U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1997
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from ________________ to _______________
Commission File No. 0-17069
Excal Enterprises, Inc.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Delaware 59-2855398
- ------------------------------- ---------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
100 North Tampa Street, Suite 3575, Tampa, Florida 33602
---------------------------------------------------------
(Address of principal executive offices)
(813) 224-0228
-------------------------
Issuer's telephone number
-------------------------------------------------------------------------
(Former Name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 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
As of January 31, 1998, there were 3,996,594 shares of the issuer's common
stock, par value $0.001, outstanding.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
EXCAL ENTERPRISES, INC.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1997
(unaudited)
ASSETS
Current Assets
Cash and cash equivalents $ 13,021,495
Accounts receivable 191,739
Income tax receivable 182,691
Prepaid expenses and deposits 218,818
Net assets of discontinued operations 65,479
Deferred tax asset 169,000
----------
Total current assets 13,849,222
----------
Property, plant and equipment
Land 1,600,000
Buildings and improvements 5,973,824
Furniture, fixtures, vehicles and equipment 413,220
----------
7,987,044
Less accumulated depreciation and amortization 749,617
----------
Net property, plant and equipment 7,237,427
----------
Restricted cash reserves 955,490
Capitalized clearing costs, less accumulated
amortization of $158,008 621,545
Commission costs, less accumulated amortization of $196,890 366,155
Loan costs, less accumulated amortization of $41,652 791,332
----------
Total Assets $ 23,821,171
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 409,258
Accrued liabilities 449,386
Deferred Revenue 105,566
Reserve for litigation 350,000
Current portion of long-term debt 140,655
----------
Total current liabilities 1,454,865
Long-term debt 13,322,949
Deferred tax liability 1,832,000
----------
Total Liabilities 16,609,814
----------
Stockholders' equity
Preferred stock, $.01 par value, 7,500,000
shares authorized, 5,000,000 shares issued,
no shares outstanding --
Common stock, $.001 par value, 7,500,000
shares authorized, 4,738,866 shares issued,
3,996,594 shares outstanding 4,738
Additional paid-in capital 5,763,398
Retained earnings 3,986,725
Less 742,272 shares of common stock held
in treasury, shares at cost ( 2,543,504)
----------
Total stockholders' equity 7,211,357
----------
Total Liabilities and Stockholders' Equity $23,821,171
==========
The accompanying notes are an integral part of the consolidated financial
statements
EXCAL ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
December 31 December 31
----------------------- ---------------------
1997 1996 1997 1996
--------- --------- --------- ---------
Net revenue $ 1,128,991 $ 786,393 $ 2,296,940 $ 1,593,379
--------- --------- --------- ---------
Operating costs 575,900 458,009 1,174,588 1,016,651
Depreciation and
amortization 160,575 88,351 276,342 176,426
--------- --------- --------- ---------
Total operating costs 736,475 546,360 1,450,930 1,193,077
--------- --------- --------- ---------
Net operating profit 392,516 240,033 846,010 400,302
--------- --------- --------- ---------
Other expense (income)
Interest expense 307,136 9,796 310,771 12,745
Professional fees
related to litigation 155,810 167,338 284,810 400,504
Litigation Settlement 45,395 -- 45,395 --
Gain on disposals
of assets ( 58,141) -- ( 58,141) --
Dividend and
interest income ( 182,822) ( 7,404) ( 194,910) ( 38,341)
Miscellaneous income ( 34,875) ( 16,628) ( 57,552) ( 28,437)
--------- --------- --------- ---------
Net other expense 232,503 153,102 330,373 346,471
--------- --------- --------- ---------
Income before
income taxes 160,013 86,931 515,637 53,831
Income tax provision 67,000 70,000 212,000 66,000
--------- --------- --------- ---------
Net income (loss) $ 93,013 $ 16,931 $ 303,637 $( 12,169)
========= ========= ========= =========
Earnings (loss) per share
Basic $ .02 $ nil $ .08 $ nil
Diluted $ .02 $ nil $ .06 $ nil
Weighted average
shares outstanding
Common 3,999,148 4,025,594 3,997,034 4,251,959
Common and equivilant 4,761,836 4,413,547 4,764,273 4,251,959
The accompanying notes are an integral part of the consolidated financial
statements
EXCAL ENTERPRISES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Six Months Ended December 31
----------------------------
1997 1996
---------- ---------
Cash provided by operating activities
Net income (loss) $ 303,637 $( 12,169)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Depreciation and amortization 279,799 255,266
Other adjustments 98,830 ( 69,377)
Increase in net operating assets ( 680,161) ( 8,010)
---------- ---------
Net cash provided by operating activities 2,105 165,710
---------- ---------
Cash flows from investing activities
Proceeds from sale of assets 535,006 64,699
Property and equipment additions ( 56,485) ( 21,765)
---------- ---------
Net cash provided by investing activities 478,521 42,934
---------- ---------
Cash flows from financing activities
Net proceeds (payments) on line of credit ( 10,952) --
Net proceeds from long-term debt 13,500,000 73,184
Principal repayments of long-term
debt and capital leases ( 36,396) ( 37,653)
Loan Costs ( 799,824) --
Restricted cash reserves ( 955,490) --
Issuance of common stock 73,000 --
Purchase right to outstanding options ( 110,000) --
Purchase of treasury stock ( 166,635) (2,116,198)
Net cash provided (used) by ---------- ---------
financing activities 11,493,703 (2,080,667)
---------- ---------
Increase (decrease) in cash and cash equivalent 11,974,329 (1,872,023)
Cash and cash equivalents at beginning of period 1,047,166 2,750,578
---------- ---------
Cash and cash equivalents at end of period $ 13,021,495 $ 878,555
========== =========
The accompanying notes are an integral part of the consolidated financial
statements
EXCAL ENTERPRISES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - FINANCIAL STATEMENTS
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three-month and six-month periods ended December 31, 1997
and 1996, (b) the financial position at December 31, 1997, and (c) cash flows
for the six-month periods ended December 31, 1997 and 1996, have been made.
The unaudited consolidated financial statements and notes are presented as
permitted by Form 10-QSB. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted. The
accompanying consolidated financial statements and notes should be read in
conjunction with the audited financial statements and notes of the Company for
the fiscal year ended June 30, 1997. The results of operations for the three-
month and six-month periods ended December 31, 1997 are not necessarily
indicative of those to be expected for the entire year.
NOTE 2 - DISCONTINUED OPERATIONS
During the fourth quarter of fiscal 1996, the Company decided to terminate
the agency agreements with its licensed agents effective June 30, 1997. The
Company sold the existing machines to former licensed agents. At June 30,
1996, management estimated proceeds of $458,607 from the sale of Combi-
Matchers and inventory resulting in a loss of $1,319,956 and a loss from
operations during the disposal period of $262,687, resulting in a total loss
from disposal of $1,582,643. During fiscal 1997, the Company revised its
estimate to $614,043 in proceeds from disposal of assets and a loss from
operations during the disposal period of $162,123, excluding depreciation,
decreasing the estimated total loss on disposal to $1,326,643. The Company
has recorded $609,670 in proceeds from the disposal of assets, resulting in a
loss of $1,048,889 and a loss from operations of $277,754, including
depreciation of $115,288. The net assets of the discontinued operations at
December 31, 1997 consisted of current assets and liabilities which were
subsequently distributed to Excal Enterprises, Inc., in final liquidation of
the subsidiariesO automotive operations. There was no revenue from
discontinued operations in fiscal 1998, compared to revenue of $211,323 in the
first six-months of fiscal 1997.
NOTE 3 - LONG-TERM DEBT
On September 30, 1997, the Company closed on a $13,500,000 mortgage
secured by the Imeson Center property located in Jacksonville, Florida. The
mortgage bears a 9% interest rate with a monthly payment of $113,292 based on
a twenty-five year amortization. The mortgage matures on October 1, 2002. As
a requirement of the mortgage, $950,000 was placed in an interest bearing
reserve for future tenant improvements and leasing commissions. In addition,
$1,372 per month is required to be placed in an interest bearing reserve for
certain future maintenance items. Both of these reserves are required to be
maintained over the term of the loan and any disbursements will require
monthly repayments. The mortgage does not allow early repayment during the
first two years of the loan term and provides for an early repayment penalty
of 3%, 2% and 1% of the outstanding loan amount during the third year, fourth
year and first six months of the fifth year of the loan term, respectively.
As part of the mortgage transaction, all of the assets of Imeson Center, Inc.
were transferred to a new, single-purpose, wholly-owned subsidiary,
Jacksonville Holdings, Inc.
NOTE 4 - STOCKHOLDERSO EQUITY
As part of the restructuring in connection with the mortgage loan from
Love Funding Corporation, Jacksonville Holdings, Inc. acquired 5,000,000
shares of Excal Enterprises Series B Participating Preferred Stock. These
shares are shown as issued but not outstanding and all transactions related to
their issuance have been eliminated in consolidation.
During the six months ended December 31, 1997, the Company repurchased
26,000 shares of its common stock through open-market purchases at a cost of
$102,030 and received 8,000 shares with a value of $46,480 as payment for
withholding taxes due on exercise of options. The Company will receive 5,000
shares of its common stock with a value of $18,125 as part of the settlement
of the lawsuit with Mr. Kerry Marler. The Company paid $110,000 for the
right to repurchase three options to purchase a total of 285,000 shares of
common stock. Future payments of $110,000, $120,500 and $95,000 are due upon
termination of each of the options but not later than January 15, 1998,
January 15, 1999 and January 15, 2000, respectively. On September 30, 1997,
options for the purchase of 25,000 shares of common stock were exercised,
generating $73,000 in proceeds and tax savings for the Company.
During the six months ended December 31, 1996, the Company purchased
641,272 shares of its common stock for an aggregate cash purchase price of
$2,116,198.
NOTE 5 - EARNINGS (LOSS) PER COMMON SHARE
In March of 1997, the Financial Accounting Standards Board issued SFAS No.
128 - Earnings Per Share. SFAS No. 128 establishes the standards for
computing and presenting earnings per share, effective for financial
statements ending after December 15, 1997. Therefore, the CompanyOs
calculation and presentation of earnings per share has been modified for the
current period and restated for prior periods to conform to SFAS No. 128.
Basic earnings (loss) per common share is based upon the weighted average
number of common shares outstanding. Diluted earnings (loss) per common share
is based upon the weighted average number of common shares outstanding plus
the dilutive effect of common stock equivalents consisting of stock options
and purchase warrants.
Item 2. ManagementOs Discussion and Analysis.
This Quarterly Report on Form 10-QSB contains forward-looking statements
within the meaning of Section 27A of the Securities Exchange Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. The CompanyOs actual
results could differ materially from those set forth in the forward-looking
statements.
