(x) "Legal Requirement" or "Legal Requirements" shall mean, as
the case may be, any one or more of the following, to the extent applicable to,
or to the extent that the same impose obligations on Landlord or Tenant with
respect to, the Leased Premises or the use, manner of use, occupancy possession,
operation, maintenance, alteration, repair or reconstruction of the Leased
Premises: all present and future laws, codes, statutes, ordinances,
administrative and judicial orders, judgments, decrees, injunctions, rules,
regulations and requirements, even if unforeseen or extraordinary, of every duly
constituted Governmental Authority or agency, all orders, rules and regulations
of the National and Local Boards of Fire Underwriters or any other body or
bodies exercising similar functions ("Insurance Boards") and all covenants,
restrictions and conditions now or hereafter of record, even if compliance
therewith (i) necessitates structural changes or improvements (including changes
required to comply with the "Americans with Disabilities Act") or results in
interference with the use or enjoyment of any of the Leased Premises or (ii)
requires Tenant to carry insurance other than as required by the provisions of
this Lease.
(y) "Lender" shall mean (i) First Union National Bank, which
is making the Loan to Landlord, which Loan is secured by the Mortgage and
evidenced by the Note, (ii) the holder of the Mortgage and the Note as a result
of an assignment thereof, and (iii) if the Mortgage secures multiple Notes held
by one or more noteholders, any trustee acting on behalf of such holders,
provided such trustee has been identified as such in writing to Tenant.
(z) "Loan" shall mean a loan made to Landlord by the party
described in clause (i) of the definition of Lender, secured by the Mortgage and
evidenced by a Note or Notes.
(aa) "Mortgage" shall mean a first priority mortgage, deed of
trust, deed to secure debt, or similar security instrument dated as of the date
of this Lease, executed by Landlord in favor of the party described in clause
(i) of the definition of Lender, and covering the Leased Premises.
(ab) "Net Award" shall mean the entire award payable to
Landlord by reason of a Condemnation, less any actual and reasonable
out-of-pocket expenses incurred by Landlord in collecting such award.
(ac) "Net Proceeds" shall mean the entire proceeds of any
property/casualty insurance required under Section 14(a), less any reasonable
and actual expenses incurred by Landlord in collecting such proceeds.
(ad) "Note" or "Notes" shall mean a promissory note or notes
now or hereafter executed from Landlord to Lender to evidence the Loan, which
Note or Notes are or will be secured by the Mortgage.
(ae) "Note Rate" shall mean the non-default rate of
interest payable under the Note.
(af) "Notice" or "Notices": as defined in Section 22.
(ag) "Officer's Certificate" shall mean a certificate signed
by the President, any Vice President, the Treasurer, the Secretary or any of the
Assistant Vice Presidents, Assistant Treasurers or Assistant Secretaries of
Tenant.
(ah) "Original Tenant": as defined in Section 20(e).
(ai) "Permits": as defined in Section 8.
(aj) "Permitted Encumbrances" shall mean the following:
(i) Any state of facts an accurate survey
or inspection of the Leased Premises may show.
(ii) Present and future Legal Requirements
including, without limitation,
all violations of Legal Requirements that might be disclosed by an examination,
inspection or search of the Leased Premises or any part thereof by Governmental
Authorities, and all notes or notices of such violations.
(iii) Possible lack or revocable nature of right,
if any, to maintain or
use vaults, vault spaces, basement and sub-basement spaces, areas, marquees,
signs or projections beyond the building lines, if any.
(iv) Any covenants, restrictions, easements,
agreements, conditions and
party wall agreements, if any, affecting the Leased Premises as of the
Commencement Date or entered into subsequent to the Commencement Date pursuant
to Section 38.
(v) The condition and state of repair that the
Leased Premises or any part thereof may be in.
(vi) Rights, if any, of others relating to water,
gas, sewer, electric, telephone and other utility lines, wires, poles, pipes,
conduits and other equipment of any kind whatever and the maintenance thereof.
(vii) Consents by any prior owner of the Leased
Premises, or any part
thereof, for the erection of any structure or structures on, under or above any
street or streets on which the same may abut.
(viii) Unpaid Taxes.
(ix) All other defects in title as at the
Commencement Date, if any, including, without limitation, any mechanic's and
materialmen's liens (choate or
inchoate), unpaid franchise taxes of any corporation in the chain of title,
unsatisfied judgments and the like.
(x) Rights of any parties in possession of the
Leased Premises or any part thereof.
(xi) The Mortgage (and any assignment of leases,
rents and profits collateral thereto).
(ak) Rent Commencement Date@: as defined in Section 4(a).
(al) "Requisition" shall mean any temporary condemnation or
confiscation of the use or occupancy of any of the Leased Premises by any
governmental authority, civil or military, whether pursuant to an agreement with
such governmental authority in settlement of or under threat of any such
requisition or confiscation, or otherwise.
(am) "Restoration" shall mean the restoration of the Leased
Premises after any Taking or Casualty as nearly as possible to their value,
condition and character existing immediately prior to such Taking or Casualty.
(an) "Restoration Award": as defined in Section 13(c).
(ao) "Restoration Fund": as defined in Section 16.
(ap) "Section 15(a) Amount": as defined in Section 15(a).
(aq) "State" shall mean the State or Commonwealth in which
the Leased Premises are situated.
(ar) "Successor Owner": as defined in Section 17(c).
(as) "Taking" shall mean any taking of any of the Leased
Premises in or by condemnation or other eminent domain proceedings pursuant to
any law, general or special, or by reason of any agreement with any condemnor in
settlement of or under threat of any such condemnation or other eminent domain
proceedings or by any other means, or any de facto condemnation.
(at) "Taxes" shall mean all duties, taxes, water and sewer
rents, rates and charges, assessments (including all assessments for public
improvement or benefit), charges for public utilities, excises, levies, license
and permit fees and other charges, ordinary or extraordinary, whether foreseen
or unforeseen, of any kind and nature whatsoever, which prior to or during the
Term have been or may be laid, levied, assessed or imposed upon, or become a
lien on, the Leased Premises, or any other property or rights included in the
Leased Premises, or any part thereof or appurtenances thereto, or which are
levied or assessed against the rent and income received in respect of the Leased
Premises and any subleases or other occupancy agreements, by virtue of any
present or future law, order or ordinance of the United States of America or of
any state, county, city or local government or of any department, office or
bureau thereof or any other Governmental Authority.
(au) "Tenant Insurance Payment":as defined in Section 15(c).
(av) "Term": as defined in Section 25(a).
(aw) "Transfer": as defined in Section 26.
(ax) "Trustee": as defined in Section 15(a).
If and during such times as there is no Lender, Loan, Note or Mortgage, the
provisions of this Lease using such terms shall be disregarded as to such terms.
2. Demise of Leased Premises. Landlord hereby demises, leases
and lets to Tenant and Tenant hereby takes and leases from Landlord the Leased
Premises for the Term and upon the provisions hereinafter specified.
3. Term.
Tenant shall have and hold the Leased Premises for a term (the
"Term") commencing on the date hereof (the "Commencement Date") and ending on
July 31, 2017 (the "Expiration Date").
4. Rent
(a) Tenant shall pay to Landlord, or Lender or Lender's
designee, if directed by Landlord, as annual rent ("Basic Rent") for the Leased
Premises during the Term, the amounts determined in accordance with the schedule
set forth in Exhibit "B" attached hereto and made a part hereof, which Basic
Rent shall be paid in equal monthly installments commencing on that date (the
ARent Commencement Date@) which is the first day of the second month next
following the Commencement Date and continuing on the first day of each month
thereafter during the Term (the said days being called the "Basic Rent Payment
Dates"), and shall pay the same at Landlord's address set forth below, or at
such other place or to such other person or persons (not exceeding four (4) in
number) and in such proportions as Landlord, or if directed by Landlord, Lender
or Lender's designee, from time to time may designate to Tenant in writing, in
funds which at the time of such payment shall be legal tender for the payment of
public or private debts in the United States of America. Basic Rent shall be
abated from the Commencement Date to, but not including, the Rent Commencement
Date.
(b) If any installment of Basic Rent is not paid on the date
due, Tenant shall pay Landlord interest on such overdue payment at the Default
Rate, accruing from the due date of such payment until the same is paid together
with a late fee of 5% (or such lower percentage that is the maximum permitted
under applicable law) of the past due installment for any installment of Basic
Rent that is not paid within five (5) days of the date such installment is due.
(c) Tenant shall pay and discharge before the imposition of
any fine, lien, interest or penalty may be added thereto for late payment
thereof, as Additional Rent, all other amounts and obligations which Tenant
assumes or agrees to pay or discharge pursuant to this Lease, together with
every fine, penalty, interest and cost which may be added by the party to whom
such payment is due for nonpayment or late payment thereof. In the event of any
failure by Tenant to pay or discharge any of the foregoing, Landlord shall have
all rights, powers and remedies provided herein, by law or otherwise, in the
event of nonpayment of Basic Rent.
5. Net Lease; True Lease.
(a) It is the intention of the parties hereto that the
obligations of Tenant hereunder shall be separate and independent covenants and
agreements, and that Basic Rent, Additional Rent and all other sums payable by
Tenant hereunder shall continue to be payable in all events, and that the
obligations of Tenant hereunder shall continue unaffected, unless the
requirement to pay or perform the same shall have been terminated pursuant to an
express provision of this Lease. This is a triple net lease and Basic Rent,
Additional Rent and all other sums payable hereunder by Tenant shall be paid
without notice or demand, and without setoff, counterclaim, recoupment,
abatement, suspension, deferment. diminution, deduction reduction or defense,
unless otherwise specifically set forth herein. Landlord shall not be required
to expend any funds in connection with the Leased Premises. This Lease shall not
in any event terminate and Tenant shall not have any right to terminate this
Lease during the Term (except as otherwise expressly provided herein). Tenant
agrees that, except as otherwise expressly provided herein, it shall not have
any right to nor shall it take any action to terminate, rescind or avoid this
Lease notwithstanding (i) the bankruptcy, insolvency, reorganization,
composition, readjustment, liquidation, dissolution, winding-up or other
proceeding affecting Landlord, (ii) the exercise of any remedy, including
foreclosure, under the Mortgage, (iii) any action with respect to this Lease
(including the disaffirmance hereof) which may be taken by Landlord under the
Federal Bankruptcy Code or by any trustee, receiver or liquidator of Landlord or
by any court under the Federal Bankruptcy Code or otherwise, (iv) the Taking of
the Leased Premises or any portion thereof, (v) the prohibition or restriction
of Tenant's use of the Leased Premises under any Legal Requirement or otherwise,
(vi) the destruction of the Leased Premises or any portion thereof, (vii) the
eviction of Tenant from possession of the Leased Premises by paramount title or
otherwise, (viii) Tenant's acquisition of fee title to the Leased Premises, (ix)
default by Landlord under any other agreement between Landlord and Tenant or (x)
for any other cause similar or dissimilar to the foregoing, any present or
future Law to the contrary notwithstanding, it being the intention of the
parties that Basic Rent, Additional Rent and all other charges and amounts
payable to or on behalf of Landlord shall continue to be payable in all events
and the obligations of Tenant shall continue unaffected, unless the requirement
to pay or perform the same shall be abated or terminated pursuant to an express
provision of this Lease. Tenant waives all rights which are not expressly stated
herein but which may now or hereafter otherwise be conferred by law (x) to quit,
terminate or surrender this Lease or any of the Leased Premises, (y) to any
setoff, counterclaim, recoupment, abatement, suspension, deferment, diminution,
deduction, reduction or defense of or to Basic Rent, Additional Rent or any
other charges or amounts payable under this Lease, and (z) for any statutory
lien or offset right against Landlord or its property.
(b) Landlord and Tenant agree that this Lease is a true lease
and does not represent a financing arrangement. Each party shall reflect the
transaction represented hereby in all applicable books, records and reports
(including income tax filings) in a manner consistent with "true lease"
treatment rather than "financing" treatment.