The following discussion should be read in conjunction with the
information contained in the financial statements of the Company and the notes
thereto appearing elsewhere herein and in conjunction with ManagementOs
Discussion and Analysis set forth in the Company's Form 10-KSB for the fiscal
year ended June 30, 1997.
The following discussion compares the results of operations for the three-
month period ended December 31, 1997 (Second Quarter 1998) with the three-
month period ended December 31,1996 (Second Quarter 1997) and the six-month
period ended December 31, 1997 (1998 YTD) with the six-month period ended
December 31, 1996 (1997 YTD).
Results of Continuing Operations
Net revenue of the Company consists of commercial real estate rental
revenue from the lease and management of property located in Jacksonville,
Florida (Imeson Center). The property consists of approximately 1,392,000
square feet of warehouse space and 274,000 square feet of office space. The
Company's lease agreements are structured to include a base minimum rental
fee, a contingent rental fee to reimburse the Company for operating expenses,
common area maintenance costs, insurance and property taxes, and a requirement
that the tenant pay for its own utilities.
Net revenue increased by 44% to $1,128,991 in Second Quarter 1998 from
$786,393 in Second Quarter 1997. Net revenue for 1998 YTD increased by 44%
from $1,593,379 in 1997 YTD to $2,296,940. These increases were primarily
related to the lease of 139,000 square feet of office space to Prudential
Insurance Company effective June 16, 1997. The initial term of this lease is
two years and, therefore, management expects the increase in revenue to
continue through at least fiscal 1999.
Operating costs increased by 35% to $736,475 in Second Quarter 1998 from
$546,360 in Second Quarter 1997. Operating costs for 1998 YTD increased by 22%
to $1,450,930 from $1,193,077 in 1997 YTD. The increase was the result of
higher costs for property maintenance, salaries and depreciation and
amortization. The increases in maintenance and salary costs are a result of
the expansion of the office space at the facility and increases in general
maintenance expenditures. Depreciation and amortization increased primarily
as a result of the amortization of lease commission costs related to the lease
of office space to Prudential Insurance Company and loan costs.
Interest expense for both the Second Quarter 1998 and 1998 YTD increased
as compared to the same periods of fiscal 1997 as a result of the mortgage
loan obtained on September 30, 1997. Professional fees related to litigation
were $155,810 in Second Quarter 1998 compared to $167,338 in Second Quarter
1997 and $284,810 for 1998 YTD as compared to $400,504 for 1997 YTD. A
significant portion of the fiscal year 1997 costs were related to the
preparation and trial of the KFM Venture, Inc. lawsuit in the first quarter.
The jury found that the contract was unenforceable and awarded KFM Venture,
Inc. no compensation. In addition, the Company incurred significant costs in
Second Quarter 1997 preparing for the Harvey Moore trial, which ended in a
mistrial. The trial was rescheduled for February 1997 and resulted in a
judgement in favor of Harvey moore of $294,861 plus 85,445 of pre-judgement
interest. In Second Quarter 1998, the Company agreed to settlement terms in
the Kerry Marler, John Sanford and Channel Partnership cases. Therefore, the
Company expects a continuing decline in future litigation costs because the
only remaining on-going litigation is with the Securities and Exchange
Commission. The increase in interest and dividend income is a result of
investing the proceeds from the mortgage loan.
The income tax provision for both Second Quarter 1997 and 1997 YTD
included additional state income tax expense of $51,192 as a result of audits
of fiscal 1994 income tax returns. These amounts were assessed and paid in
Second Quarter 1997.
Results of Discontinued Operations
Until fiscal 1995, the Company derived substantially all of its revenue
from its automotive services operations. The Company's automotive services
revenue significantly declined in fiscal 1995 and fiscal 1996. During the
fourth quarter of fiscal 1996, the Company decided to terminate the agency
agreements with its licensed agents effective June 30, 1997 and report the
automotive services division as discontinued operations. There was no revenue
from the automotive services division in 1998 YTD, compared to revenue of
$211,323 in 1997 YTD. Automotive services operating costs, excluding
depreciation, decreased 85% to $46,847 in 1998 YTD from $317,230 in 1997 YTD.
The declines in revenue and operating costs were related to the cessation of
operations effective June 30, 1997. Depreciation and amortization costs
decreased from $78,839 in 1997 YTD to $3,456 in 1998 YTD as a result of the
sale of assets of the automotive services division during fiscal 1997. In
final liquidation of the automotive operations, the Company has recorded
aggregate proceeds of $607,670 from the disposal of assets, resulting in a
loss of $1,048,889 and an aggregate loss from operations of $277,754,
including depreciation of $115,288.
Liquidity and Capital Resources
The cash provided by operating activities was $2,105 in 1998 YTD compared
to $165,710 in 1997 YTD. The other adjustments are primarily non-cash
operating costs. The increase in net operating assets in 1998 was primarily
the result of a reduction in accounts payable and accrued liabilities of
$550,952. These liabilities were higher than normal at June 30, 1997,
primarily as a result of costs associated with the lease of office space to
Prudential Insurance Company. In 1998 YTD the Company's operations provided
$682,266 in working capital compared to $173,720 in working capital in 1997
YTD.
The proceeds from sale of assets in 1998 YTD included $497,845 in net
proceeds from the sale of the property in Tampa, Florida formerly used for
automotive operations. The proceeds remaining from sales of assets in both
fiscal 1998 and fiscal 1997 represent proceeds from the sale of the
discontinued operations. Property and equipment additions in both fiscal 1998
and fiscal 1997 YTD were for equipment, and renovations used at Imeson Center.
Cash of $2,080,667 was used by financing activities in 1997 YTD, as
compared to cash provided by financing activities of $11,493,703 in 1998 YTD.
The Company closed on a mortgage loan in the amount of $13,500,000 on
September 30, 1997. Loan costs associated with the loan were $832,984, of
which $33,160 were incurred in the prior fiscal year. As a requirement of the
loan, $955,490 was placed in reserves for future tenant improvements, leasing
commissions and certain items of maintenance. The net proceeds of the
mortgage are expected to be used primarily for the acquisition of new
businesses, but will also be used for the continued development of the Imeson
center property and funding of the CompanyOs stock repurchase program. During
1998 YTD, the Company repurchased 26,000 shares of its common stock through
open-market purchases at a cost of $102,030, received 8,000 shares with a
value of $46,480 as payment for withholding taxes due on the exercise of
options and 5,000 shares with a value of 18,125 as part of a settlement of the
lawsuit with Mr. Kerry Marler. The Company paid $110,000 for the right to
repurchase three options to purchase a total of 285,000 shares of common
stock. Future payments of $110,000, $120,500 and $95,000 are due upon
termination of each of the options but not later than January 15, 1998, 1999
and 2000, respectively. On September 30, 1997, options for the purchase of
25,000 shares of common stock were exercised, generating $73,000 in proceeds
and tax savings for the Company. During the first quarter of fiscal 1997, the
Company purchased 641,272 shares of its common stock from a group of
shareholders (the "Smith Group") for $2,116,198 as part of settlement of
litigation. The board of directors believed this action was in the best
interests of the Company and its shareholders for several reasons, including:
(i) media coverage of the dispute with the Smith Group had caused concern
among current and prospective tenants for the Imeson Center; (ii) estimated
litigation costs could have exceeded $500,000 and business operations would
have been further disrupted; and (iii) by purchasing the Smith Group shares,
the percentage ownership and share of future returns increased proportionally
for each remaining shareholder.
The Company did not have any material commitments for capital expenditures
as of December 31, 1997 other than for ordinary expenses incurred during the
usual course of business. The Company has agreed to settlement terms in the
lawsuits with Mr. Kerry Marler, John Sanford, et al. and Channel Partnership.
As part of the settlements, the Company has agreed to make payments totaling
approximately $635,000, which include the repurchase of 54,163 shares of stock
at $4.75 per share, the market price on the date the settlement terms were
agreed to. While the Company has agreed to settlement terms on almost all of
its outstanding litigation, the Court must approve the settlement reached in
the Channel Partnership litigation. The litigation with the Securities and
Exchange Commission is still outstanding and Mr. Harvey Moore has made claims
for reimbursement of legal fees. Therefore, the Company still has potential
liability from litigation. The Company is looking for additional tenants for
Imeson Center for the remaining 41,000 square feet of office space. The
Company is also investigating options to expand the amount of office space
available for lease. It is expected that any new tenant will require the
Company to incur significant costs related to renovation of the property to
meet the tenant's needs. Although the Company has not identified any specific
acquisition opportunities, management is spending resources to identify
potential opportunities to expand the Company's business operations into other
areas. Any new business operation will likely involve a substantial commitment
of Company resources and a significant degree of risk. The Company believes
the proceeds from the recent mortgage obtained on its Imeson Center property
will be sufficient to meet its needs for at least the next year. However, any
of the above mentioned items could require significant capital resources in
excess of the Company's liquidity, requiring it to raise additional capital
through public or private debt or equity financing. The availability of these
capital sources will depend upon prevailing market conditions, interest rates,
and the then existing financial position and results of operations of the
Company. Therefore, no assurances can be made by the Company that such
additional capital will be available.
PART II - OTHER INFORMATION
Item 1. - Legal Proceedings
No material events have occurred in the Company's ongoing litigation
matters other than those described below. For the history of such litigation,
please refer to the Company's Annual Report on Form 10-KSB for the fiscal year
ended June 30, 1997.
ASX Investment Corporation
On October 30, 1997, the United States District Court granted the
Company's motion to dismiss with prejudice as to plaintiff ASX Investment
Corporation, but denied the motion as to plaintiff Steve Rosner.
Subsequently, Plaintiff Steve Rosner voluntarily dismissed his claim and ASX
Investment Corporation filed an appeal. In addition, the Court granted the
Company's motion for summary judgment in a separate class-action suit filed by
Rosner.
Kerry Marler
The Company and Mr. Marler reached a settlement agreement on November 17,
1997 during jury selection. The Company has agreed to pay Mr. Marler $300,000
and Mr. Marler will transfer 5,000 shares of Excal Enterprises common stock to
the Company in settlement of all outstanding claims. The final settlement
documents have not been signed and closing has not yet occurred.
John Sanford, et al.
The defendants and the Company agreed to settle the litigation with the
Company agreeing to purchase 49,163 shares of Excal Enterprises common stock
held by two of the defendants at market value ($4.75) at the time of the
agreement and all parties dismissing all claims. The settlement agreement was
finalized in the third quarter of fiscal 1998.
Channel Partnership II, GP
The Company and Channel Partnership have agreed to a tentative settlement.
The settlement must be approved by the Court before it becomes effective. The
settlement is based upon actions taken by the Company to increase shareholder
value and the agreement not to oppose legal fee requests of the Plaintiff not
to exceed $100,000.
Harvey Moore
This lawsuit was finalized in Februaury 1997 when the Court awarded Harvey
Moore a judgement of $294,861 plus $85,445 of pre-judgement interest. Harvey
Moore has petitioned the Court for an award of fees and costs of $330,602.
The hearing is set for April 13, 1998.
Item 2. Changes in Securities
The Company designated 5,000,000 of its 7,500,000 shares of preferred
stock as Series B Participating Preferred Stock and issued all 5,000,000
shares to Jacksonville Holdings, Inc., a wholly-owned subsidiary. The Series
B Participating Preferred Stock pays a quarterly dividend equal to 6% of the
$2.00 per share liquidation value. No dividends can be paid on the Company's
common shares and the Company cannot redeem, purchase, or otherwise acquire
for consideration any shares of its common stock unless and until the
quarterly dividend has been paid on the Series B Participating Preferred
Stock.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company held its annual shareholder meeting on November 5, 1997 to
elect one Class II director and ratify the election of Pender Newkirk &
Company as independent auditors for the fiscal year ended June 30, 1998. The
terms of office as director for R. Park Newton, III and John L. Caskey
continued after the meeting. The voting results were as follows:
Issue For Against Abstain
- -------------------------------------------- --------- ------- -------
Elect W. Aris Newton as Class II director 2,921,380 33,847 651,190
Ratify selection of Pender Newkirk & Company
as auditors for fiscal 1998 3,003,651 597,746 5,020
Item 6. - Exhibits and Reports on Form 8-K.
(a) Exhibits
3.1 Series B Participating Preferred Stock Certificate of
Designations
4.1 Love Funding Corporation Promissory Note
4.2 Love Funding Corporation Mortgage Security Agreement and Fixture
Filing
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
EXCAL ENTERPRISES, INC.
Registrant
Dated: February 11, 1997 /s/ W. CAREY WEBB
W. Carey Webb
President and Chief Executive Officer
Dated: February 11, 1997 /s/ TIMOTHY R. BARNES
Timothy R. Barnes
Vice President and Chief
Financial Officer
CERTIFICATE OF DESIGNATIONS
OF
SERIES B PARTICIPATING PREFERRED STOCK
OF
EXCAL ENTERPRISES, INC.
Section 1. Designation and Amount. The shares of such series shall
be designated as the "Series B Participating Preferred Stock" (the "Series
B Preferred Stock"). The number of shares constituting the Series B
Preferred Stock shall be 5,000,000. Such number of shares may be increased
or decreased by resolution of the Board of Directors; provided that such
increase together with the aggregate number of authorized shares of all
other series' of preferred stock of the Corporation, does not exceed the
total number of authorized shares of preferred stock of the Corporation and
provided further that no decrease shall reduce the number of shares of
Series B Preferred Stock to a number less than the number of shares of such
series then outstanding.
Section 2. Dividends and Distributions.
(A) The holders of shares of Series B Preferred Stock, in
preference to the holders of shares of Series A Preferred Stock and in
preference to the holders of Common Stock, par value $0.001 per share
of the Corporation (the "Common Stock"), and in preference to any
other junior stock, shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally available for
the purpose, preferential dividends, payable in cash on the first day
of January, April, July, and October of each year (each such date
being referred to herein as a "Quarterly Dividend Payment Date"),
commencing on the first Quarterly Dividend Payment Date after the
first issuance of a share or fractional share of Series B Preferred
Stock, at a rate per annum (rounded to the nearest cent) equal to six
percent (6%) of the Liquidation Value of the Series B Preferred Stock,
as defined in Section 6 hereof.
(B) Dividends shall begin to accrue on outstanding shares of
Series B Preferred Stock from the Quarterly Dividend Payment Date
following the date of issue of such shares, unless the date of issue
of such shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the
date of issue is a Quarterly Dividend Payment Date or is a date after
the record date for the determination of holders of shares of Series B
Preferred Stock entitled to receive a quarterly dividend and before
such Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such Quarterly
Dividend Payment Date. Dividends paid on the shares of Series B
Preferred Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall be
allocated pro rata on a share by share basis among all such shares at
the time outstanding. The Board of Directors may fix a record date
for the determination of holders of shares of Series B Preferred Stock
entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 60 days prior to the
date fixed for the payment thereof.
Section 3. Voting Rights. Holders of shares of Series B Preferred
Stock shall have no voting rights.
Section 4. Certain Restrictions.
(A) In the event that quarterly dividends or other dividends or
distributions payable on the Series B Preferred Stock as provided in
Section 2 are unpaid, the Corporation shall not in such quarter:
(i) declare or pay dividends, or make any other
distributions, on any share of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series B Preferred Stock;
(i) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up)
with the Series B Preferred Stock, except dividends paid ratably
on the Series B Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to the
total amounts to which the holders of all such shares are then
entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series B Preferred Stock, provided that the corporation may at
any time redeem, purchase or otherwise acquire shares of any such
junior stock in exchange for shares of any stock of the
Corporation ranking junior (both as to dividends and upon
dissolution, liquidation or winding up) to the Series B Preferred
Stock; or
(iv) purchase or otherwise acquire for consideration
any shares of Series B Preferred Stock, or any shares of stock
ranking on a parity with the Series B Preferred Stock, except in
accordance with a purchase offer made in writing or by
publication (as determined by the Board of Directors) to all
holders of such shares upon such terms as the Board of Directors,
after consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares. Any shares of Series B Preferred Stock
redeemed, purchased or otherwise acquired by the Corporation in any manner
whatsoever shall be retired and canceled promptly after the acquisition
thereof. All such shares shall upon their cancellation become authorized
but unissued shares of Preferred Stock without designation as to series and
may be reissued as part of a new series of Preferred Stock subject to the
conditions and restrictions on issuance set forth herein, in the Restated
Certificate of Incorporation, or in any other Certificate of Designation
creating a series of Preferred Stock or any similar stock or as otherwise
required by law.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution
shall be made (1) to the holders of shares of Common Stock, Series A
Preferred Stock, or any other stock ranking junior to the Series B
Preferred Stock upon liquidation, distribution or winding up, unless prior
thereto, the holders of shares of Series B Preferred Stock shall have
received $2 per share, plus an amount equal to accrued and unpaid dividends
and distributions thereon, declared for such quarter (the "Liquidation
Value"), or (2) to the holders of shares of stock ranking on a parity with
the Series B Preferred Stock upon liquidation, dissolution or winding up,
except distributions made ratably on the Series B Preferred Stock and all
such parity stock in proportion to the total amounts to which the holders
of all such shares are entitled upon such liquidation, dissolution or
winding up.
Section 7. No Redemption. Shares of the Series B Preferred Stock
shall not be redeemable.
Section 8. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter
or change the powers, preferences or special rights of the Series B
Preferred Stock so as to affect them adversely without the
affirmative vote of the holders of at least two-thirds of the outstanding
shares of Series B Preferred Stock, voting together as a single class.
NOTE-FIX
Loan No.E25012
PROMISSORY NOTE
(FIXED)
As of September 30, 1997
Tampa, Florida
$13,500,000
FOR VALUE RECEIVED, JACKSONVILLE HOLDINGS, INC., a Florida
corporation, having an address at One Imeson Boulevard, Building #100,
Jacksonville, Florida 32218 ("Borrower"), hereby unconditionally promises to
pay to the order of LOVE FUNDING CORPORATION, having an address at 1220 19th
Street, N.W., Suite 502, Washington, DC 20036 ("Lender"), or at such other
place as the holder hereof may from time to time designate in writing, the
principal sum of THIRTEEN MILLION FIVE HUNDRED THOUSAND DOLLARS ($13,500,000)
and all other amounts due or becoming due hereunder in lawful money of the
United States of America, with interest thereon to be computed from the date
of this Note at the Applicable Interest Rate (as hereinafter defined), and to
be paid in installments as follows:
1: PAYMENT TERMS
(a) A payment of interest from the date hereof through the last day of
the current month shall be paid on the date hereof;
(b) A constant payment of ONE HUNDRED THIRTEEN THOUSAND TWO HUNDRED
NINETY-ONE AND 51/100 DOLLARS ($113,291.51) on the first day of November, 1997
and on the first day of each calendar month thereafter up to and including the
first day of October, 2002 (the "Maturity Date"), which payment Lender has
determined to be sufficient to (i) pay interest on the principal sum of this
Note at the Applicable Interest Rate (as hereinafter defined), and
(ii)Eamortize the principal sum of this Note over an amortization term ending
on the last day of the twenty-fifth Loan Year (as hereinafter defined);
each of the payments to be applied as follows:
(i) first, to the payment of interest computed at the
Applicable Interest Rate; and
(ii) the balance toward the reduction of the principal
sum;
and the balance of the principal sum and all interest thereon shall be due and
payable on the Maturity Date. Interest on the principal sum of this Note
shall be calculated on the basis of a three hundred sixty (360) day year, on
twelve (12) 30-day months for each full calendar month and on the actual
number of days elapsed in the applicable period for which interest is being
calculated for any partial calendar month. As used herein, the term "Loan
Year" shall mean each 365 or 366, as applicable, day period after the first
day of the first calendar month after the date of this Note (or the date of
this Note if it is dated the first day of a calendar month).
2: INTEREST
The term "Applicable Interest Rate" shall mean an interest rate
equal to nine percent (9.0%) per annum.
3: DEFAULT AND ACCELERATION
(a) (i) The whole of the principal sum of this Note, (ii)Einterest,
default interest, late charges, prepayment charges and other sums, as provided
in this Note, the Security Instrument or the Other Security Documents (as such
terms are hereinafter defined), (iii)Eall other monies agreed or provided to
be paid by Borrower in this Note, the Security Instrument or the Other
Security Documents, (iv) all sums advanced pursuant to the Security Instrument
to protect and preserve the Property (as hereinafter defined) and the lien and
the security interest created thereby, and (v) all sums advanced and costs and
expenses incurred by Lender in connection with the Debt (as hereinafter
defined) or any part thereof, any renewal, extension, or change of or
substitution for the Debt or any part thereof, or the acquisition or
perfection of the security therefor, whether made or incurred at the request
of Borrower or Lender (the sums referred to in (i) through (v) above,
collectively, the "Debt") shall without notice become immediately due and
payable at the option of Lender if any payment required in this Note is not
paid prior to the tenth (10th) day after the date when due or on the Maturity
Date or on the happening of any other default, after the expiration of any
applicable notice and grace periods, herein or under the terms of the Security
Instrument or any of the Other Security Documents (collectively, an "Event of
Default").