(c) Tenant shall pay directly to the proper authorities
charged with the collection thereof all charges for water, sewer, gas, oil,
electricity, telephone and other utilities or services used or consumed on the
Leased Premises during the Term, whether designated as a charge, tax,
assessment, fee or otherwise, including, without limitation, water and sewer use
charges and taxes, if any, all such charges to be paid as the same from time to
time become due. It is understood and agreed that Tenant shall make its own
arrangements for the installation or provision of all such utilities and that
Landlord shall be under no obligation to furnish any utilities to the Leased
Premises and shall not be liable for any interruption or failure in the supply
of any such utilities to the Leased Premises.
6. Title and Condition.
(a) The Leased Premises are demised and let subject to the
Permitted Encumbrances, including any existing violation of any thereof and
without representation or warranty by Landlord; it being understood and agreed,
however, that the recital of the Permitted Encumbrances herein shall not be
construed as a revival of any thereof which for any reason may have expired.
(b) Without limiting the effect of Landlord's covenant set
forth in Section 9(c), the Landlord makes no, and expressly hereby denies any,
representations or warranties regarding the condition or suitability of, or
title to, the Leased Premises. Tenant agrees that it takes the Leased Premises
"as is," without any such representation or warranty.
7. Taxes
(a) Tenant shall pay all Taxes, or cause the same to be paid,
before any fine, penalty, interest or cost may be added thereto for the
nonpayment thereof; provided, however, that:
(i) if, by law, any recurring or non-recurring
Tax, at the option of the
taxpayer may be, and customarily is, paid in installments, whether or not
interest shall accrue on the unpaid balance of such Tax, Tenant may, so long as
no Event of Default shall have occurred and be continuing, exercise the option
to pay the same (and any accrued interest on the unpaid balance of such Tax) in
installments and, in such event shall pay such installments as may become due
during the Term together with any interest thereon as the same respectively
become due and before any fine, penalty, additional interest or cost may be
added thereto. Upon Tenant's request, Landlord will execute any and all
documents necessary to allow Tenant to make such payments in installments,
provided that Landlord shall not be required to incur any expense by reason of
the foregoing; and
(ii) any Tax (including assessments which have
been converted into
installment payments by Tenant) relating to a fiscal period of a taxing
authority, a part of which is included within the Term and a part of which is
included in a period of time after the Expiration Date shall (whether or not
such Tax shall be assessed, levied, confirmed, imposed upon or in respect of or
become a lien upon the Leased Premises, or any part thereof, or shall become due
and payable during the Term) be prorated between Landlord and Tenant as of the
Expiration Date, so long as, in the case of any such proration in favor of
Tenant, no Event of Default shall have occurred and be continuing.
(b) If at any time during the Term, tax deposits on account of
Taxes shall be required to be paid under the Mortgage, Tenant shall make the tax
deposits called for by such Mortgage to the holder thereof or to any party
designated by such holder.
(c) Except as provided in this subsection (c), Tenant shall
not be required to pay income taxes assessed against Landlord, or any capital
levy, corporation, franchise, excise, excess profits, estate, gift, succession,
inheritance or transfer taxes of Landlord; provided, however, that if at any
time during the Term, the present method of taxation shall be changed so that in
lieu of or as a substitute for the whole or any part of any Taxes on real estate
and the improvements thereon there shall be levied, assessed or imposed on
Landlord a capital levy or other tax directly on the rents received therefrom
and/or a franchise tax, assessment, levy or charge measured by or based, in
whole or in part, upon such rents or the present or future Improvements or
Equipment, then all such taxes, assessments, levies or charges, or the part
thereof so measured or based, shall be deemed to be included within the term
"Taxes" for the purposes hereof, but only to the extent that the same would be
payable if the Leased Premises were the only property of Landlord, and Tenant
shall pay and discharge the same as herein provided in respect of the payment of
Taxes.
(d) As to any Taxes in respect of which Tenant is not making
tax deposits pursuant to subsection (b) hereof, Tenant shall furnish to Landlord
bills, invoices and/or statements for all Taxes and receipts (or if receipts are
not immediately available, with copies of canceled checks evidencing payment
with receipts to follow promptly after they become available) of the appropriate
taxing authority, or other evidence satisfactory to Landlord, evidencing the
payment thereof at least fourteen (14) days prior to the applicable delinquency
date thereof.
(e) Tenant shall have the right to contest the amount or
validity, in whole or in part, of any Tax, or to seek a reduction in the
valuation of the Leased Premises as assessed for real estate or personal
property tax purposes by appropriate proceedings diligently conducted in good
faith, but only after payment of such Tax unless such payment would operate as a
bar to such contest or interfere materially with the prosecution thereof, in
which event Tenant may postpone or defer payment of such Tax (but not the
payment of any tax deposits pursuant to subsection (b) hereof), in each case
only if:
(i) neither the Leased Premises nor any part
thereof would by reason of such postponement or deferment be in imminent danger
of being forfeited or lost; and
(ii) Tenant shall either (1) have deposited with
Landlord or, if the
Mortgage shall be outstanding, the Lender the amount so contested and unpaid,
together with all interest and penalties in connection therewith and all charges
that may be assessed against or become a charge on the Leased Premises, or any
part thereof, in such proceedings, or (2) have posted with Landlord or, if the
Mortgage shall be outstanding, the Lender a bond by a surety company approved by
Landlord or, if the Mortgage shall be outstanding, the Lender whereby such
surety undertakes to pay such Tax, interest, penalties and charges in the event
that (x) Tenant shall fail to pay the same upon the final disposition of the
contest (including appeals); or, (y) the Leased Premises or any part thereof,
is, in the reasonable judgment of Landlord or Lender, in imminent danger of
being forfeited or lost during the pendency of such contest; or (3) Tenant fails
to increase the amount so contested and unpaid. In determining the amount of
such deposit or bond, Tenant shall be credited with any amounts theretofore
deposited with the Lender in respect of the Tax being contested. Any deposit
made by Tenant under the provisions of this clause (ii), together with any
additions thereto and all interest, if any, earned thereon, shall be held in
trust and disposed of as hereinafter provided; and
(iii) Tenant shall have obtained the prior consent
to such postponement or
deferment of the Lender, if such consent is required under the Mortgage.
(f) Upon the termination of any proceeding (including
appeals), conducted pursuant to subsection (e) hereof, or if Tenant should so
elect, at any time prior thereto, Tenant shall pay the amount of such Tax or
part thereof as finally determined in such proceeding (including appeals), the
payment of which may have been deferred during the prosecution of such
proceeding, together with any costs, fees, interest, penalties or other
liabilities in connection therewith, and upon such payment, Landlord or the
Lender, as the case may be, shall return any amount deposited with it (and not
previously applied by it as herein provided) with respect to such Tax. Such
payment, at Tenant's request, shall be made by Landlord or the Lender, as the
case may be, out of and to the extent of the amount deposited with it with
respect to such Tax, any balance due shall promptly be paid by Tenant, and any
balance remaining shall be paid to Tenant with interest, if any accrued thereon.
If, at any time during the continuance of such proceeding, Landlord or the
Lender, as the case may be, shall on a reasonable basis deem the amount
deposited with Landlord or the Lender, as the case may be, or provided by bond
insufficient, Tenant shall, upon demand, make an additional deposit of, or
increase the amount of its bond by, such additional amount as Landlord, or the
Lender as the case may be, may reasonably request to cover payment of the items
set forth in clause (ii)) of subsection (e) hereof, which amount shall not
exceed 115% of the amount so contested and unpaid and the fees and penalties in
connection therewith. Upon failure of Tenant to do so, and if such failure
would, in the reasonable judgment of Landlord, or Lender, as the case may be,
result in the imminent forfeiture of all of any portion of the Leased Premises,
Landlord, or the Lender, as the case may be, may require the amount theretofore
deposited with Landlord or the Lender, as the case may be, to be applied (or
Landlord or the Lender, as the case may be, may require application of the
bonded amount by the surety company, if a bond has been furnished) to or on
account of the payment, removal or discharge of such Tax, the interest and
penalties in connection therewith and any costs, fees or other liability
accruing in any such proceeding, or any part of any of the same, regardless of
the effect thereof on Tenant's contest. Any balance due shall promptly be paid
by Tenant and any balance remaining shall be returned to Tenant with interest,
if any, accrued thereon. If, at any time during the continuance of such
proceeding, the Leased Premises or any part thereof is, in the reasonable
judgment of Landlord or the Lender, as the case may be, in imminent danger of
being forfeited or lost, Landlord or the Lender, as the case may be, may require
the amount theretofore deposited with Landlord or the Lender, as the case may
be, to be applied to the payment of such Tax (or Landlord or the Lender, as the
case may be, may require application of the bonded amount by the surety company,
if a bond has been furnished) as provided in the preceding sentence, any balance
due shall promptly be paid by Tenant, and any balance remaining shall be
returned to Tenant with interest, if any, accrued thereon.
(g) During the last year of the Term, Landlord shall have the
right (i) to seek a reduction in the valuation of the Leased Premises assessed
for tax purposes if, within 30 days after Notice by Landlord, Tenant fails to
commence a proceeding to secure such reduction; (ii) at Landlord's expense to
participate in any such proceeding commenced by Tenant at Landlord's insistence
or otherwise; and (iii) to commence a proceeding without notice to Tenant, or to
intervene in and prosecute any proceeding commenced by Tenant, for a reduction
of such assessed valuation or valuations which shall in whole or in part be for
any period of time subsequent to the Expiration Date. To the extent to which any
tax refund payable as a result of any proceeding which Landlord or Tenant may
institute, or payable by reason of compromise or settlement of any such
proceeding, may be based upon a payment made by or for the account of Tenant and
shall not relate to a period subsequent to the Expiration Date, subject to
Tenant's obligation to reimburse Landlord forthwith, as Additional Rent
hereunder, for any expense incurred by Landlord in connection with any such
proceeding including reasonable attorneys' fees, and so long as no Event of
Default shall have occurred and be continuing, Tenant shall be authorized to
collect the same.
(h) Landlord shall not be required to join in any proceeding
referred to in subsection (e) hereof unless, in Tenant's reasonable opinion, the
provisions of any law at the time in effect shall require that such a proceeding
be brought by and/or in the name of Landlord or any owner of the Leased
Premises, in which event Landlord shall, upon written request, join in such
proceeding or permit the same to be brought in its name, upon compliance by
Tenant with such requirements as Landlord may reasonably impose. Upon Tenant's
request, Landlord shall execute whatever receipts are required to obtain
refunds. Tenant agrees to indemnify and hold Landlord harmless from and against
any costs or expenses (including reasonable attorneys' fees) or liabilities in
connection with any proceeding.
(i) The certificate, advice or bill of the appropriate
official designated by Law to make or issue the same or to receive payment of
any Tax, of non-payment of such Tax, shall be prima facie evidence that such Tax
is due and unpaid at the time of the making or issuance of such certificate,
advice or bill.
8. Compliance with Legal Requirements
(a) Throughout the Term, Tenant, at its own sole cost and
expense, shall promptly comply with all present and future Legal Requirements
foreseen or unforeseen, ordinary as well as extraordinary, that are applicable
to the Leased Premises or any part thereof, the appurtenances thereof and the
sidewalks, alleyways, passageways, planters and shrubbery, curbs and vaults
adjoining the Leased Premises or to the use or manner of use of the Leased
Premises or the owners, tenants or occupants thereof, whether or not any such
Legal Requirements shall necessitate structural changes or improvements or
interfere with the use or enjoyment of the Leased Premises. Tenant shall also
procure, pay for and maintain all permits, licenses, approvals and other
authorizations (collectively, "Permits") necessary for the operation of its
business at the Leased Premises and the lawful use and occupancy of the Leased
Premises in connection therewith.
(b) Tenant shall, at its own sole cost and expense, observe
and comply or cause observance and compliance with the requirements of the
policies of public liability, fire and all other insurance at any time in force
with respect to the Leased Premises, and Tenant shall, in the event of any
violation or attempted violation of the provisions of this subsection (b) and
subsection (a) by any subtenant or other occupant of the Leased Premises, take
steps, immediately upon knowledge of such violation or attempted violation, as
may be permitted by law to remedy or prevent the same, as the case may be.
(c) Tenant shall have the right, after Notice to Landlord, to
contest by appropriate legal proceedings, diligently conducted in good faith, in
the name of Tenant or Landlord or both, the validity or application of any Legal
Requirements of the nature referred to in subsection (a) and regulations of
Insurance Boards and insurance companies, and Landlord, on written request,
shall execute and deliver any appropriate papers which may be necessary or
proper to permit Tenant so to contest the validity or application of any such
Legal Requirement, subject to the following:
(i) If by the terms of any such Legal
Requirement, compliance therewith
pending the prosecution of any such proceeding may legally be delayed without
subjecting Tenant or Landlord to any liability, civil or criminal, for failure
so to comply therewith, or if any lien, charge or civil liability would be
incurred by reason of any such delay, the same would not subject the Leased
Premises or any part thereof to forfeiture, loss or suspension of operation, and
Tenant (a) furnishes Landlord security reasonably satisfactory to Landlord
against any loss or injury by reason of such contest or delay and (b) prosecutes
the contest with due diligence, then Tenant may delay compliance therewith until
the final determination of any such proceeding.
(ii) Tenant covenants that Landlord shall not
suffer or sustain any costs, expenses or liabilities by reason of any act or
thing done or omitted to be done by Tenant pursuant to this subsection (c).
9. Use
(a) Tenant may use the Leased Premises for any lawful purpose
other any use that will (i) have a material adverse effect on the value of the
Leased Premises, (ii) materially increase the likelihood that Tenant, Landlord
or Lender would incur liability under any provisions of the Act referred to in
Section 26 of this Lease, or (iii) result or give rise to any material
environmental deterioration or degradation of the Leased Premises. In no event
shall the Leased Premises be used (x) for any purpose which shall violate any of
the provisions of any recorded covenants, restrictions or agreements applicable
to the Leased Premises, (y) for any purpose which will involve the storage or
disposition of hazardous medical waste or (z) as a so-called "adult book store"
or "adult video store". Tenant agrees that with respect to any such recorded
covenants, restrictions or agreements, Tenant shall observe, perform and comply
with and carry out the provisions thereof required therein to be observed and
performed by Landlord.
(b) Subject to Tenant's rights of contest under Section 8
hereof, Tenant shall not permit any unlawful occupation, business or trade to be
conducted on any of the Leased Premises or any use to be made thereof contrary
to applicable Legal Requirements or Insurance Requirements. Subject to Tenant's
rights of contest under Section 8 hereof, Tenant shall not use, occupy or permit
any of the Leased Premises to be used or occupied, nor do or permit anything to
be done in or on any of the Leased Premises, in a manner which would (i) violate
any certificate of occupancy or equivalent certificate affecting any of the
Leased Premises, (ii) make void or voidable any insurance which Tenant is
required hereunder to maintain then in force with respect to any of the Leased
Premises, (iii) affect in any manner the ability of Tenant to obtain any
insurance which Tenant is required to furnish hereunder, (iv) cause any injury
or damage to any of the Improvements unless pursuant to Alterations permitted
under Section 12 hereof, or (v) constitute a public or private nuisance or
waste.
(c) Subject to all of the provisions of this Lease and the
Mortgage, so long as no Event of Default shall have occurred and be continuing,
Landlord covenants that neither it nor any party claiming by, through or under
it, shall do any act to disturb the peaceful and quiet occupation and enjoyment
of the Leased Premises by Tenant. Landlord may enter upon and examine any of the
Leased Premises at reasonable times after reasonable notice and during business
hours and exercise any rights and privileges granted to Landlord under the
provisions of this Lease.
10. Maintenance and Repair
(a) Except for any Alterations that Tenant is permitted to
make hereunder. Tenant shall at all times, including any Restoration period,
put, keep and maintain the Leased Premises, including, without limitation, the
roof, landscaping, parking areas, walls (interior and exterior), footings,
foundations, Building Systems, and structural and non-structural components of
the Leased Premises in good repair and appearance, and shall promptly make all
repairs and replacements (substantially equivalent in quality and workmanship to
the original work) of every kind and nature, ordinary as well as extraordinary,
whether foreseen or unforeseen, which may be required to be made upon or in
connection with any of the Leased Premises in order to keep and maintain the
Leased Premises in good repair and appearance. Tenant shall, during the Term of
this Lease, implement and carry out a program requiring reasonable maintenance
practices and preventative maintenance with respect to the Leased Premises.
Tenant shall do or cause others to do all shoring of the Leased Premises or of
foundations and walls of the Improvements and every other act necessary or
appropriate for preservation and safety thereof, by reason of or in connection
with any excavation or other building, operation upon any of the Leased Premises
whether or not Landlord shall, by reason of any Legal Requirements or Insurance
Requirements, be required to take such action or be liable for failure to do so.
Landlord shall not be required to make any repair, ordinary as well as
extraordinary, whether foreseen or unforeseen or to maintain any of the Leased
Premises in any way, and Tenant hereby expressly waives the right to make
repairs at the expense of the Landlord, which right may otherwise be provided
for in any law now or hereafter in effect. Nothing in the preceding sentence
shall be deemed to preclude Tenant from being entitled to insurance proceeds or
condemnation awards for Restoration pursuant to the terms of this Lease. Tenant
shall, in all events, make all repairs for which it is responsible hereunder
promptly, and all repairs shall be in a good, proper and workmanlike manner with
materials substantially equivalent in quality to the original work. In the event
that (i) Tenant shall make any repair to the Leased Premises and such repair is
of the type with respect to which Landlord is entitled to have disbursed to it
funds on deposit in the "Replacement Reserve" (as defined in Section 1.8(a) of
the Mortgage) and (ii) such funds shall have been disbursed to Landlord, then,
provided no Event of Default shall have occurred and be continuing, Landlord
shall pay to Tenant any funds so disbursed to Landlord from the Reserve Fund on
account of such repair promptly after Landlord's receipt of such funds.
(b) If Tenant shall be in default under any of the provisions
of this Section 10, Landlord may, after thirty (30) days' notice to Tenant and
failure of Tenant to commence to cure during said period or to diligently
prosecute such cure to completion once begun, but immediately upon notice in the
event of an emergency (that is, imminent danger of injury to persons or material
damage to property), do whatever is necessary to cure such default as may be
reasonable under the circumstances for the account of and at the expense of
Tenant. In the event of an emergency, before Landlord may avail itself of its
rights under this Section 10(b), Landlord shall send notice to Tenant of the
situation by phone or other available communication. All actual and reasonable
costs and expenses (including, without limitation, reasonable attorneys' fees
and expenses) so incurred by Landlord, together with interest thereon at the
Default Rate from the date of payment or incurring the expense, shall constitute
Additional Rent payable by Tenant under this Lease and shall be paid by Tenant
to Landlord on demand. Landlord and Tenant agree that, in the event of an
emergency, expenditures which might otherwise be unreasonable (such as overtime)
may nevertheless be reasonable under the circumstances.
(c) Tenant shall from time to time replace Equipment which
shall have become worn out, obsolete or unusable for the purpose for which it is
intended, been taken by a Condemnation as provided in Section 13, or been lost,
stolen, damaged or destroyed as provided in Section 15. Tenant shall repair at
its sole cost and expense all damage to the Leased Premises caused by the
removal of Equipment or any other personal property of Tenant at any time,
including upon expiration or termination of this Lease.
11. Liens Tenant shall not, directly or indirectly,
create or permit to be created or to remain, and shall promptly discharge,
any lien on any of the Leased Premises, or the Basic Rent, Additional Rent or on
any other sums payable by Tenant under this Lease, other than the Mortgage (and
any assignment of leases, rents or profits collateral thereto), the Permitted
Encumbrances and any mortgage, lien, encumbrance or other charge created by or
resulting from any act or omission by Landlord or those claiming by, through or
under Landlord, provided, however, that Tenant shall promptly discharge any lien
arising out of the breach or failure of Tenant to comply with any obligations
arising under any easement agreement with respect to the Leased Premises.
12. Alterations. (a) Tenant shall not make any Alterations which would
result, after giving consideration to the completed alteration, in a material
diminution in the value of the Leased Premises or a diminution in the cubic
content of the building on the Leased Premises (other than to a de minimis
extent) without Landlord's written consent. Tenant may make any other
Alterations without the prior written consent of the Landlord provided such
Alterations comply with all of the provisions of the following sentence. All
Alterations shall be performed in a good and workmanlike manner with materials
substantially equivalent in quality to the original work, and shall be
expeditiously completed in compliance with all Legal Requirements; all work done
in connection with any such Alteration shall comply with all Insurance
Requirements; Tenant shall promptly pay all costs and expenses of any such
Alteration, and shall discharge all liens filed against any of the Leased
Premises arising out of the same; Tenant shall procure and pay for all permits
and licenses required in connection with any such Alteration; all such
Alterations shall be the property of Landlord and shall be subject to this
Lease; and any Alteration the estimated cost of which in any one instance
exceeds Fifty Thousand Dollars ($50,000) shall be made under the supervision of
a licensed architect or engineer in accordance with detailed plans and
specifications which shall be submitted to Landlord at least twenty (20) days
prior to the commencement of the Alterations. Upon completion of any Alteration
involving structural changes or changes to Building Systems, Tenant will provide
as-built plans and specifications or record drawings marked to show such changes
to Landlord and Lender.
(b) Promptly upon completion of any Alterations, Tenant shall
cause to be delivered to Landlord (1) a certification from an inspecting
architect, engineer or other consultant reasonably acceptable to Landlord
describing the completed work, verifying the completion of the work
substantially in accordance with the plans therefor previously delivered to
Landlord and, if applicable, certifying that the Leased Premises is, as a result
of such work, in compliance with all applicable Legal Requirements relating to
the work so performed, and (2) affidavits, lien waivers or other evidence
reasonably satisfactory to Landlord showing that all materialmen, laborers,
subcontractors and any other parties who might or could claim statutory or
common law liens and are furnishing or have furnished materials or labor to the
Leased Premises have been paid all amounts due for such labor and materials
furnished to the Leased Premises.
13. Condemnation.
(a) Immediately upon obtaining knowledge of the institution of
any proceeding for Condemnation, Tenant shall notify Landlord thereof and
Landlord shall be entitled to participate in any Condemnation proceeding at
Tenant's expense. Immediately upon obtaining knowledge of the institution of any
proceeding for Condemnation, Landlord shall notify Tenant thereof and Tenant
shall have the right to participate in such proceedings at its own expense.
Subject to the provisions of this Section 13 and Section 16, Tenant hereby
irrevocably assigns to Landlord any award or payment in respect of any
Condemnation of the Leased Premises, except that nothing in this Lease shall be
deemed to require the assignment to Landlord or Lender of any award or payment
on account of Tenant's trade fixtures, or Tenant's other tangible personal
property, moving expenses and similar claims, if available, to the extent Tenant
shall have a right to make a separate claim therefor against the condemnor; it
being agreed, however, that Tenant shall in no event be entitled to any payment
that reduces the award to which Landlord is or would be entitled for the
condemnation of the Leased Premises.
(b) Notwithstanding anything herein to the contrary, Tenant
shall have no right to pursue a claim for damage to or loss of Tenant's
leasehold estate in the Leased Premises but may pursue a claim for and retain
any other separate damages that Tenant may suffer, provided, however, that such
award or payment to Tenant is completely separate from, or separately itemized
or determined, and shall in no manner reduce the award or payment to Landlord.