(b) Unless payments are made in the amount and as required
hereunder, remittances in payment of all or any part of the Debt shall not,
regardless of any receipt or credit issued therefor, constitute payment until
the required amount is actually received by Lender in funds immediately
available as specified herein and shall be made and accepted subject to the
condition that any check or draft may be handled for collection in accordance
with the practice of the collecting bank or banks. Acceptance by Lender of
any payment in an amount less than the amount then due shall be deemed an
acceptance on account only, and the failure to pay the entire amount prior to
the tenth (10th) day after the date when due shall be and continue to be an
Event of Default.
4: DEFAULT INTEREST
Borrower does hereby agree that upon the occurrence of an Event of
Default, Lender shall be entitled to receive and Borrower shall pay interest
on the entire unpaid principal sum at a per annum rate equal to the lesser of
(a) eighteen percent (18%) and (b) the maximum interest rate which Borrower
may by law pay (the "Default Rate"). The Default Rate shall be computed from
the occurrence of the Event of Default until the earlier of the date upon
which the Event of Default is cured or the date upon which the Debt is paid in
full. Interest calculated at the Default Rate shall be added to the Debt and
shall be deemed secured by the Security Instrument. This clause, however,
shall not be construed as an agreement or privilege to extend the date of the
payment of the Debt, nor as a waiver of any other right or remedy accruing to
Lender by reason of the occurrence of any Event of Default.
5: PREPAYMENT
(a) The principal balance of this Note may be prepaid by Borrower
in whole, but not in part, at any time on or after the expiration of a twenty-
four month period following the first day of the first calendar month after
the date of this Note (or the date of this Note, if it is dated the first day
of a calendar month), upon not less than thirty (30) and not greater than
sixty (60) days prior written notice to Lender specifying the date on which
prepayment is to be made (the "Prepayment Date") and upon the payment of:
(i) all accrued interest to and including the Prepayment Date;
(ii) all interest which would have accrued on the principal balance
of this Note after the Prepayment Date to and including the last day of the
calendar month in which the Prepayment Date occurs (the "Interest Shortfall
Payment") if such prepayment occurs on a date which is not on the first day of
a month;
(iii) all other sums due under this Note, the Security
Instrument and the Other Security Documents (collectively, the "Loan
Documents"); and
(iv) the Prepayment Consideration (as hereinafter defined).
Notwithstanding anything to the contrary contained herein, there
shall be no Prepayment Consideration due in connection with (A)Ethe prepayment
of the principal balance of this Note if the Prepayment Date of the principal
balance of this Note occurs within six (6) months immediately prior to the
Maturity Date, or (B) a complete or partial prepayment resulting from Lender's
application of insurance proceeds or condemnation awards pursuant to Sections
4.3 and 4.4 of the Security Instrument.
(b) The term "Prepayment Consideration" shall mean: (i) three
percent (3.0%) of the principal balance of the Loan being prepaid during the
third Loan Year, (ii) two percent (2.0%) of the principal balance of the Loan
being prepaid during the fourth Loan Year (iii) one percent (1.0%) of the
principal balance of the Loan being prepaid during the first six months of the
fifth Loan Year, and (iv) no Prepayment Consideration thereafter.
(c) Lender shall notify Borrower of the amount and basis of
determination of the required Prepayment Consideration which shall be
conclusive and binding on Borrower absent manifest error. Lender shall not be
obligated to accept any prepayment of the principal balance of this Note
unless it is accompanied by the sums referenced in (a) (i), (ii), (iii) and
(iv) above. In the event that either (i)EBorrower shall notify Lender of
Borrower's intention to prepay this Note but shall not conclude such
prepayment by paying to Lender all sums required on the Prepayment Date as
specified herein, or (ii) a Default Prepayment occurs, then Borrower shall
pay, indemnify and hold Lender harmless from and against any and all losses,
costs and expenses that Lender may incur as a result thereof, including,
without limitation, any interest paid by Lender to lenders of funds borrowed
by it to make or carry the indebtedness evidenced by this Note, any loss,
expense or liability sustained by Lender in connection with the liquidation or
re-employment of such funds and any sums expended by Lender in calculating or
otherwise preparing for such prepayment. Such amounts shall be paid by
Borrower within fifteen (15) days after demand therefor by Lender, provided
that Lender shall have delivered to Borrower a certificate setting forth in
reasonable detail the amount of such compensation payable by Borrower, and
such certificate shall be conclusive and binding on Borrower as to the amount
thereof except in the case of manifest error or willful misconduct.
Notwithstanding anything contained herein to the contrary, in no event shall
Borrower be responsible for any consequential damages in the event of either
of the events described in clauses (i) and (ii) of the second sentence of this
paragraph (c). BORROWER ACKNOWLEDGES AND AGREES THAT THE PREPAYMENT
CONSIDERATION REPRESENTS A REASONABLE AND FAIR ESTIMATE OF COMPENSATION FOR
THE LOSS THAT LENDER MAY SUSTAIN FROM THE PREPAYMENT OF THIS NOTE. BORROWER
ACKNOWLEDGES AND AGREES THAT IT HAS NO RIGHT TO PREPAY THIS NOTE WITHOUT
PAYING THE PREPAYMENT CONSIDERATION (EXCEPT AS SPECIFICALLY PROVIDED HEREIN),
AND BORROWER SPECIFICALLY ACKNOWLEDGES AND AGREES THAT IT SHALL BE LIABLE FOR
THE PREPAYMENT CONSIDERATION UPON ANY DEFAULT PREPAYMENT, IN ADDITION TO THE
PRINCIPAL AMOUNT HEREOF AND ALL OUTSTANDING INTEREST, FEES, PENALTIES AND
OTHER SUMS DUE HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT.
(d) If a Default Prepayment occurs, Borrower shall pay to Lender
the entire principal amount of this Note and all accrued interest thereon,
including, without limitation, the Prepayment Consideration and the Interest
Shortfall Payment, if applicable. For purposes of this Note, the term
"Default Prepayment" shall mean a prepayment of the principal amount of this
Note made after the occurrence of any Event of Default or an acceleration of
the Maturity Date under any circumstances, including, without limitation, a
prepayment occurring in connection with reinstatement of the Security
Instrument provided by statute under foreclosure proceedings or exercise of a
power of sale, any statutory right of redemption exercised by Borrower or any
other party having a statutory right to redeem or prevent foreclosure, any
sale in foreclosure or under exercise of a power of sale or otherwise.
6: SECURITY
This Note is secured by the Security Instrument and the Other
Security Documents. The term "Security Instrument" shall mean that certain
Mortgage, Security Agreement and Fixture Filing, dated as of the date hereof,
given by Borrower to Lender, encumbering Borrower's interest in that certain
parcel of land situated in the County of Duval, State of Florida, as more
particularly described therein (collectively, the "Property") and intended to
be duly recorded in said County. The term "Other Security Documents" shall
mean all and any of the documents other than this Note and the Security
Instrument now or hereafter executed by Borrower and/or others and by or in
favor of Lender, which wholly or partially secure or guaranty payment of this
Note. References to this Note, the Security Instrument and the Other Security
Documents shall mean such instruments as each of the same may be amended,
modified, extended, renewed, restated, consolidated, substituted, supplemented
or replaced from time to time.
7: SAVINGS CLAUSE
It is the intention of Borrower and Lender to conform strictly to
the usury and similar laws relating to interest from time to time in force,
and all agreements between Lender and Borrower, whether now existing or
hereafter arising and whether oral or written, are hereby expressly limited so
that in no contingency or event whatsoever, whether by acceleration of
maturity hereof or otherwise, shall the amount paid or agreed to be paid in
the aggregate to Lender as interest hereunder, under the Security Instrument
or under the Other Security Documents exceed the maximum permissible under
applicable usury or such other laws (the "Maximum Amount"). If from any
possible construction of any document, interest would otherwise be payable
hereunder, under the Security Instrument or under the Other Security Documents
in excess of the Maximum Amount, or in the event for any reason whatsoever any
payment by or act of Borrower pursuant to the terms or requirements hereof, of
the Security Instrument or of the Other Security Documents shall result in the
payment of interest which would exceed the Maximum Amount, then any such
construction shall be subject to the provisions of this Article, and ipso
facto such document shall be automatically reformed, without the necessity of
the execution of any amendment or new document, so that the obligation of
Borrower to pay interest or perform such act or requirement shall be reduced
to the limit authorized under the applicable laws, and in no event shall
Borrower be obligated to pay any interest, perform any act, or be bound by any
requirement which would result in the payment of interest in excess of the
Maximum Amount. Any amount received by Lender in excess of the Maximum Amount
shall, without further agreement or notice between or by any party hereto, be
deemed applied to reduce the principal sum hereof immediately upon receipt of
such moneys by Lender, with the same force and effect as though Borrower had
specifically designated such sums to be applied to principal prepayment. The
provisions of this Article shall supersede any inconsistent provision of this
Note, the Security Instrument or any Other Security Document.
8: LATE CHARGE
If any sum payable under this Note is not paid prior to the tenth
(10th) day after the date on which it is due, Borrower shall pay to Lender
upon demand an amount equal to the lesser of five percent (5%) of the unpaid
sum or the maximum amount permitted by applicable law to defray the expenses
incurred by Lender in handling and processing the delinquent payment and to
compensate Lender for the loss of the use of the delinquent payment. The
amount thereof shall be secured by the Security Instrument and the Other
Security Documents.
9: WAIVERS
Borrower and all others who may become liable for the payment of all
or any part of the Debt do hereby severally waive presentment and demand for
payment, notice of dishonor, protest and notice of protest and non-payment and
all other notices of any kind. No release of any security for the Debt or
extension of time for payment of this Note or any installment hereof, and no
alteration, amendment or waiver of any provision of this Note, the Security
Instrument or the Other Security Documents made by agreement between Lender or
any other person or party shall release, modify, amend, waive, extend, change,
discharge, terminate or affect the liability of Borrower, and any other person
or entity who may become liable for the payment of all or any part of the
Debt, under this Note, the Security Instrument or the Other Security
Documents. No notice to or demand on Borrower shall be deemed to be a waiver
of the obligation of Borrower or of the right of Lender to take further action
without further notice or demand as provided for in this Note, the Security
Instrument or the Other Security Documents.
10: TRANSFER
Upon the transfer of this Note, Borrower hereby waiving notice of
any such transfer, Lender may deliver all the collateral mortgaged, granted,
pledged or assigned pursuant to the Security Instrument and the Other Security
Documents, or any part thereof, to the transferee who shall thereupon become
vested with all the rights herein or under applicable law given to Lender with
respect thereto, and Lender shall thereafter forever be relieved and fully
discharged from any liability or responsibility in the matter; but Lender
shall retain all rights hereby given to it with respect to any liabilities and
the collateral not so transferred.