If, but only to the extent that, the foregoing proviso is not met, Tenant's
award or payment shall be considered to be part of the award and deemed assigned
to Landlord pursuant to subsection (a) hereof.
(c) In the event of any Condemnation of part of the Leased
Premises, subject to the requirements of Section 16, the Net Award of such
Condemnation shall, to the extent so permitted by the Mortgage, be paid to
Landlord and, promptly after such Condemnation, Tenant shall, regardless of the
sufficiency of the Net Award, commence and diligently continue to perform the
Restoration to the extent physically feasible. Upon the payment to Landlord or
Lender of the Net Award of a Condemnation which falls within the provisions of
this subparagraph (c), Landlord shall, to the extent received, make available,
or cause to be made available, to Tenant for Restoration that portion of the Net
Award equal to the cost of Restoration (the "Restoration Award") in accordance
with the provisions of Section 16, and the balance remaining shall be paid to
Landlord. Notwithstanding any such Condemnation of part of the Leased Premises,
the parties' rights and obligations under this Lease shall remain unchanged,
including, without limitation, Tenant's obligations to pay Landlord Basic Rent
and Additional Rent. Landlord agrees that it shall not, without the prior
written consent of Tenant, enter into any amendment to the Mortgage, the effect
of which amendment would be (i) to make less favorable to Landlord the
conditions upon which any Restoration Award may be released to Landlord by
Lender or (ii) to reduce the amount of any Restoration Award that may be so
released.
(d) In the event of a Requisition of any of the Leased
Premises, Landlord shall apply the Net Award of such Requisition, to the extent
available, to the installments of Basic Rent, Additional Rent or other sums
payable by Tenant hereunder thereafter payable and Tenant shall pay the balance
remaining thereafter. Upon the expiration of the Term, any portion of such Net
Award attributable to the period following the expiration of the Term shall be
retained by Landlord.
(e) Except with respect to an award or payment to which Tenant
is entitled pursuant to the foregoing provisions of this Section 13, no
agreement with any condemnor in settlement of or under threat of any
Condemnation shall be made by either Landlord or Tenant without the written
consent of the other, which consent shall not be unreasonably withheld or
delayed provided such award or payment is applied in accordance with this Lease.
(f) If, during the Term, all or any portion of the Leased
Premises shall be taken by Condemnation, Tenant's right of possession under this
Lease with respect to the Leased Premises or the portion thereof to be taken
shall terminate upon the date of such Taking. Notwithstanding such termination
of possession, Tenant shall continue to pay Landlord the Basic Rent and
Additional Rent due under this Lease for the remainder of the Term, as if such
Condemnation had not occurred, as the same would otherwise be due and payable.
(g) No Taking of the Leased Premises, or any portion thereof,
shall permit Tenant to surrender this Lease, be deemed a constructive ejectment
or eviction or otherwise release Tenant from its liability to pay to Landlord
the Basic Rent and Additional Rent payable under this Lease or to perform any of
its other obligations under this Lease for the remainder of the Term. Tenant
waives any rights now or hereafter conferred upon Tenant by present or future
Legal Requirements or recorded covenants, restrictions, easement agreements or
declarations, or at equity, or otherwise to terminate, quit or surrender this
Lease or the Leased Premises, or any portion thereof, to Landlord, or, except as
otherwise expressly provided herein, to any suspension, diminution, abatement or
reduction of Basic Rent or Additional Rent or the performance of any of its
obligations on account of such Taking.
14. Insurance.
(a) Tenant shall maintain at its sole cost and expense
the following insurance on the Leased Premises:
(i) Insurance against loss or damage to the
Leased Premises by fire,
windstorm, tornado and hail and against loss and damage by such other, further
and additional risks as may be now or hereafter embraced by an "all-risk" or
"special form" type of insurance policy. The amount of such insurance shall be
not less than one hundred percent (100%) of the full replacement cost (insurable
value) of the Improvements (as established by an MAI appraisal), without
reduction for depreciation. The determination of the replacement cost amount
shall be adjusted annually to comply with the requirements of the insurer
issuing such coverage or, at Landlord's election, by reference to such indices,
appraisals or information as Landlord determines in order to reflect increased
value due to inflation. Absent such annual adjustment, each policy shall contain
inflation guard coverage insuring that the policy limit will be increased over
time to reflect the effect of inflation. Full replacement cost, as used herein,
means, with respect to the Improvements, the cost of replacing the Improvements
without regard to deduction for depreciation, exclusive of the cost of
excavations, foundations and footings below the lowest basement floor. Tenant
shall also maintain insurance against loss or damage to furniture, furnishings,
fixtures, equipment and other items (whether personalty or fixtures) included in
the Leased Premises from time to time to the extent applicable. Each policy
shall contain a replacement cost endorsement and either an agreed amount
endorsement (to avoid the operation of any co-insurance provisions) or a waiver
of any co-insurance provisions, all subject to Landlord's approval. The maximum
deductible shall be $50,000.00.
(ii) Commercial General Liability Insurance
against claims for personal
injury, bodily injury, death and property damage occurring on, in or about the
Leased Premises or the Improvements in amounts not less than $1,000,000.00 per
occurrence and $2,000,000.00 in the aggregate plus umbrella coverage in an
amount not less than $2,000,000. Landlord hereby retains the right to
periodically review the amount of said liability insurance being maintained by
Tenant and to require an increase in the amount of said liability insurance
should Landlord or Lender deem an increase to be prudent under then existing
circumstances.
(iii) Boiler and machinery insurance is required
if steam boilers or other
pressure-fired vessels are in operation at the Leased Premises. Minimum
liability coverage per accident must equal the greater of the replacement cost
(insurable value) of the Improvements housing such boiler or pressure-fired
machinery or $2,000,000.00. If one or more large HVAC units is in operation at
the Leased Premises, "Systems Breakdowns" coverage shall be required, as
determined by Landlord or Lender. Minimum liability coverage per accident must
equal the value of such unit(s).
(iv) If the Improvements or any part thereof is
situated in an area
designated by the Federal Emergency Management Agency ("FEMA") as a special
flood hazard area (Zone A or Zone V), flood insurance in an amount equal to the
lesser of: (a) the minimum amount required, under the terms of coverage, to
compensate for any damage or loss on a replacement basis (or the unpaid balance
of the Note if replacement cost coverage is not available for the type of
building insured), or (b) the maximum insurance available under the appropriate
National Flood Insurance Administration program. The maximum deductible shall be
$3,000.00 per building or a higher minimum amount as required by FEMA or other
applicable law.
(v) During the period of any construction,
renovation or alteration of
the existing Improvements which exceeds the lesser of 10% of the principal
amount of the Note or $500,000, at Landlord's or Lender's request, a completed
value, "All Risk" Builder's Risk form or "Course of Construction" insurance
policy in non-reporting form, in an amount approved by Landlord, may be
required. During the period of any construction of any addition to the existing
Improvements, a completed value, "All Risk" Builder's Risk form or "Course of
Construction" insurance policy in non-reporting form, in an amount approved by
Landlord, shall be required.
(vi) When required by applicable law, ordinance
or other regulation,
Worker's Compensation and Employer's Liability Insurance covering all persons
subject to the worker's compensation laws of the state in which the Leased
Premises is located.
(vii) Business income (loss of rents) insurance in
amounts sufficient to
compensate Landlord for all Basic Rent and Additional Rent during a period of
not less than twelve (12) months. The amount of coverage shall be adjusted
annually to reflect the Basic Rent and Additional Rent payable during the
succeeding twelve (12) month period.
(viii) Such other insurance on the Leased Premises
or on any replacements or
substitutions thereof or additions thereto as may from time to time be required
by Landlord or Lender against other insurable hazards or casualties which at the
time are commonly insured against in the case of property similarly situated
including, without limitation, Sinkhole, Mine Subsidence, Earthquake and
Environmental insurance, due regard being given to the height and type of
buildings, their construction, location, use and occupancy.
(b) All such insurance shall (i) be with insurers fully
licensed and authorized to do business in the state within which the Leased
Premises is located and who have and maintain a rating of at least (A) A from
Standard & Poors, or equivalent or (B) A-V or higher from A.M. Best, (ii)
contain the complete address of the Premises (or a complete legal description),
(iii) be for terms of at least one year, and (iv) be subject to the approval of
Landlord and Lender as to insurance companies, amounts, content, forms of
policies, method by which premiums are paid and expiration dates, and (vi)
include a standard, non-contributory, mortgagee clause naming EXACTLY:
First Union National Bank,
its Successors and Assigns ATIMA
Attn.: Commercial Mortgage Servicing
P.O. Box 20068
Charlotte, NC 28202
(x) as an additional insured under all liability insurance policies, (y) as the
first mortgagee on all property insurance policies and (z) as the loss payee on
all loss of rents or loss of business income insurance policies.
(c) Tenant shall, as of the date hereof, deliver to Landlord
and Lender evidence that such insurance policies have been paid current as of
the date hereof and certified copies of such insurance policies and original
certificates of insurance signed by an authorized agent of the applicable
insurance companies evidencing such insurance satisfactory to Landlord and
Lender. Tenant shall renew or cause to be renewed all such insurance and deliver
to Landlord and Lender certificates and policies evidencing such renewals at
least thirty (30) days before any such insurance shall expire. Tenant further
agrees that each such insurance policy: (i) shall provide for at least thirty
(30) days' prior written notice to Landlord and Lender prior to any policy
reduction or cancellation for any reason other than non-payment of premium and
at least ten (10) days' prior written notice to Landlord and Lender prior to any
cancellation due to non-payment of premium; (ii) shall contain an endorsement or
agreement by the insurer that any loss shall be payable to Lender in accordance
with the terms of such policy notwithstanding any act or negligence of Landlord
or Lender which might otherwise result in forfeiture of such insurance; (iii)
shall waive all rights of subrogation against Landlord and Lender; (iv) in the
event that the Leased Premises or the Improvements constitutes a legal
non-conforming use under applicable building, zoning or land use laws or
ordinances, shall include an ordinance or law coverage endorsement which will
contain Coverage A: "Loss Due to Operation of Law" (with a minimum liability
limit equal to replacement cost With Agreed Value Endorsement), Coverage B:
"Demolition Cost" and Coverage C: "Increased Cost of Construction" coverages;
and (v) may be in the form of a blanket policy provided that, in the event that
any such coverage is provided in the form of a blanket policy, Tenant hereby
acknowledges and agrees that failure to pay any portion of the premium therefor
which is not allocable to the Leased Premises or by any other action not
relating to the Leased Premises which would otherwise permit the issuer thereof
to cancel the coverage thereof, would require the Leased Premises to be insured
by a separate, single-property policy. The blanket policy must properly identify
and fully protect the Leased Premises as if a separate policy were issued for
100% of replacement cost at the time of loss and otherwise meet all of the
applicable insurance requirements set forth in this Section 14. In the event
Tenant fails to provide, maintain, keep in force or deliver and furnish (or
cause to be provided, maintained, kept in force or delivered and furnished) to
Landlord and Lender the policies of insurance required by this Lease or evidence
of their renewal as required herein, Landlord may, but shall not be obligated
to, procure such insurance and Tenant shall pay all amounts advanced by Landlord
therefor, together with interest thereon at the Default Rate from and after the
date advanced by Landlord until actually repaid by Tenant, promptly upon demand
by Landlord. Any amounts so advanced by Landlord, together with interest
thereon, shall be Additional Rent. Neither Landlord nor Lender shall not be
responsible for nor incur any liability for the insolvency of the insurer or
other failure of the insurer to perform, even though Landlord or Lender has
caused the insurance to be placed with the insurer after failure of Tenant to
furnish such insurance.
(d) Tenant shall not take out separate insurance concurrent in
form or contributing in the event of loss with that required in this Section 14
to be furnished by Tenant unless Landlord and Lender are included therein as an
insured, as their interest may appear, with loss payable as in this Lease
provided. Tenant shall immediately notify Landlord and Lender of the taking out
of any such separate insurance and shall cause the policies therefor to be
delivered as required in subsection (c) hereof.
15. Damage, Destruction.
(a) In the event of any damage or destruction of the Leased
Premises (a "Casualty"), Tenant shall give Landlord immediate notice thereof. If
such Casualty shall result in a loss which does not exceed an amount (the
"Section 15(a) Amount") equal to the lesser of (i) One Hundred Thousand Dollars
($100,000) and (ii) five percent (5%) of the then unpaid balance of the Note,
Tenant shall adjust, collect and compromise the resulting claim, with the
consent of Lender and of Landlord, which consent of Landlord shall not to be
unreasonably withheld or delayed, and Landlord and Lender shall have the right
to join with Tenant therein. If the estimated cost of Restoration or repair
shall be less than or equal to the Section 15(a) Amount and the proceeds of any
insurance required under Section 14(a) shall be received by Landlord, Landlord
shall pay such proceeds to Tenant. In all other events, any proceeds received by
Landlord shall be paid to a Trustee which shall be a federally insured bank or
other financial institution selected by Landlord and Tenant and reasonably
satisfactory to Lender (the "Trustee"). If the Leased Premises shall be covered
by a Mortgage, Lender, if it so desires, shall be the Trustee. Each insurer is
hereby authorized and directed to make payment under said policies directly to
such Trustee; and Tenant hereby appoints such Trustee as Tenant's
attorney-in-fact to endorse any draft therefor for the purposes set forth in
this Lease after approval by Tenant of such Trustee, if Trustee is other than
Lender, such approval not to be unreasonably withheld or delayed.
(b) In the event of any Casualty (whether or not insured
against) resulting in damage to the Leased Premises or any part thereof, the
Term shall nevertheless continue and there shall be no abatement or reduction of
Basic Rent, Additional Rent or any other sums payable by Tenant hereunder;
provided, however, that the Basic Rent and Additional Rent shall be abated to
the extent of any net insurance proceeds received by Landlord and/or Lender with
respect to the policy of business income (loss of rents) insurance required to
be maintained by Tenant pursuant to Section 14(a)(vii). The Net Proceeds of such
insurance payment shall be retained by the Trustee and, promptly after such
Casualty, Tenant shall commence and diligently continue to perform to completion
the Restoration to the Leased Premises. Upon payment to the Trustee of such Net
Proceeds, the Trustee shall make the Net Proceeds available to Tenant for
restoration, in accordance with the provisions of Section 16. Tenant shall,
whether or not the Net Proceeds are sufficient for the purpose, promptly repair
or replace the Improvements as nearly as possible to their value and condition
and character immediately prior to such event and otherwise in accordance with
all Insurance Requirements and Legal Requirements and the provisions of this
Lease and the Net Proceeds of such loss shall thereon be payable to Tenant,
subject to the provision of Section 16 hereof. Landlord agrees that it shall
not, without the prior written consent of Tenant, enter into any amendment to
the Mortgage, the effect of which amendment would be (i) to make less favorable
to Landlord the conditions upon which any Net Proceeds may be released to
Landlord by Lender or (ii) to reduce the amount of any Net Proceeds that may be
so released.
(c) In the event that any Casualty shall occur that would have
been covered by the insurance specified in section 14(a)(i) but for the fact
that it was not maintained, Tenant shall pay to the Trustee the amount of the
proceeds that would have been payable had such insurance been in effect (the
"Tenant Insurance Payment").
16. Disbursement of the Restoration Fund.
The Net Proceeds and Tenant Insurance Payment (the aggregate
of which and any interest being herein defined as the "Restoration Fund")
received by the Trustee shall be disbursed by the Trustee in accordance with the
following conditions:
(a) At the time of any disbursement, no Event of Default shall
have occurred and be continuing and no mechanics or materialmen's liens shall
have been filed and remain undischarged and unbonded.
(b) If the cost of Restoration exceeds One Hundred Thousand
Dollars ($100,000) prior to commencement of the Restoration, the architects,
contracts, contractors, plans and specifications for the Restoration shall have
been approved by Landlord, which approval shall not be unreasonably withheld or
delayed.
(c) Each request for disbursement shall be accompanied by a
certificate of Tenant, signed by the President, Treasurer or any Vice President
of Tenant, describing the completed work for which payment is requested. stating
the cost incurred in connection therewith and stating that Tenant has not
previously received payment for such work and the certificate to be delivered by
Tenant upon completion of the work shall, in addition, state that the work has
been completed and complies with the applicable requirements of this Lease and
all Legal Requirements and Insurance Requirements.
(d) Disbursements shall be made from time to time in an amount
not exceeding the cost of the work completed since the last disbursement (the
"Invoiced Cost") upon receipt of (1) satisfactory evidence, including
architects' certificates, of the stage of completion, of the estimated cost of
completion and of performance of the work to date in a good and workmanlike
mariner in accordance with the contracts, plans and specifications approved by
Landlord, (2) waivers of the general contractors lien, (3) a satisfactory bring
down of title insurance, and (4) other evidence of cost and payment so that
Landlord can verify that the amounts disbursed from time to time are represented
by work that is completed in place and free and clear of mechanics' liens.
(e) In connection with each disbursement, the Trustee may
continue to retain in the Restoration Fund ten percent (10%) of the related
Invoiced Cost until the Restoration is fully completed and the Leased Premises
are available for their intended use, in the reasonable judgment of the Lender,
including the issuance of any necessary certificate of occupancy.
(f) The Restoration Fund shall be kept in a separate
interest-bearing account federally insured to the extent applicable. Any such
interest shall become a part of the Restoration Fund.
Prior to commencement of Restoration and at any time during
Restoration, if the estimated cost of Restoration, as reasonably determined by
Landlord or Lender, exceeds the amount of the Restoration Fund, the amount of
such excess shall be paid by Tenant to the Trustee to be added to the
Restoration Fund prior to any further disbursement or Tenant shall fund at its
own expense the costs of such Restoration until the remaining Restoration Fund
is sufficient for the completion of the Restoration. Any sum remaining in the
Restoration Fund which remains in the Restoration Fund upon the completion of
Restoration shall be paid to Landlord. For purposes of determining the source of
funds with respect to the disposition of funds remaining after the completion of
Restoration, the Net Proceeds or the Restoration Award shall be deemed to be
disbursed prior to any amount added by Tenant.
17. Subordination to Financing
(a) Subject to the following provisions of this Section 17(a),
Tenant agrees that this Lease shall be subject and subordinate to the Mortgage,
including any amendments, increases, extensions, renewals or refinancings
thereof, and Tenant agrees, upon demand, without cost, to execute instruments as
may be required to further effectuate or confirm such subordination; provided,
however, that such subordination shall be conditioned upon Lender entering into
with Tenant a Subordination, Non-Disturbance and Attornment Agreement in form
and substance reasonably acceptable to Lender and Tenant.
(b) Notwithstanding the provisions of subsection (a) of this
Section 17, the holder of the Mortgage to which this Lease is subject and
subordinate, as provided in said subsection (a), shall have the right, at its
sole option, at any time, to subordinate and subject the Mortgage, in whole or
in part, to this Lease by recording a unilateral declaration to such effect.
(c) At any time prior to the expiration of the Term, Tenant
agrees, at the election and upon demand of any owner (each, a "Successor Owner")
of the Leased Premises, including the Lender or a purchaser at a foreclosure
sale, to attorn, from time to time, to any such Successor Owner, upon the then
executory terms and conditions of this Lease, for the remainder of the term
originally demised in this Lease and for any renewal term, provided that such
Successor Owner shall then be entitled to possession of the Leased Premises
subject to the provisions of this Lease. The provisions of this subsection (c)
shall enure to the benefit of any such Successor Owner, shall apply
notwithstanding that, as a matter of law, this Lease may terminate upon the
foreclosure of the Mortgage, shall be self operative upon any such demand, and
no further instrument shall be required to give effect to said provisions.
(d) Tenant agrees for the benefit of Lender that Tenant will
not, without in each case the prior written consent of Lender (i) amend, modify,
cancel or surrender the term of this Lease, or enter into any agreement with
Landlord so to do, or (ii) pay any installment of Basic Rent more than one (1)
month in advance of the due date thereof or otherwise than in the manner
provided for in this Lease.
18. Assignment, Subleasing.
(a) Tenant is currently in occupancy and is operating its
business at the Leased Premises. Provided that no Event of Default shall have
occurred and be continuing, Tenant may sublet the Leased Premises in whole or in
part without the consent of Landlord. Except as expressly permitted below,
Tenant shall not assign its interest in this Lease without the prior written
consent of Landlord and Lender. The assignment of this Lease by Tenant named
herein (the "Original Tenant") to the parent, a wholly owned subsidiary or an
affiliate of Tenant shall not require the consent of Landlord and Lender. An
"affiliate" of Tenant shall mean any corporation, partnership or other business
entity which controls or is controlled by, or is under common control with
Tenant. The word "control" (including "controlled by", "under common control
with" and "controlling") as used with respect to any corporation, partnership or
other business entity, shall mean the possession of the power to direct or cause
the direction of the management and policies of such corporation, partnership or
other business entity, whether through the ownership of voting securities or
contract. No sublease under, or assignment of this Lease shall relieve Tenant of
its obligations hereunder, which shall continue jointly and severally with any
such assignee as the obligations of a principal and not as the obligations of a
surety or a guarantor.
(b) Either a transfer (including the issuance of treasury
stock or the creation and issuance of new stock or a new class of stock) of a
controlling interest in the shares of Tenant (if Tenant is a corporation or
trust) or a transfer of a majority of the total interest in Tenant (if Tenant is
a partnership or other entity) at any one time or over a period of time through
a series of transfers, shall be deemed an assignment of this Lease and shall be
subject to all of the provisions of this Section 18, including, without
limitation, the requirement that Tenant obtain Landlord's prior consent thereto.
The transfer of shares of Tenant (if Tenant is a corporation or trust) for
purposes of this Section 18(b) shall not include the sale of shares effected
through the "over-the-counter market" or through any recognized stock exchange.
(c) Each sublease of the Leased Premises or any part thereof
shall be subject and subordinate to the provisions of this Lease. Tenant agrees
that in the case of an assignment, Tenant shall, within fifteen (15) days after
the execution and delivery of any such assignment, deliver to Landlord and
Lender (i) a duplicate original of such assignment in recordable form and (ii)
an agreement executed and acknowledged by the assignee in recordable form
wherein the assignee shall agree to assume and agree to observe and perform all
of the terms and provisions of this Lease on the part of the Tenant to be
observed and performed from and after the date of such assignment, and, in the
case of a sublease, Tenant shall, within fifteen (15) days after the execution
and delivery of such sublease, deliver to Landlord and Lender a duplicate
original of such sublease.
(d) Upon the occurrence of an Event of Default under this
Lease, Landlord shall have the right to collect and enjoy all rents and other
sums of money payable under any sublease of any of the Leased Premises, and
Tenant hereby irrevocably and unconditionally assigns such rents and money to
Landlord, which assignment may be exercised upon and after (but not before) the
occurrence of an Event of Default.