11: EXCULPATION
(a) Except as otherwise provided herein, Lender shall not enforce
the liability and obligation of Borrower to perform and observe the
obligations contained in this Note, the Security Instrument or the Other
Security Documents by any action or proceeding wherein a money judgment shall
be sought against Borrower, except that Lender may bring a foreclosure action,
action for specific performance or other appropriate action or proceeding to
enable Lender to enforce and realize upon the Security Instrument, the Other
Security Documents, and the Property; provided, however, that any judgment in
any action or proceeding shall be enforceable against Borrower only to the
extent of Borrower's interest in the Property. Lender, by accepting this Note
and the Security Instrument, agrees that it shall not, except as otherwise
provided in Sections 9.9 and 11.2 of the Security Instrument, sue for, seek or
demand any deficiency judgment against Borrower in any action or proceeding,
under or by reason of or under or in connection with this Note, the Security
Instrument or the Other Security Documents.
(b) The provisions of Section 11(a) hereof shall not (i) constitute
a waiver, release or impairment of any obligation evidenced or secured by this
Note, the Security Instrument or the Other Security Documents; (ii) impair the
right of Lender to name Borrower as a party defendant in any action or suit
for judicial foreclosure and sale under the Security Instrument; (iii) affect
the validity or enforceability of any indemnity, guaranty, master lease or
similar instrument made in connection with this Note, the Security Instrument
or the Other Security Documents; (iv) impair the right of Lender to obtain the
appointment of a receiver; (v) impair the enforcement of the Assignment of
Leases and Rents executed in connection herewith; (vi) impair the right of
Lender to obtain a deficiency judgment or judgment on this Note against
Borrower if necessary to obtain any insurance proceeds or condemnation awards
to which Lender would be otherwise entitled under the Security Instrument,
provided, however, Lender shall only enforce such judgment against the
insurance proceeds and/or condemnation awards; or (vii) impair the right of
Lender to enforce the provisions of Sections 9.9 and 11.2 of the Security
Instrument.
(c) Notwithstanding the provisions of Section 11(a) hereof to the
contrary, Borrower shall be personally liable to Lender for any and all
claims, suits, liabilities (including, without limitation, strict
liabilities), actions, proceedings, obligations, debts, damages, losses,
costs, expenses, diminutions in value, fines, penalties, charges, fees,
expenses, judgments, awards, amounts paid in settlement, punitive damages,
foreseeable and unforeseeable consequential damages, of whatever kind or
nature (including but not limited to reasonable attorneys' fees and other
costs of defense) (collectively, "Losses") it incurs due to: (i)Efraud or
intentional misrepresentation by Borrower or any other person or entity in
connection with the execution and the delivery of this Note, the Security
Instrument or the Other Security Documents; (ii)EBorrower's misapplication or
misappropriation of Rents (as defined in the Security Instrument) received by
Borrower after the occurrence of an Event of Default; (iii)EBorrower's
misapplication or misappropriation of tenant security deposits or Rents
collected in advance; (iv)Ethe misapplication or the misappropriation of
insurance proceeds or condemnation awards; (v)EBorrower's failure to pay Taxes
and Insurance Premiums (as such terms are defined in the Security Instrument)
(except to the extent that sums sufficient to pay such amounts have been
deposited in reserve with Lender pursuant to the terms of the Security
Instrument), and charges for labor or materials or other charges that can
create liens on the Property (except to the extent being contested in
accordance with the provisions of the Security Instrument); (vi)EBorrower's
failure to return or to reimburse Lender for all Personal Property (as defined
in the Security Instrument) taken from the Property by or on behalf of
Borrower and not replaced with Personal Property of the same utility and of
the same or greater value; (vii) any act of actual waste or arson by Borrower,
any principal, affiliate, member or general partner thereof or by any
indemnitor or guarantor; or (viii)EBorrower's failure to comply with the
provisions of Sections 10.1 and 10.2 of the Security Instrument.
(d) Notwithstanding the foregoing, the agreement of Lender not to
pursue recourse liability as set forth in Section 11(a) above SHALL BECOME
NULL AND VOID and shall be of no further force and effect in the event of
Borrower's default under SectionE7.2 of the Security Instrument or Section 4.2
of the Security Instrument (except for the covenants described in Sections
4.2(i) and 4.2(n) of the Security Instrument, as to which only a willful
default thereunder shall result in Lender's agreement not to pursue recourse
liability becoming null and void).
(e) Nothing herein shall be deemed to be a waiver of any right
which Lender may have under Sections 506(a), 506(b), 1111(b) or any other
provisions of the Bankruptcy Code to file a claim for the full amount of the
Debt secured by the Security Instrument or to require that all collateral
shall continue to secure all of the Debt owing to Lender in accordance with
this Note, the Security Instrument and the Other Security Documents.
12: DOCUMENT PROTOCOLS
This Note is governed by the Document Protocols set forth on
AppendixEI annexed to the Security Instrument, which are incorporated herein
as if fully set forth herein.
13: AUTHORITY
Borrower (and the undersigned representative of Borrower, if any)
represents and warrants that it has full power and authority to execute and
deliver this Note, and the execution and delivery of this Note has been duly
authorized and does not conflict with or constitute a default under any law,
judicial order or other agreement affecting Borrower or the Property.
IN WITNESS WHEREOF, Borrower has duly executed this Note as of the
day and year first above written.
BORROWER:
JACKSONVILLE HOLDINGS, INC.
By:
Name:
Title:
THIS MORTGAGE, SECURITY AGREEMENT AND FIXTURE FILING (this "Security
Instrument") is made as of September 30, 1997, by JACKSONVILLE HOLDINGS, INC.,
a Florida corporation, having an address at One Imeson Boulevard, Building
#100, Jacksonville, Florida 32218 ("Borrower"), to LOVE FUNDING CORPORATION, a
Virginia corporation, having an address at 1220 19th Street, N.W., Suite 502,
Washington, DC 20036 ("Lender").
W I T N E S S E T H:
WHEREAS, Borrower has requested that Lender make a loan to Borrower in
the aggregate principal amount of THIRTEEN MILLION FIVE HUNDRED THOUSAND
DOLLARS ($13,500,000) (the "Loan"); and
WHEREAS, Lender has agreed to make the Loan to Borrower upon, and subject
to, the terms and conditions set forth herein and in the other Loan Documents
(as hereinafter defined);
WHEREAS, concurrently herewith, Borrower has delivered to Lender its
Promissory Note of even date herewith in the amount of the Loan (as the same
may hereafter from time to time be modified, amended, replaced, restated,
supplemented, renewed, or extended, and any note(s) issued in exchange
therefor or in substitution thereof, collectively, the "Note") in evidence of
the Loan, with interest from the date hereof at the rates set forth in the
Note, such interest and the principal amount thereof to be payable in
accordance with the terms and conditions provided in the Note;
WHEREAS, the Note is due and payable on the first day of October, 2002 if
not sooner in accordance with the terms and conditions thereof;
WHEREAS, Borrower desires to secure the payment of the Debt (as
hereinafter defined) and the performance of all of the Obligations (as
hereinafter defined).
NOW THEREFORE, in consideration of the making of the Loan and other good
and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, Borrower hereby agrees, covenants, represents and
warrants with and to Lender as follows:
1 - GRANTS OF SECURITY
1.1 PROPERTY MORTGAGED. Borrower does hereby irrevocably mortgage,
grant, bargain, sell, pledge, assign, warrant, transfer and convey to Lender,
and grant a security interest to Lender in, with power of sale, all of
Borrower's right, title and interest in and to the following property, rights,
interests and estates now owned or hereafter acquired by Borrower, whether now
existing or hereafter created (collectively, the "Property"):
(a) Land. The real property described in Exhibit A attached
hereto and made a part hereof (the "Land");
(b) Additional Land. All additional lands, estates and
development rights hereafter acquired by Borrower for use in
connection with the Land and the development of the Land and all
additional lands and estates therein which may, from time to time,
by supplemental mortgage or otherwise be expressly made subject to
the lien of this Security Instrument;
(c) Improvements. All buildings, structures, fixtures,
additions, enlargements, extensions, modifications, repairs,
replacements and improvements now or hereafter erected or located on
the Land (the "Improvements");
(d) Easements. All easements, rights-of-way or use, rights,
strips and gores of land, streets, ways, alleys, passages, sewer
rights, water, water courses, water rights and powers, air rights
and development rights, and all estates, rights, titles, interests,
privileges, liberties, servitudes, tenements, hereditaments and
appurtenances of any nature whatsoever, in any way now or hereafter
belonging, relating or pertaining to the Land or the Improvements
and the reversion and reversions, remainder and remainders, and all
land lying in the bed of any street, road or avenue, opened or
proposed, in front of or adjoining the Land to the center line
thereof, and all the estates, rights, titles, interests, dower and
rights of dower, curtesy and rights of curtesy, property,
possession, claim and demand whatsoever, both at law and in equity,
of Borrower of, in and to the Land and the Improvements and every
part and parcel thereof, with the appurtenances thereto;
(e) Fixtures and Personal Property. All machinery, equipment,
fixtures (including, without limitation, all heating, air
conditioning, plumbing, lighting, communications and elevator
fixtures) and other property of every kind and nature whatsoever
owned by Borrower, or in which Borrower has or shall have an
interest, now or hereafter located upon the Land or the
Improvements, or appurtenant thereto, and usable in connection with
the present or future operation and occupancy of the Land or the
Improvements and all building equipment, materials and supplies of
any nature whatsoever owned by Borrower, or in which Borrower has or
shall have an interest, now or hereafter located upon the Land or
the Improvements, or appurtenant thereto, or usable in connection
with the present or future operation and occupancy of the Land or
the Improvements (collectively, the "Personal Property"), and all
proceeds and products of the above;
(f) Leases and Rents. All leases and other agreements
affecting the use, enjoyment or occupancy of all or any portion of
the Land or the Improvements heretofore or hereafter entered into
(the "Leases"), whether before or after the filing by or against
Borrower of any petition for relief under 11 U.S.C. Sec. 101 et seq.,
as the same may be amended from time to time or any successor statute
thereto (the "Bankruptcy Code"), and all right, title and interest
of Borrower, its successors and assigns therein and thereunder,
including, without limitation, cash or other collateral deposited to
secure the performance by the lessees of their obligations
thereunder; and all rents, additional rents, revenues, issues and
profits (including all oil and gas or other mineral royalties and
bonuses) from the Land and the Improvements, whether paid or
accruing before or after the filing by or against Borrower of any
petition for relief under the Bankruptcy Code (the "Rents") and all
proceeds from the sale or other disposition of the Leases and the
right to receive and apply the Rents;
(g) Condemnation Awards. All awards or payments, including
interest thereon, which may heretofore and hereafter be made with
respect to the Property, whether from the exercise of the right of
eminent domain (including, without limitation, any transfer made in
lieu of or in anticipation of the exercise of the right), or for a
change of grade, or for any other injury to or decrease in the value
of the Property;
(h) Insurance Policies and Proceeds. All insurance policies
covering the Property and proceeds of and any unearned premiums on
any such policies, including, without limitation, the right to
receive and apply the proceeds of any insurance, judgments, or
settlements made in lieu thereof, for damage to the Property;
(i) Tax Certiorari. All refunds, rebates or credits in
connection with a reduction in real estate taxes and assessments
charged against the Property as a result of tax certiorari or any
applications or proceedings for reduction, whether arising or
accruing before or after the date hereof;
(j) Rights. The right, in the name and on behalf of Borrower,
to appear in and defend any action or proceeding brought with
respect to the Property and to commence any action or proceeding to
protect the interest of Lender in the Property;
(k) Agreements. All agreements, contracts, certificates,
instruments, franchises, permits, licenses, plans, specifications
and other documents, now or hereafter entered into, and all rights
therein and thereto, respecting or pertaining to the use,
occupation, construction, management or operation of the Land and
any part thereof and any Improvements or respecting any business or
activity conducted on the Land and any part thereof and all right,
title and interest of Borrower therein and thereunder, including,
without limitation, the right, upon the happening of any default
hereunder, to receive and collect any sums payable to Borrower
thereunder;
(l) Trademarks. All tradenames, trademarks, servicemarks,
logos, copyrights, goodwill, books and records and all other general
intangibles relating to or used in connection with the operation of
the Property;
(m) Accounts Receivable. All right, title and interest of
Borrower arising from the operation of the Property in and to all
payments for goods or property sold or leased or for services
rendered, whether or not yet earned by performance, and not
evidenced by an instrument or chattel paper, including, without
limitation, all accounts arising from the operation of a mobile home
park or manufactured housing community, if any, on the Property and
all rights, if any, to payment from any consumer credit/charge card
organization or entity; and
(n) Other Rights; Replacements and Conversions. Any and all
other rights of Borrower in and to the items set forth in
Subsections (a) through (m) above and all renewals, substitutions,
improvements, accessions, attachments, additions, replacements and
all proceeds (whether cash or non-cash, movable or immovable,
tangible or intangible) to or of each of the items set forth in
Subsections (a) through (m) above, and all conversions of the
security constituted thereby (whether voluntary or involuntary and
in whatever form) so that, immediately upon such renewal,
substitution, improvement, accession, attachment, addition,
replacement or conversion, as the case may be, and in each such
case, the foregoing shall be deemed a part of the Property and shall
automatically become subject to the lien of this Security Instrument
as fully and completely and with the same priority and effect as
though now owned by Borrower and specifically described herein,
without any further mortgage or assignment or conveyance by
Borrower.