19. Conditional Limitations--Default Provisions. The following
shall constitute events of
default ("Events of Default") hereunder:
(a) If default shall be made in the due and punctual payment
to Landlord of any installment of Basic Rent payable under the Lease or any part
thereof when and as the same shall have become due and payable, and such default
shall continue for a period of three (3) days after Notice from Landlord or
Lender; or
(b) If default shall be made in the due and punctual payment
of any Additional Rent payable by Tenant under this Lease or any part thereof
when and as the same shall become due and payable, and such default shall
continue for a period of fifteen (15) days after Notice from Landlord or Lender;
or
(c) If any of the representations and warranties made by
Tenant in this Lease shall prove untrue in any material respect, and Tenant
shall fail to make such representations and warranties true (if such default is
capable of being remedied) within fifteen (15) days after Notice thereof from
Landlord or Lender to Tenant or, if such default cannot with all due diligence
be cured within such period of fifteen (15) days but is susceptible of being
cured within a longer period of time, Tenant fails to proceed with all due
diligence within such period of fifteen (15) days to cure the same and
thereafter to prosecute the curing of such default with all due diligence (it
being intended that if such default is susceptible of being cured but cannot
with all due reasonable diligence be cured within such period of fifteen (15)
days that the time of Tenant within which to cure the same shall be extended for
such period of time as may be necessary to complete the curing thereof with all
due diligence); or
(d) If default shall be made by Tenant in the performance of
or compliance with any of the provisions contained in this Lease (other than
those referred to in the foregoing subsections (a), (b) and (c) and such default
shall continue for a period of thirty (30) days after notice thereof from
Landlord to Tenant, or, in the case of a default or a contingency which is
susceptible of being cured but which cannot with all due diligence be cured
within such period of thirty (30) days, Tenant fails to proceed with all due
diligence within such period of thirty (30) days to cure the same and thereafter
to prosecute the curing of such default with all due diligence (it being
intended that in connection with a default susceptible of being cured but which
cannot with all due diligence be cured within such period of thirty (30) days
that the time of Tenant within which to cure the same shall be extended for such
period as may be necessary to complete the curing thereof with all due
diligence); or
(e) If Tenant or, in the event the Lease shall have been
assigned, the Tenant named herein (the "Original Tenant"), or any Guarantor as
the case may be, shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent or shall file any petition or answer seeking
any reorganization, arrangement, recapitalization, readjustment, liquidation,
dissolution or similar relief under any present or future Federal Bankruptcy
Code or any other present or future applicable law relating to relief for
debtors ("Bankruptcy Law"), or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of Tenant, Original Tenant,
or any Guarantor as the case may be, or of all or any substantial part of its or
their properties or of the Leased Premises, or shall make an assignment for the
benefit of creditors, or shall admit in writing its or their inability to pay
its debts generally as the same become due; or
(f) If within one hundred twenty (120) days after the
commencement of any proceedings against Tenant, Original Tenant, or any
Guarantor as the case may be, seeking any reorganization, arrangement,
recapitalization, readjustment, liquidation, dissolution or similar relief under
any Bankruptcy Law, such proceedings shall not have been dismissed, or if,
within ninety (90) days after the appointment, without the consent or
acquiescence of Tenant, Original Tenant, or any Guarantor as the case may be, of
any trustee, receiver or liquidator of Tenant, Original Tenant, or any Guarantor
as the case may be, or of all or any substantial part of its or their properties
or the Leased Premises, such appointment shall not have been vacated or stayed
on appeal or otherwise, or within one hundred twenty (120) days after the
expiration of any such stay such appointment shall not have been vacated, or if
within ninety (90) days, an execution, warrant, attachment, garnishment levied
or fixed against the Leased Premises, or any part thereof, or against Tenant,
Original Tenant, or any Guarantor as the case may be, shall not be vacated or
discharged; or
(g) If Original Tenant shall not be the then Tenant and the
then Tenant shall cease to be the parent, an affiliate or a wholly owned
subsidiary of Original Tenant; or
(h) If the provisions of Section 18 restricting assignments of
this Lease or any interest therein, or interests in Tenant, or the admission of
new or additional partners or shareholders to Tenant, shall be violated; or
(i) If the Lender shall declare an "Event of Default" under
the Mortgage or accelerate the maturity of the indebtedness secured thereby or
if such Mortgage shall be foreclosed.
20. Landlord's Remedies. After the occurrence of an Event of
Default by Tenant, Landlord shall have the right to exercise the following
remedies:
(a) Landlord may, at its option, continue this Lease in full
force and effect, without terminating Tenant's right to possession of the Leased
Premises, in which event Landlord shall have the right to collect Basic Rent,
Additional Rent and all other charges when due. In the alternative, Landlord
shall have the right to peaceably re-enter the Leased Premises on the terms set
forth in subparagraph (b) below, but without such re-entry being deemed a
termination of the Lease or an acceptance by Landlord of a surrender thereof.
Landlord shall also have the right at its option, from time to time, without
terminating this Lease, to relet the Leased Premises, or any part thereof, with
or without legal process, as the agent, and for the account, of Tenant upon such
terms and conditions as Landlord may deem advisable (which terms may be
materially different from the terms of this Lease) in which event the rents
received on such reletting shall be applied (i) first to the reasonable expenses
of such reletting and collection, including without limitation necessary
renovation and alterations of the Leased Premises, reasonable attorneys' fees
and any reasonable real estate commissions paid, and (ii) thereafter toward
payment of all sums due or to become due Landlord hereunder. If a sufficient
amount to pay such expenses and sums shall not be realized or secured, then
Tenant shall pay Landlord any such deficiency monthly, and Landlord may bring an
action therefor as such monthly deficiency shall arise. Landlord shall not, in
any event, be required to pay Tenant any sums received by Landlord on a
reletting of the Leased Premises in excess of the rent provided in this Lease,
but such excess shall reduce any accrued present or future obligations of Tenant
hereunder. Landlord's reentry and reletting of the Leased Premises without
termination of this Lease shall not preclude Landlord from subsequently
terminating this Lease as set forth below.
(b) Landlord may terminate this Lease by written notice to
Tenant specifying a date therefor, which shall be no sooner than thirty (30)
days following notice to Tenant, and this Lease shall then terminate on the date
so specified as if such date had been originally fixed as the expiration date of
the Term. In the event of such termination, Landlord shall be entitled to
recover from Tenant the worth at the time of the award of all of the following:
(i) Any obligation which has accrued prior to
the date of termination, plus,
(ii) the amount by which the unpaid Basic Rent
and all other charges which
would have accrued after termination until the time of award exceeds the amount
of any sums which Landlord has (or Tenant proves that Landlord could reasonably
have) received in mitigation, plus,
(iii) the amount by which the unpaid rent for
the balance of the Term
(excluding any option periods or portions thereof) after the time of award
exceeds the amount of such rental loss that Tenant proves could be reasonably
avoided (it being understood that Landlord shall not have any duty to mitigate
its damages hereunder (including, but not limited to, any duty to relet or
re-lease the Leased Premises), regardless of the use or mitigation costs in the
calculations described above), plus
(iv) the amount of any prepayment premium or
penalty required to be paid
in connection with the declaration of an Event of Default under, or the
acceleration of the indebtedness secured by, the Mortgage.
As used in this Section the term, "worth at the time of the award",
shall be computed by (1) allowing simple interest on amounts payable prior to
the time of the award, from the date(s) due and payable, at an accrual rate
equal to the "Treasury Constant Maturity Index" (as hereinafter defined) plus
one percent (1%) and (2) discounting to net present value anticipated future
obligations using the Treasury Constant Maturity Index plus one percent (1%). As
used herein the term "Treasury Constant Maturity Yield Index" shall mean the
average yield for "This Week" with respect to the U.S. Treasury security having
a maturity coterminous with the remaining Term of this Lease as reported by the
Federal Reserve Board in Federal Reserve Statistical Release H.15(519) during
the second full week preceding the date upon which the default occurred that
gave rise to the right on the part of Landlord to terminate this Lease; if there
is no Treasury Constant Maturity Yield Index for a U.S. Treasury security having
a maturity coterminous with the remaining Term of this Lease, then the index
shall be equal to the weighted average yield to maturity of the Treasury
Constant Maturity Yield Indices with maturities next longer and shorter than
such remaining average life to maturity, calculated by averaging (and rounding
upward to the nearest whole multiple of 1/100 of 1% per annum, if the average is
not such a multiple) the yields of the relevant Treasury Constant Maturity Yield
Indices (rounded, if necessary, to the nearest 1/100 of 1% with any figure of
1/200 of 1% or above rounded upward).
(c) Landlord may recover from Tenant, and Tenant shall pay to
Landlord upon demand, as Additional Rent such reasonable and actual expenses as
Landlord may incur in recovering possession of the Leased Premises, placing the
same in good order and condition and repairing the same for reletting, and all
other reasonable and actual expenses, concessions and charges incurred by
Landlord in exercising any remedy provided herein or as a result of any Event of
Default by Tenant hereunder (including without limitation reasonable attorneys'
fees and related costs).
The various rights and remedies reserved to Landlord herein are
cumulative, the rights and remedies described in subsections (a), (b) and (c)
hereof shall survive termination of this Lease and Landlord may pursue any and
all such rights and remedies and any other available to Landlord under
applicable law or equity, whether at the same time or otherwise (to the extent
not inconsistent with specific provisions of this Lease).
21. Notices. All notices, demands, requests, consents, approvals,
offers, statements and other instruments or communications required or permitted
to be given pursuant to the provisions of this Lease (collectively "Notice" or
"Notices") shall be in writing and shall be deemed to have been given for all
purposes (i) two (2) Business Days after having been sent by United States mail,
by registered or certified mail, return receipt requested, postage prepaid,
addressed to the other party at its address as stated below, or (ii) one (1)
Business Day after having been sent by Federal Express or other nationally
recognized air courier service to the addresses stated below:
(a) If to Landlord, at the address set forth on the first
page of this Lease.
(b) If to Tenant, at the address set forth on the first
page of this Lease,
With a copy to:
Wyche, Burgess, Freeman & Parham, P.A.
P.O. 728
44 East Camperdown Way (29601)
Greenville, South Carolina 29602
Attention: Larry D. Estridge, Esq.
If any Lender shall have advised Tenant by Notice in the manner aforesaid that
it is the holder of a Mortgage and stating in said Notice its address for the
receipt of Notices, then simultaneously with the giving of any Notice by Tenant
to Landlord, Tenant shall serve one or more copies of such Notice upon Lender in
the manner aforesaid. For the purposes of this Section, any party may substitute
its address by giving fifteen (15) days' notice to the other party in the manner
provided above.
22. Memorandum of Lease: Estoppel Certificates. (a) Upon the request of
either party, Landlord and Tenant, at the sole cost and expense of Tenant, shall
execute, deliver and record, file or register from time to time all such
instruments as may be required or permitted by any present or future law in
order to evidence the respective interests of Landlord and Tenant in any of the
Leased Premises, and shall cause a memorandum or short-form of this Lease, and
any supplement hereto or to such other instrument, if any, as may be
appropriate, to be recorded, filed or registered and re-recorded, refiled or
re-registered in such manner and in such places as may be required or permitted
by any present or future law in order to give public notice and protect the
validity of this Lease. In the event of any discrepancy between the provisions
of said recorded memorandum of this Lease or any other recorded instrument
referring to this Lease and the provisions of this Lease, the provisions of this
Lease shall prevail.
(b) Landlord and Tenant shall, at any time and from time to
time, upon not less than twenty days' prior written request by the other (or, in
the case of an estoppel certificate requested of either, upon not less than
twenty days' prior written request of Lender), execute, acknowledge and deliver
to the other a statement in writing, executed by Landlord or Tenant or, if other
than an individual, by a President, Vice President or authorized general
partner, principal officer or agent certifying (i) that this Lease is unmodified
and in full effect (or, if there have been modifications, that this Lease is in
full effect as modified, setting forth such modifications), (ii) the dates to
which Basic Rent payable hereunder has been paid, (iii) that to the knowledge of
the party executing such certificate no default by either Landlord or Tenant
exists hereunder that has not been cured within any applicable cure period or
specifying each such of which such party may have knowledge; (iv) the remaining
Term hereof; and (v) with respect to a certificate signed by Tenant, that to the
knowledge of the party executing such certificate, there are no proceedings
pending or threatened against Tenant before or by an court or administrative
agency which if adversely decided would materially and adversely affect the
financial condition and operations of Tenant or if any such proceedings are
pending or threatened to said party's knowledge, specifying and describing the
same. It is intended that any such statements may be relied upon by Lender, the
recipient of such statements or their assignees or by any prospective mortgagee,
purchaser, assignee or subtenant of the Leased Premises.
23. Surrender and Holding Over. Upon the expiration or earlier
termination of this Lease, Tenant shall peaceably leave and surrender the Leased
Premises to Landlord in good condition, reasonable wear and tear excepted.
Tenant may remove at Tenant's sole cost and expense from the Leased Premises on
or prior to such expiration or earlier termination Tenant's trade fixtures and
personal property which are owned by Tenant or third parties other than
Landlord, and Tenant at its expense shall, on or prior to such expiration or
earlier termination, repair any damage caused by such removal. Tenant's trade
fixtures and personal property not so removed at the end of the Term or within
thirty (30) days after the earlier termination of the Term for any reason
whatsoever shall become the property of Landlord, and Landlord may thereafter
cause such property to be removed from the Leased Premises. Landlord shall not
in any manner or to any extent be obligated to reimburse Tenant for any property
which becomes the property of Landlord as a result of such expiration or earlier
termination. Upon such expiration or earlier termination, no party shall have
any further rights or obligations hereunder except as specifically provided
herein. Any holding over by Tenant of the Leased Premises after the expiration
or earlier termination of the term of this Lease or any extensions thereof, with
the consent of Landlord, shall operate and be construed as tenancy from month to
month only, at one hundred fifty percent (150%) of the Basic Rent reserved
herein and upon the same terms and conditions as contained in this Lease.
Notwithstanding the foregoing, any holding over without Landlord's consent shall
entitle Landlord, in addition to collecting Basic Rent at a rate of one hundred
fifty percent (150%) thereof, to exercise all rights and remedies provided by
law or in equity, including the remedies of Section 20.
24. No Merger of Title24. There shall be no merger
of this Lease nor of the leasehold estate created by this Lease with the fee
estate in or ownership of any of the Leased Premises by reason of the fact that
the same person, corporation, firm or other entity may acquire or hold or own,
directly or indirectly, (i) this Lease or the leasehold estate created by this
Lease or any interest in this Lease or in such leasehold estate and (ii) the fee
estate or ownership of any of the Leased Premises or any interest in such fee
estate or ownership. No such merger shall occur unless and until all persons,
corporations, firms and other entities having any interest in (x) this Lease or
the leasehold estate created by this Lease and (y) the fee estate or ownership
of the Leased Premises including, without limitation, Lender's interest therein,
or any part thereof sought to be merged shall join in a written instrument
effecting such merger and shall duly record the same.
25. Landlord Exculpation. (a) The term "Landlord" as used herein means
only the owner for the time being of the Demised Premises or the holder of a
lease of the Leased Premises, and, in the event of any transfer of Landlord's
interest in the Leased Premises after the Commencement Date (herein called a
"Transfer"), the seller, assignor or transferor shall be, and hereby is, except
as stated below, freed and relieved of all covenants and obligations of Landlord
under this Lease arising or to be performed after the date of such Transfer, and
it shall be deemed and construed without further agreement between the parties
or their successors in interest, or between the parties and the transferee
pursuant to any such Transfer, that the transferee has assumed and agreed to
carry out any and all covenants and obligations of Landlord arising or to be
performed under this Lease after the date of such Transfer (and before such date
if not performed by the transferor), except that no Transfer shall free any
party from its obligations to (i) pay to Tenant any amount due to Tenant
immediately prior to such Transfer, or (ii) apply any insurance proceeds or
condemnation awards as required by this Lease.
(b) Except for the obligations described above in clauses (i) and (ii)
of subsection (a) hereof, if Landlord shall be in default with respect to any
obligation hereunder, Tenant agrees to look for satisfaction solely to the
equity of Landlord in the Leased Premises, and no other assets of Landlord
(which term for purposes hereof shall be deemed to include any mortgagee as
mortgagee in possession), or of any partners, venturers, or principals, direct
or indirect, comprising Landlord, or of any stockholders, directors or officers
of Landlord, or of any of their heirs, personal representatives, successors and
assigns shall be subject to levy, execution or other procedures for the
satisfaction of Tenant's remedies, it being intended hereby to limit the assets
of Landlord available for the satisfaction of any judgment against Landlord to
Landlord's equity in the Leased Premises.
26. Hazardous Substances.
(a) Tenant represents and warrants that it will not on, about,
or under the Leased Premises, make, treat or dispose of any "hazardous
substances" as that term is defined in the Comprehensive Environmental Response,
Compensation and Liability Act, and the rules and regulations promulgated
pursuant thereto, as from time to time amended, 42 U.S.C. ' 9601 et seq. (the
"Act"), but the foregoing shall not prevent the use to the extent necessary and
customary in normal retail operations of any such substances in accordance with
applicable laws and regulations and Tenant represents and warrants that it will
at all times comply with the Act and any other federal, state or local laws,
rules or regulations governing Hazardous Materials. Hazardous Materials as used
herein shall include, without limitation, all chemicals, petroleum, crude oil or
any fraction thereof, hydrocarbons, polychlorenated biphenyls (PCBs), asbestos,
asbestos-containing materials and/or products, urea formaldehyde, or any
substances which are classified as "hazardous" or "toxic" under the Act,
hazardous waste as defined under the Solid Waste Disposal Act, as amended 42
U.S.C. ' 6901; air pollutants regulated under the Clean Air Act, as amended, 42
U.S.C. ' 7401, et seq.; pollutants as defined under the Clean Water Act, as
amended, 33 U.S.C. ' 1251, et seq., any pesticide as defined by Federal
Insecticide, Fungicide, and Rodenticide Act, as amended, 7 U.S.C. ' 136, et
seq., any hazardous chemicals substance or mixture or imminently hazardous
substance or mixture regulated by the Toxic Substances Control Act, as amended.
15 U.S.C. '2601, et seq., any substance listed in the United States Department
of Transportation Table at 45 CFR 172.101; any chemicals included in regulations
promulgated under the above listed statutes or any modifications thereof or
successor statutes thereto; any explosives, radioactive material, and any
chemical regulated by state statutes similar to the federal statutes listed
above and regulations promulgated under such state statutes.
(b) To the extent required by the Act and/or any federal,
state or local laws, rules or regulations governing Hazardous Materials, Tenant
shall remove any hazardous substances (as defined in the Act) and Hazardous
Materials (as defined above) whether now or hereafter existing on the Leased
Premises and whether or not arising out of or in any manner connected with
Tenant's occupancy of the Leased Premises during the Initial Term or any
extension or renewal Term thereof. Tenant shall and hereby does agree to defend,
indemnify, and hold Lender and Landlord, their officers, directors,
shareholders, partners and employees harmless from and against any and all
causes of actions, suits, demands or judgments of any nature whatsoever, losses,
damages. penalties, expenses, fees, claims, costs (including response and
remedial costs), and liabilities, including, but not limited to, attorneys' fees
and costs of litigation, arising out of or in any manner connected with (i) the
violation of any applicable federal, state or local environmental law with
respect to the Leased Premises; the "release" or "threatened release" of or
failure to remove, as required by, this Section "hazardous substances" (as
defined in the Act) and Hazardous Materials (as defined above) from the Leased
Premises or any portion or portions thereof, now or hereafter existing during
the Initial Term and any extension or renewal Term whether or not arising out of
or in any manner connected with Tenants' occupancy of the Leased Premises during
the Initial Term or any extension or renewal Term.
(c) The Tenant represents and warrants that it will not
install any underground storage tank without specific, prior written approval
from the Landlord, which may be withheld in its sole discretion. The Tenant will
not store combustible or flammable materials on the Leased Premises in violation
of the Act and any other federal, state or local laws, rules or regulations
governing Hazardous Materials.
27. Entry by Landlord. Landlord and its authorized representatives
shall have the right upon reasonable notice (which shall be not less than 48
hours except in the case of emergency) to enter the Leased Premises at all
reasonable business hours, (and at all other times in the event of an
emergency), for (i) the purpose of inspecting the same or for the purpose of
doing any work under Section 10, and may take all such action thereon as may be
necessary or appropriate for any such purpose (but nothing contained in this
Lease or otherwise shall create or imply any duty upon the part of Landlord or
Lender to make any such inspection or do any such work), and (ii) the purpose of
showing the Leased Premises to prospective purchasers and mortgagees and, at any
time within twelve (12) months prior to the expiration of the term of this Lease
for the purpose of showing the same to prospective tenants. No such entry shall
constitute an eviction of Tenant but any such entry shall be done by Landlord in
such reasonable manner as to minimize any disruption of Tenant's business
operation.
28. Statements. The Original Tenant shall submit to Lender and Landlord
(i) within 45 days of the end of each of the first three fiscal quarters of each
fiscal year of the Original Tenant, quarterly balance sheets, income and cash
flow statements for the Original Tenant, certified by a senior financial officer
of the Original Tenant; (ii) within 90 days of the end of each fiscal year,
annual balance sheets, income and cash flow statements for the Original Tenant,
certified by independent public accountant. Quarterly 1OQs as filed with the
Securities and Exchange Commission shall satisfy the requirements contained in
clause (i) of the immediately preceding sentence. Copies of the 1OKs filed with
the Securities and Exchange Commission shall satisfy the requirements contained
in clause (ii) of the second preceding sentence. The obligations of the Original
Tenant shall continue whether or not this Lease shall have been assigned.
29. No Usury. The intention of the parties being to conform strictly to
the usury laws now in force in the State, whenever any provision herein provides
for payment by Tenant to Landlord of interest at a rate in excess of the legal
rate permitted to be charged, such rate herein provided to be paid shall be
deemed reduced to such legal rate.
30. Broker. Landlord and Tenant represent and warrant to each other
that neither party negotiated with any broker in connection with this Lease and
that this Lease was negotiated directly by Landlord and Tenant. Each party
hereby agrees to indemnify the other against all claims, damages, costs and
expenses incurred by the indemnified party as a result of the breach of the
foregoing representation or warranty by the indemnifying party.
31. Waiver of Landlord's Lien. Landlord hereby waives any right to
distrain trade fixtures or any property of Tenant and any Landlord's lien or
similar lien upon trade fixtures and any other property of Tenant regardless of
whether such lien is created or otherwise. Landlord agrees, at the request of
Tenant, to execute a waiver of any Landlord's or similar lien for the benefit of
any present or future holder of a security interest in or lessor of any of trade
fixtures or any other personal property of Tenant. Landlord acknowledges and in
the future to acknowledge (in a written form reasonably satisfactory to Tenant)
to such persons and entities at such times and for such purposes as Tenant may
reasonably request that trade fixtures are Tenant's property and not part of
Improvements (regardless of whether or to what extent such trade fixtures are
affixed to the Improvements) or otherwise subject to the terms of this Lease.
32. No Waiver. (a) Failure of either party to complain of any act or
omission on the part of the other party, no matter how long it may continue,
shall not be deemed to be a waiver by such party of any of its rights hereunder.
No waiver by either party at any time, express or implied, of any breach of any
provision of this Lease shall be deemed a waiver of a breach of any other
provision of this Lease or a consent to any subsequent breach of the same or any
other provision. If an action by either party shall require the consent or
approval of the other party, the other party's consent to or approval of such
action on any one or more occasions shall not be deemed a consent to or approval
of said action on any subsequent occasion or a consent to or approval of any
other action on the same or any subsequent occasion. Any and all rights and
remedies which either party may have under this Lease on any breach shall be
distinct, separate and cumulative and shall not be deemed inconsistent with each
other, and no one of them, whether exercised by such party or not, shall be
deemed to be in exclusion of any other. Any two or more or all of such rights
and remedies may be exercised at the same time.
33. Separability. If any term or provision of this Lease or the
application thereof to any provision of this Lease or the application thereof to
any person or circumstances shall to any extent be invalid and unenforceable,
the remainder of this Lease, or the application of such term or provision to
person or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term and provision of
this Lease shall be valid and shall be enforced to the extent permitted by law.