1.2 ASSIGNMENT OF RENTS. Borrower hereby absolutely and
unconditionally assigns to Lender Borrower's right, title and interest in and
to all current and future Leases and Rents; it being intended by Borrower that
this assignment constitutes a present, absolute collateral assignment and not
an assignment for additional security only. Nevertheless, subject to the
terms of this Section 1.2 and Section 3.6, Lender grants to Borrower a
revocable license to collect and receive the Rents. Borrower shall hold a
sufficient portion of the Rents in trust for the benefit of Lender to
discharge all current sums due on the Debt.
1.3 SECURITY AGREEMENT; FIXTURE FILING. (a) This Security Instrument is
both a real property mortgage and a "security agreement" within the meaning of
the Uniform Commercial Code as adopted and enacted by the State or
Commonwealth where the Property is located (as amended, modified or replaced
from time to time, the "UCC"). The Property includes both real and personal
property and all other rights and interests, whether tangible or intangible in
nature, of Borrower in the Property. Borrower hereby grants to Lender, as
security for the Obligations, a security interest in the Property to the full
extent that the Property may be subject to the UCC (said portion of the
Property so subject to the UCC, the "UCC Collateral"). Borrower hereby
irrevocably appoints Lender as its attorney-in-fact, coupled with an interest,
to file with the appropriate public office on its behalf any financing,
continuation or other statements signed only by Lender, as secured party, in
connection with the UCC Collateral.
(a) From the date of its recording, this Security Instrument
further constitutes a financing statement filed as a fixture filing and covers
goods which are or are to become fixtures on the Property. For this purpose,
Borrower is the "Debtor," and its name and mailing address are set forth in
the preamble of this Security Instrument. Lender is the "Secured Party," and
its name and mailing address also are set forth in the preamble of this
Security Instrument. This document covers goods which are or are to become
fixtures and personal property. The statement describing the portion of the
Property comprising the fixtures and personal property secured hereby is set
forth as Section 1.1(e) of this Security Instrument.
1.4 PLEDGE OF MONIES HELD. Borrower hereby pledges to Lender any and
all monies now or hereafter held by Lender, including, without limitation, any
sums deposited in the Reserve Fund (as hereinafter defined), Net Proceeds (as
hereinafter defined) and condemnation awards or payments in connection with
the Property, as additional security for the Obligations until expended or
applied as provided in this Security Instrument.
CONDITIONS TO GRANT
TO HAVE AND TO HOLD the above granted and described Property unto
and to the use and benefit of Lender, and the successors and assigns of
Lender, WITH POWER OF SALE, forever;
PROVIDED, HOWEVER, these presents are upon the express condition
that, if Borrower shall well and truly pay to Lender the Debt at the time and
in the manner provided in the Note and this Security Instrument, shall well
and truly perform the other Obligations as set forth in this Security
Instrument and shall well and truly abide by and comply with each and every
covenant and condition set forth herein, in the Note and in the other Loan
Documents, these presents and the estate hereby granted shall cease, terminate
and be void.
2 - DEBT AND OBLIGATIONS SECURED
2.1 DEBT. This Security Instrument and the grants, assignments and
transfers made herein are given for the purpose of securing the following, in
such order of priority as Lender may determine in its sole discretion (the
"Debt"):
(a) the payment of the indebtedness evidenced by the Note;
(b) the payment of interest, default interest, late charges,
prepayment consideration and all other moneys agreed or provided to be
paid by Borrower in the Note, this Security Instrument and the other Loan
Documents;
(c) the payment of all sums advanced pursuant to this Security
Instrument or any other Loan Document to protect and preserve the
Property and the lien and security interests created hereby; and
(d) the payment of all sums advanced and costs and expenses
incurred by Lender in connection with the Loan or any part thereof, any
renewal, extension, increase, change of or substitution for the items set
forth in Subsections (a) through (c) above or any part thereof, or the
acquisition or perfection of the security therefor, whether made or
incurred at the request of Borrower or Lender.
2.2 OBLIGATIONS. This Security Instrument and the grants,
assignments and transfers made herein are also given for the purpose of
securing the performance of all other obligations of Borrower contained herein
and the performance of each obligation of Borrower contained in the other Loan
Documents (all of such obligations, together with Borrower's obligations for
the payment of the Debt, collectively, the "Obligations").
3 - BORROWER COVENANTS
Borrower covenants and agrees that:
3.1 PAYMENT OF DEBT. Borrower will pay the Debt at the time and in
the manner provided in the Note and the other Loan Documents.
3.2 INCORPORATION BY REFERENCE. All the covenants, conditions and
agreements contained in (a) the Note, and (b) any and all of the documents,
instruments and agreements other than the Note and this Security Instrument
now or hereafter executed by Borrower and/or others and by or in favor of
Lender, which wholly or partially secure or guaranty payment of the Debt (the
"Other Security Documents"; the Note, any other instrument which from time to
time may evidence any portion of the Debt, this Security Instrument and the
Other Security Documents, as each of the same may be amended, modified,
extended, renewed, restated, consolidated, substituted, supplemented or
replaced from time to time, collectively, the "Loan Documents"), are hereby
made a part of this Security Instrument to the same extent and with the same
force as if fully set forth herein.
3.3 INSURANCE.
(a) Borrower shall obtain and maintain, or cause to be maintained,
insurance for Borrower and the Property providing at least the following
coverages:
(1) Insurance against loss or damage by fire, casualty and other
hazards as now are or subsequently may be covered by an "all risk" policy
or a policy covering "special" causes of loss, with such endorsements as
Lender may from time to time reasonably require and which are customarily
required by institutional lenders of similar properties similarly
situated, including, without limitation, building ordinance and law,
lightning, windstorm, civil commotion, hail, riot, strike, water damage,
sprinkler leakage, collapse, malicious mischief, explosion, smoke,
aircraft, vehicles, vandalism, falling objects and weight of snow, ice or
sleet, and covering the Improvements and Personal Property in an amount
equal to or greater than one hundred percent (100%) of the appraised
value of the entire Property (pursuant to the appraisal accepted by
Lender) pursuant to an agreed amount endorsement containing a waiver of
co-insurance without deduction for depreciation. The determination of
the replacement cost amount shall be adjusted annually to comply with the
requirements of the insurer issuing the coverage or, at Lender's
election, by reference to such indexes, appraisals or information as
Lender determines in its reasonable discretion, and, unless the insurance
required by this paragraph shall be effected by blanket and/or umbrella
policies in accordance with the requirements of this Security Instrument,
the policy shall include inflation guard coverage that ensures that the
policy limits will be increased over time to reflect the effect of
inflation. Each policy shall, subject to Lender's approval, contain a
replacement cost endorsement, without deduction for depreciation and
either an agreed amount endorsement equal to or greater than the
appraised value of the Property as described above or a waiver of any co-
insurance provisions, and shall provide for deductibles not to exceed
$10,000 except for windstorm insurance, in which case the deductible
shall not exceed $250,000.
(2) Commercial general liability insurance under a policy
containing "Comprehensive General Liability Form" of coverage (or a
comparably worded form of coverage) and the "Broad Form CGL" endorsement
(or a policy which otherwise incorporates the language of such
endorsement), providing coverage on an occurrence (not "claims made")
basis, which policy shall include, without limitation, coverage against
claims for personal injury, bodily injury, death and property damage
liability with respect to the Property and the operations related
thereto, whether on or off the Property, and the following coverages:
Employee as Additional Insured, Product Liability/Completed Operations;
Broad Form Contractual Liability, Independent Contractor, Personal Injury
and Advertising Injury Protection, Medical Payment (with a minimum limit
of Five Thousand Dollars ($5,000) per person), Broad Form Cross Suits
Liability Endorsement, where applicable, hired and non-owned automobile
coverage (including rented and leased vehicles), and, if any alcoholic
beverages shall be sold, manufactured or distributed on the Property,
liquor liability coverage, all of which shall be in such amounts as
Lender may from time to time reasonably require, but not less than One
Million Dollars ($1,000,000) per occurrence with a general aggregate
limit of Three Million Dollars ($3,000,000). If such Policy shall cover
more than one property, such limits shall apply on a "per location"
basis. If any elevators, health club facilities or swimming pools are
located on the Property, the foregoing amounts shall be increased to
Three Million Dollars ($3,000,000) and Six Million Dollars ($6,000,000),
respectively. Such liability policy shall delete the contractual
exclusion under the personal injury coverage, if possible, and if
available, shall include the following endorsements: Notice of Accident,
Knowledge of Occurrence, and Unintentional Error and Omission.