34. Indemnification of Landlord and Lender. (a) Tenant shall indemnify
and save Landlord and Lender harmless from and against, and shall reimburse
Landlord and Lender for, all liabilities, obligations, damages, fines,
penalties, claims, demands,costs, charges, judgments and expenses, whether
founded in tort, in contract or otherwise, including reasonable architects' and
attorneys' fees, which may be imposed upon or incurred or paid by or asserted
against Landlord and Lender or Landlord's fee or reversionary or other interest
in the Leased Premises by reason of or in connection with any of the following
occurring during the Term of this Lease:
(b) The construction of the Improvements, any Tenant's
Alterations and anything
done in, on or about the Leased Premises or any part thereof in connection
therewith;
(c) the use, non use, possession, occupation, condition,
operation, maintenance or management of the Leased Premises, or any part
thereof, or any street, alley, sidewalk, curb, vault, passageway or space
adjacent thereto;
(d) any negligent or tortious act on the part of
Tenant or any of its agents,
contractors, servants, employees, subtenants, licensees or invitees;
(e) any accident, injury, death or damage to any Person or
property occurring in, on or about the Leased Premises or any part thereof or
any street, alley, sidewalk, cub, vault, passageway or space adjacent thereto;
(f) any theft, loss, damage or destruction of any
property of subtenant or other
occupant stored in or on the Demised Premises or any portion thereof;
(g) any failure on the part of Tenant to perform
or comply with any of the
provisions contained in this Lease on its part to be performed or complied with;
and
(h) any violation of covenants, restrictions, easements,
agreements or conditions affecting the Demised Premises, whether existing on or
before the Commencement Date.
Nothing contained in subsection (a) hereof shall be deemed to
require Tenant to indemnify Landlord with respect to any act or negligence
committed by Landlord, its agents, servants or employees; provided, however,
that the foregoing shall not apply to an act or omission which is deemed to be
negligent on the part of Landlord solely because it constitutes at law a
non-delegable duty and which, under the provisions of this Lease, Tenant has
agreed to perform or assume.
In case any action or proceeding is brought against Landlord
or Lender by reason of any claim mentioned in this Section, Tenant, upon notice
from Landlord or Lender, shall, at Tenant's expense, resist or defend such
action or proceeding, in Landlord's name, if necessary, by counsel for the
insurance company, if such claim is covered by insurance, otherwise by counsel
approved by Landlord or Lender (whichever is entitled to indemnification), which
approval shall not be unreasonably withheld. Landlord agrees to give Tenant
prompt notice of any such claim or proceeding and not to settle the same without
Tenant's consent, which consent shall not be unreasonably withheld.
The provisions of this Section 34 shall not in any way be
affected by the absence in any case of any covering insurance or by the failure
or refusal of any insurance company to perform any obligation on its part.
35. Landlord's Right to Perform Tenant's Covenants.
(a) If Tenant shall at any time fail to pay any Tax in
accordance with the provisions of Section 7 hereof, or to take out, pay for,
maintain or deliver any of the insurance policies provided for in Section 14
hereof, or shall fail to make any other payment or perform any other act on its
part to be made or performed hereunder, or required to be performed under the
Mortgage, then Landlord, after 5 days' notice to Tenant, except when other
notice is expressly provided for in this Lease (or without Notice in case of an
emergency), and without waiving or releasing Tenant from any obligation of
Tenant contained in this Lease, may (but shall be under no obligation to):
(i) pay any Tax payable by Tenant pursuant to
the provisions of Section 7
hereof; or
(ii) take out, pay for and maintain any of the
insurance policies provided
for in Section 14 hereof; or
(iii) make any other payments or perform any
act on Tenant's part to be
made or performed as provided in this Lease or under the Mortgage;
and may enter upon the Leased Premises for any such purpose, and take all such
action thereon as may be reasonably necessary therefor.
(b) All sums so paid by Landlord and all costs and expenses
incurred by Landlord in connection with the performance of any such act,
together with interest thereon at the Default Rate from the respective dates of
Landlord's making of each such payment or incurring of each such cost and
expense, shall be paid by Tenant to Landlord on demand as Additional Rent
hereunder, and Landlord shall not be limited in the proof of any damages which
Landlord may claim against Tenant arising out of or by reason of Tenant's
failure to provide and keep in force insurance as aforesaid to the amount of the
insurance premium or premiums not paid or incurred by Tenant and which would
have been payable upon such insurance, but Landlord shall also be entitled to
recover as damages for such breach the uninsured amount of any loss, to the
extent of any deficiency in the minimum amount of insurance required by the
provisions of this lease, and damages, costs and expenses of suit suffered or
incurred by reason of damage to, or destruction of, the Improvements occurring
during any period when Tenant shall have failed or neglected to provide such
insurance. Upon the expiration of this lease, the unearned premiums upon any
such insurance policies lodged with Landlord by Tenant shall be apportioned
unless an Event of Default shall have occurred and be continuing.
36. Representations. Tenant hereby makes the representations
set forth in Exhibit C
annexed hereto and made a part hereof.
37. Headings. The paragraph headings in this Lease are used
only for convenience in finding the subject matters and are not part of this
Lease or to be used in determining the intent of the parties or otherwise
interpreting this Lease.
38. Modifications. This Lease may be modified, amended, discharged or
waived only by an agreement in writing signed by the party against whom
enforcement of any such modification, amendment, discharge or waiver is sought.
Each of Tenant and Landlord agrees that it will not modify or amend this Lease
or waive any provision of this Lease without the written consent of Lender
within any period during which there is a Lender hereunder.
39. Successors, Assigns. The covenants of this Lease shall run with the
Land and bind Tenant, the heirs, distributees, personal representatives,
successors and permitted assigns of Tenant and all present and subsequent
encumbrancer and subtenants of any of the Leased Premises, and shall inure to
the benefit of and bind Landlord, its successors and assigns. In the event there
is more than one Tenant, the obligation of each shall be joint and several.
40. Counterparts. This Lease may be executed in several
counterparts, which together shall be deemed one and the same instrument.
41. Governing Law. This Lease shall be governed by and construed
according to the laws of the State.
42. Attorneys' Fees. In the event Landlord shall be required to
commence or defend any action or proceeding against Tenant by reason of any
breach or claimed breach of any provision of this Lease, to commence or defend
any action or proceeding in any way connected with this Lease, or to seek a
judicial declaration of rights under this Lease, Landlord, if Landlord is the
prevailing party, shall be entitled to recover from or be reimbursed by Tenant
for Landlord's reasonable attorneys' fees and costs through all levels of
proceedings. The identity of the "prevailing party" for purposes of this
provision shall be deemed at issue in any such action or proceeding and shall be
established by the trier of fact therein.
IN WITNESS WHEREOF, Landlord and Tenant have caused this instrument to
be executed under seal as of the day and year first above written.
<TABLE>
<S> <C> <C>
LANDLORD:
ONE PRICE REALTY, INC.
By: /s/ C. Burt Duren
Name: C. Burt Duren
Title: Treasurer
TENANT:
ONE PRICE CLOTHING STORES, INC.
By: /s/ C. Burt Duren
Name: C. Burt Duren
Title: Treasurer
</TABLE>
<PAGE>
EXHIBIT A
MORTGAGE DESCRIPTION
EXHIBIT B
BASIC RENT
Annually Monthly
$1,377,309.40 $114,775.78
<PAGE>
EXHIBIT C
REPRESENTATIONS AND WARRANTIES OF TENANT
Tenant represents and warrants that:
<TABLE>
<S> <C> <C>
1. it is a corporation duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation;
2. it has all requisite power and authority
own and operate its properties and to carry on its business as now
conducted and as presently proposed to be conducted;
3. it has all material licenses and permits
necessary to own and operate its properties and to carry on its
business as now conducted and as presently proposed to be
conducted, the absence of which could have a materially adverse
effect upon Tenant.
4. the Lease has been duly authorized,
executed and delivered by Tenant and constitutes the legal, valid
and binding obligation, contract and agreement of Tenant
enforceable against it in accordance with its terms; and
5. the execution, delivery and performance
by Tenant of the Lease (i) have been duly authorized by all
requisite corporation action and, if required, shareholder
action, (ii) do not require the consent or approval of any
governmental or regulatory body or agency, and (iii) will not
violate (1) any provision of law, statute, rule or regulation
of its certificate of incorporation or bylaws (2) any order of
any court or any rule, regulation or order of any other agency
or government binding upon it, or (3) any provision of any
material indenture, agreement or other instrument to which it
is a party or by which any of its properties or assets are or
may be bound.
</TABLE>
<PAGE>
<PAGE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARIES
EXHIBIT 11 -- Computation of Per Share Earnings
<TABLE>
<S> <C> <C> <C> <C>
Three-Month Period Ended Six-Month Period Ended
August 2, August 3, August 2, August 3,
1997 1996 1997 1996
PRIMARY INCOME PER COMMON SHARE
Weighted average number of common shares outstanding 10,435,531 10,397,064 10,435,531 10,366,047
Net effect of dilutive stock options -based on the treasury
stock method using the average market price 33,023 47,186 30,820 27,731
---------- ---------- ---------- ----------
TOTAL 10,468,554 10,444,250 10,466,351 10,393,778
Net income $ 2,391,000 $ 2,940,000 $ 3,835,000 $ 4,177,000
Net income per common share $ 0.23 $ 0.28 $ 0.37 $ 0.40
=========== =========== =========== ===========
FULLY DILUTED INCOME PER COMMON SHARE
Weighted average number of common shares outstanding 10,435,531 10,397,064 10,435,531 10,366,047
Net effect of dilutive stock options - based on the treasury
stock method using the greater of ending or average
market price 33,023 50,481 30,820 39,744
----------- ----------- ----------- ----------
TOTAL 10,468,554 10,447,545 10,466,351 10,405,791
Net income $ 2,391,000 $ 2,940,000 $ 3,835,000 $4,177,000
Net income per common share $ 0.23 $ 0.28 $ 0.37 $ 0.40
=========== =========== =========== ===========
</TABLE>
<PAGE>
ONE PRICE CLOTHING STORES, INC. AND SUBSIDIARIES
EXHIBIT 15 -- ACKNOWLEDGMENT OF DELOITTE & TOUCHE LLP,
INDEPENDENT ACCOUNTANTS
One Price Clothing Stores, Inc. and Subsidiaries
Duncan, South Carolina
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim condensed
consolidated financial information of One Price Clothing Stores, Inc. and
subsidiaries for the three-month and six-month periods ended August 2, 1997 and
August 3, 1996, as indicated in our report dated August 21, 1997; because we did
not perform an audit, we expressed no opinion on that information.
We are aware that our report referred to above, which is included in your
Quarterly Report on Form 10-Q for the quarter ended August 2, 1997, is
incorporated by reference in Registration Statements No. 33-20529, 33-31623,
33-48091, and 33-61803 on Form S-8 pertaining to the 1987 Stock Option Plan, the
1988 Stock Option Plan, the 1991 Stock Option Plan, and the Director Stock
Option Plan, respectively, of One Price Clothing Stores, Inc.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
DELOITTE & TOUCHE LLP
Greenville, South Carolina
September 10, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JAN-31-1998
<PERIOD-END> AUG-02-1997
<CASH> 2691
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 43925
<CURRENT-ASSETS> 54699
<PP&E> 58935
<DEPRECIATION> 22873
<TOTAL-ASSETS> 93793
<CURRENT-LIABILITIES> 34378
<BONDS> 0
0
0
<COMMON> 104
<OTHER-SE> 48073
<TOTAL-LIABILITY-AND-EQUITY> 93793
<SALES> 165033
<TOTAL-REVENUES> 165033
<CGS> 104397
<TOTAL-COSTS> 104397
<OTHER-EXPENSES> 14981
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1071
<INCOME-PRETAX> 6340
<INCOME-TAX> 2505
<INCOME-CONTINUING> 3835
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3835
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
</TABLE>