(3) Rental insurance (i) with loss payable to Lender; (ii) covering
all risks required to be covered by the insurance provided for in Section
3.3(a)(1); and (iii) in an amount equal to the greater of (x) not less
than one hundred percent (100%) of the actual Rent for the preceding
twelve (12) month period, or (y) the annualized rent based upon the most
recent quarterly rent roll including, in either case, the total amount of
all other charges which are the legal obligations of all tenants, lessees
and sublessees of the Land and/or the Improvements under the Leases. The
amount of such rental insurance shall be determined upon the execution of
this Security Instrument and once each calendar year thereafter based on
Borrower's reasonable estimate of rental income or projected gross
revenues from operations, as the case may be, from the Property for the
succeeding twelve (12) months as approved by Lender. The rental
insurance shall include either an agreed amount endorsement or a waiver
of any co-insurance provisions, so as to prevent Borrower, Lender and any
other insured thereunder from being a co-insurer.
(4) During the period of any new construction on the Land, a so-
called "Builder's All-Risk Completed Value" or "Course of Construction"
insurance policy in non-reporting form for any improvements under
construction, including, without limitation, for demolition and increased
cost of construction or renovation, in an amount equal to one hundred
percent (100%) of the estimated replacement cost value on the date of
completion, including "soft cost" coverage, and Worker's Compensation
Insurance covering all persons engaged in such construction, in an amount
at least equal to the minimum required by law. In addition, each
contractor and subcontractor shall be required to provide Lender with a
certificate of insurance for (i) Worker's Compensation Insurance covering
all persons engaged by such contractor or subcontractor in such
construction in an amount at least equal to the minimum required by law,
and (ii) if the construction contract price is greater than one Hundre
Thousand Dollars ($100,000), then general liability insurance showing
minimum limits of at least Three Million Dollars ($3,000,000), including
coverage for products and completed operations and if the construction
contract is equal to or less than One Hundred Thousand Dollars
($100,000), then general liability insurance showing minimum limits of at
least One Million Dollars ($1,000,000), including coverage for products
and completed operations. Each contractor and subcontractor also shall
cover Borrower and Lender as an additional insured under such liability
policy and shall indemnify and hold Borrower and Lender harmless from and
against any and all claims, damages, liabilities, costs and expenses
arising out of, relating to or otherwise in connection with its
performance of such construction.
(5) If the Property contains steam boilers, steam pipes, steam
engines, steam turbines or other high pressure vessels, insurance
covering the major components of the central heating, air conditioning
and ventilating systems, boilers, other pressure vessels, high pressure
piping and machinery, elevators and escalators, if any, and other similar
equipment installed in the Improvements, in an amount equal to one
hundred percent (100%) of the appraised value of the Property, which
policies shall insure against physical damage to and loss of occupancy
and use of the Improvements arising out of an accident or breakdown
covered thereunder.
(6) Flood insurance with a deductible not to exceed Three Thousand
Dollars ($3,000), or such greater amount as may be satisfactory to Lender
in its sole discretion, and in an amount equal to the full insurable
value of the Property or the maximum amount available, whichever is less,
if the Property is located in an area designated by the Secretary of
Housing and Urban Development or the Federal Emergency Management Agency
as having special flood hazards.
(7) Worker's compensation insurance or other similar insurance
which may be required by governmental authorities or applicable legal
requirements in an amount at least equal to the minimum required by law.
(8) Such other insurance coverages, in such amounts, and such other
forms and endorsements, as may from time to time be required by Lender
and which are customarily required by institutional lenders to similar
properties, similarly situated, including, without limitation, coverages
against other insurable hazards (including, by way of example only,
earthquake, sinkhole and mine subsidence), which at the time are commonly
insured against and generally available.
(b) All insurance policies required under this Section 3.3 (each, a
"Policy" and collectively, the "Policies") shall have a term of not less than
one year and shall be in the form and amount and with deductibles as, from
time to time, shall be reasonably acceptable to Lender, under valid and
enforceable policies issued by financially responsible insurers either
licensed to transact business in the State where the Property is located, or
obtained through a duly authorized surplus line insurance agent or otherwise
in conformity with the laws of such State, with (1) a rating of not less than
the third (3rd) highest rating category by either Standard & Poor's Ratings
Group, Duff & Phelps Credit Rating Co., Moody's Investors Service, Inc., Fitch
Investors Service, Inc. or any successors thereto (each, a "Rating Agency"),
or (2) an A.M. Best Company, Inc. general policy rating of A or higher and a
financial size category of not less than X. Originals or certified copies of
all Policies shall be delivered to and held by Lender.
(c) All Policies shall name Lender as an insured or additional
insured, shall provide for loss payable solely to Lender and shall contain:
(i) standard "non-contributory mortgagee" endorsement or its equivalent
relating, inter alia, to recovery by Lender notwithstanding the negligent or
willful acts or omissions of Borrower and notwithstanding (a) occupancy or use
of the Property for purposes more hazardous than those permitted by the terms
of such Policy, (b) any foreclosure or other action taken by Lender pursuant
to this Security Instrument upon the occurrence of an Event of Default (as
hereinafter defined), or (c) any change in title or ownership of the Property;
and (ii) a provision that such Policies shall not be canceled or amended,
including, without limitation, any amendment reducing the scope or limits of
coverage, or failed to be renewed, without at least thirty (30) days prior
written notice to Lender in each instance. With respect to Policies which
require payment of premiums annually, not less than thirty (30) days prior to
the expiration dates of such Policies, Borrower shall pay such amount, except
to the extent Lender is reserving sums therefor pursuant to the Loan Documents
and to such extent, Lender shall place such reserves in an account with
Lender. If ever Lender does not reserve funds for the payment of insurance
premiums, then, not less than thirty (30) days prior to the expiration dates
of the Policies, originals or certified copies of renewals of such Policies
(or binders evidencing such renewals) bearing notations evidencing the payment
of all premiums required thereunder (the "Insurance Premiums") or accompanied
by other evidence satisfactory to Lender of such payment shall be delivered by
Borrower to Lender. The Insurance Premiums shall not be paid by Borrower
through or by any financing arrangement. Borrower shall not carry separate
insurance, concurrent in kind or form or contributing in the event of loss,
with any insurance required under this Section 3.3. If the limits of any
Policy are reduced below the amounts set forth herein or eliminated due to a
covered loss, Borrower shall pay the additional premium, if any, in order to
have the original limits of insurance reinstated, or Borrower shall purchase
new insurance in the same type and amount that existed immediately prior to
the loss.
(d) If Borrower fails to maintain and deliver to Lender the
original Policies required by this Security Instrument, Lender may, at its
option, procure such insurance and Borrower shall pay or, as the case may be,
reimburse Lender for, all premiums thereon promptly, upon demand by Lender,
with interest thereon at the Default Rate (as hereinafter defined) from the
date paid by Lender to the date of repayment and such sum shall constitute a
part of the Obligations secured by this Security Instrument.
(e) The insurance required by this Security Instrument may, at the
option of Borrower, be effected by blanket and/or umbrella policies issued to
Borrower or an Affiliate (as hereinafter defined) of Borrower covering the
Property and the properties of such Affiliate, provided that, in each case,
the policies otherwise comply with the provisions of this Security Instrument
and allocate to the Property, from time to time, the coverage specified by
this Security Instrument, without possibility of reduction or coinsurance by
reason of, or damage to, any other property (real or personal) named therein.
If the insurance required by this Security Instrument shall be effected by
any such blanket or umbrella policies, Borrower shall furnish to Lender
original policies or certified copies thereof, with schedules attached thereto
showing the amount of the insurance provided under such policies which is
applicable to the Property.
(f) Neither Lender nor its agents or employees shall be liable for
any loss or damage insured by the Policies; it being understood that
(i) Borrower shall look solely to its insurance company for the recovery of
such loss or damage, (ii) such insurance company shall have no rights of
subrogation against Lender, its agents or employees, and (iii) Borrower shall
use its best efforts to procure from such insurance company a waiver of
subrogation rights against Lender. If, however, any Policy does not provide
for a waiver of subrogation rights against Lender (whether because such a
waiver is unavailable or otherwise), then Borrower hereby agrees, to the
extent permitted by law and to the extent not prohibited by such Policy, to
waive its rights of recovery, if any, against Lender, its agents and
employees, whether resulting from any damage to the Property, any liability
claim in connection with the Property or otherwise. If any such Policy shall
prohibit Borrower from waiving such claims, then Borrower must obtain from
such insurance company a waiver of subrogation rights against Lender.
3.4 PAYMENT OF TAXES, ETC. (a) Except to the extent sums sufficient
to pay all Taxes and Other Charges have been deposited with Lender in
accordance with the terms of this Security Instrument, Borrower shall promptly
pay all taxes, assessments, water rates, sewer rents, governmental
impositions, and other charges, including, without limitation, vault charges
and license fees for the use of vaults, chutes and similar areas adjoining the
Land, now or hereafter levied or assessed or imposed against the Property or
any part thereof (the "Taxes"), all ground rents, maintenance charges and
similar charges, now or hereafter levied or assessed or imposed against the
Property or any part thereof (the "Other Charges"), and all charges for
utility services provided to the Property at least five (5) days prior to the
date upon which any fine, penalty, interest or cost for nonpayment is imposed,
and furnish to Lender upon request receipted bills of the appropriate taxing
authority or other documentation reasonably satisfactory to Lender evidencing
the payment thereof. Borrower shall not suffer and shall promptly cause to be
paid and discharged any lien or charge whatsoever which may be or become a
lien or charge against the Property.
(b) After prior written notice to Lender, Borrower, at its own
expense, may contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the amount or validity or
application in whole or in part of any of the Taxes or Other Charges or any
claims or judgments of mechanics, materialmen, suppliers or vendors or any
lien therefor, as described in Section 3.10, provided that (i) no Event of
Default has occurred and is continuing hereunder or under any of the other
Loan Documents, (ii) Borrower is not prohibited from doing so under the
provisions of any other agreement affecting either Borrower or the Property,
(iii) such proceeding shall suspend the collection of the disputed amount from
Borrower and from the Property (and Borrower shall furnish such security as
may be required in the proceeding for such purpose), or Borrower shall have
paid all of the disputed amount under protest, (iv) neither the Property nor
any part thereof or interest therein will be in danger of being sold,
forfeited, terminated, cancelled or lost, and (v) Borrower shall have
deposited with Lender adequate reserves for the payment of the disputed
amount, together with all interest and penalties thereon, unless Borrower has
paid all of the disputed amount under protest.
3.5 RESERVE FUND. In addition to the initial deposits with respect
to Taxes and Insurance Premiums made by Borrower to Lender on the date hereof
to be held by Lender in reserve (the initial deposits, together with the
subsequent payments made in accordance with this Section, collectively, the
"Reserve Fund"), Borrower shall pay to Lender on the first day of each
calendar month (a) one-twelfth of an amount which would be sufficient to pay
the Taxes payable, or estimated by Lender to be payable, during the next
ensuing twelve (12) months, and (b) one-twelfth of an amount which would be
sufficient to pay the Insurance Premiums due for the renewal of the coverage
afforded by the Policies upon the expiration thereof. Borrower shall make
such payments into the Reserve Fund, which payments shall be adjusted annually
or more frequently if Lender requires, so that Lender shall hold an amount
which, when added to the monthly payments subsequently required to be
deposited with Lender hereunder on account of Taxes and Insurance Premiums,
will result in there being on deposit with Lender an amount sufficient to pay
the next due installment of Taxes in the period as required by applicable law
prior to the delinquency date thereof and the next due Insurance Premiums at
least one month prior to the due date thereof, plus, in both cases, one-sixth
of such amount. Borrower agrees to notify Lender immediately of any changes
to the amounts, schedules and instructions for payment of any Taxes and
Insurance Premiums of which it has or obtains knowledge and authorizes Lender
or its agent to obtain the bills for Taxes and Insurance Premiums directly
from the appropriate taxing authority or insurance agent or provider, as
applicable. The Reserve Fund and the payments of interest or principal or
both, payable pursuant to the Note, shall be added together and shall be paid
as an aggregate sum by Borrower to Lender. Provided no Event of Default has
occurred and is continuing hereunder, Lender will apply the Reserve Fund to
payments of Taxes and Insurance Premiums required to be made by Borrower
pursuant to Sections 3.3 and 3.4 hereof. If the amount of the Reserve Fund
shall exceed the amounts due for Taxes and Insurance Premiums pursuant to
Sections 3.3 and 3.4 hereof, Lender shall credit such excess against future
payments to be made to the Reserve Fund. Upon the payment in full to Lender
of the Debt and the performance of all other Obligations as set forth in this
Security Instrument, any excess remaining in the Reserve Fund shall be paid to
Borrower. If the Reserve Fund is not sufficient to pay the items set forth in
(a) and (b) above, Borrower shall promptly pay to Lender, upon demand, an
amount which Lender shall estimate as sufficient to make up the deficiency.
Any monetary reserve required by Lender pursuant to this Security Instrument
shall be held in a reserve account bearing interest for the benefit of
Borrower, or, at Borrower's option, obligations issued by the Federal
Government of the United States, the interest on which shall accrue to the
benefit of Borrower. Provided no Event of Default shall exist, all interest
shall be disbursed to Borrower on a quarterly basis, less six percent (6%) of
such interest earned as an administrative fee payable to Lender for the cost
of maintaining such account or obligations. Lender may withhold such
administrative fee from the disbursement of interest to Borrower.
3.6 LEASES AND RENTS. (a) Upon request, Borrower shall furnish
Lender with executed copies of all Leases. No material changes may be made to
the Leases without the prior written consent of Lender. In addition, all
renewals of Leases and all proposed leases shall provide for rental rates and
terms comparable to existing local market rates and terms and shall be arms-
length transactions with bona fide, independent third party tenants. All
proposed commercial Leases and renewals of existing commercial Leases (other
than those renewals pursuant to renewal options exercised by tenants pursuant
to Lender-approved Leases) shall be subject to the prior approval of Lender,
which approval shall not be unreasonably withheld or delayed. All Leases
shall provide that they are subordinate to this Security Instrument and that
the lessee agrees to attorn to Lender and shall not contain an option to
purchase or a right of first refusal in favor of the tenant. Borrower
(i) shall observe and perform all the obligations imposed upon the lessor
under the Leases and shall not do or permit to be done anything to impair the
value of the Leases as security for the Debt; (ii) shall promptly send copies
to Lender of all notices of default which Borrower shall send or receive
thereunder; (iii) shall enforce all of the terms, covenants and conditions
contained in the Leases upon the part of the lessee thereunder to be observed
or performed, short of termination thereof; (iv) shall not collect any of the
Rents more than one (1) month in advance; (v) shall not execute any other
assignment of the lessor's interest in the Leases or the Rents; (vi) shall not
alter, modify or change the economic terms of any commercial Lease or cancel
or terminate any commercial Lease or accept a surrender thereof without the
prior written consent of Lender, which consent shall not be unreasonably
withheld or delayed, or convey or transfer or suffer or permit a conveyance or
transfer of the Land or of any interest therein so as to effect a merger of
the estates and rights of, or a termination or diminution of the obligations
of, lessees thereunder; (vii) shall not alter, modify or change the terms of
any guaranty, letter of credit or other credit support with respect to the
Leases or cancel or terminate such lease guaranty without the prior written
consent of Lender, which consent shall not be unreasonably withheld or
delayed; and (viii) shall not consent to any assignment of or subletting under
any commercial Lease not in accordance with its terms, without the prior
written consent of Lender, which consent shall not be unreasonably withheld or
delayed.
(b) All security deposits of lessees, whether held in cash or any
other form, shall be treated by Borrower as trust funds, shall not be
commingled with any other funds of Borrower and, if cash, shall be deposited
by Borrower at a federally insured institution reasonably satisfactory to
Lender.
(c) Notwithstanding the provisions of Subsection 3.6(a) above,
renewals of existing commercial Leases and proposed Leases for commercial
space shall not be subject to the prior approval of Lender provided all of the
following conditions are satisfied: (i) the rental income pursuant to the
renewal or proposed Lease is not more than ten percent (10%) of the total
rental income for all of the space tenants at the Property, (ii) the renewal
or proposed Lease covers less than ten percent (10%) of space at the Property,
(iii) the renewal or proposed Lease shall be written in a form of Lease which
has either been previously approved by Lender or is on the same form of the
original lease, provided Lender receives its standard form of Subordination,
Non-Disturbance and Attornment Agreement in recordable form and executed by
Borrower and the tenant prior to the execution of such lease, (iv) no rent
credits, free rents or concessions have been granted under the renewal or
proposed Lease, (v) the renewal or proposed Lease shall provide for rental
rates and terms comparable to existing local market rates and terms, and (vi)
the renewal or proposed Lease shall be an arms-length transaction with a bona
fide, independent third party tenant. Borrower shall deliver to Lender copies
of all Leases which are entered into pursuant to this Subsection (c) together
with Borrower's certification that it has satisfied all of the conditions of
the preceding sentence within thirty (30) days after the execution of the
Lease.
3.7 MAINTENANCE OF PROPERTY. Borrower shall cause the Property to be
maintained in a good and safe condition and repair and shall not commit or
suffer any waste of the Property or do or permit to be done thereon anything
that may in any way impair the value of the Property or the security of this
Security Instrument. The Improvements and the Personal Property shall not be
removed, demolished or materially altered (except for normal replacement of
the Personal Property) without the consent of Lender, which consent shall not
be unreasonably withheld or delayed. Borrower shall not initiate, join in,
acquiesce in, or consent to any change in any private restrictive covenant,
zoning law or other public or private restriction, limiting or defining the
uses which may be made of the Property or any part thereof, except as
specifically provided for herein. If under applicable zoning provisions the
use of all or any portion of the Property is or shall become a nonconforming
use, Borrower will not cause or permit the nonconforming use to be
discontinued or abandoned without the express written consent of Lender.
3.8 COMPLIANCE WITH LAWS. (a) Borrower shall promptly comply with
all existing and future federal, state and local laws, orders, ordinances,
governmental rules and regulations or court orders affecting or which may be
interpreted to affect the Property, any portion thereof, or the use thereof
(collectively, the "Applicable Laws"). Borrower shall give prompt notice to
Lender of the receipt by Borrower of any notice related to a violation of any
Applicable Laws and of the commencement of any proceedings or investigations
which relate to compliance with Applicable Laws.
(b) Borrower shall have the right, after prior written notice to
Lender, to contest by appropriate legal proceedings diligently conducted in
good faith, without cost or expense to Lender, the validity or application of
any Applicable Law and to suspend compliance therewith if permitted under
Applicable Laws, provided (i) failure to comply therewith may not subject
Borrower or Lender to any civil or criminal liability, (ii) prior to and
during such contest, Borrower shall furnish to Lender security reasonably
satisfactory to Lender against loss or injury by reason of such contest or
non-compliance with such Applicable Law, (iii) no Event of Default shall exist
during such proceedings, and such contest shall not otherwise violate any of
the provisions of any of the Loan Documents, and (iv) such contest shall not
subject the Property to any lien or encumbrance the enforcement of which is
not suspended by such contest or otherwise affect the priority of the lien of
this Security Instrument.
3.9 BOOKS AND RECORDS. (a) Borrower, its Affiliates, any Person
guaranteeing payment of the Debt or any portion thereof or performance by
Borrower of any of the terms of this Security Instrument (a "Guarantor"), if
any, and R. PARK NEWTON, III ("Indemnitor"), shall keep adequate books and
records of account in accordance with generally accepted accounting principles
("GAAP") or in accordance with other methods acceptable to Lender in its sole
discretion, consistently applied and shall furnish to Lender the following,
which shall be prepared, dated and certified by Borrower (or by Guarantor
and/or Indemnitor, to the extent such items relate to Guarantor and/or
Indemnitor) as true, correct and complete in the form required by Lender,
unless otherwise specified below:
(i) quarterly operating statements of the Property, detailing the
revenues received, the expenses incurred and the net operating income
before and after debt service (principal and interest) and major capital
improvements for that quarter and containing appropriate year to date
information, within forty-five (45) days after the end of each fiscal
quarter;
(ii) annual rent rolls detailing the names of all tenants of the
Improvements, the portion of Improvements occupied by each tenant, the
base rent and any other charges payable under each Lease and the term of
each Lease, including the expiration date, and any other information
reasonably required by Lender, together with an accounting of all
security deposits held in connection with any Lease of any part of the
Property, specifying the name and identification number of the accounts
in which such security deposits are held, the name and address of the
financial institutions in which such security deposits are held and the
name of the person to contact at such financial institution, along with
any authority or release necessary for Lender to obtain information
regarding such accounts directly from such financial institutions, within
ninety (90) days after the end of each fiscal year;
(iii) an annual operating statement of the Property detailing the
total revenues received, total expenses incurred, total cost of all
capital improvements, total debt service and total cash flow, within
ninety (90) days after the close of each fiscal year of Borrower;
(iv) an annual balance sheet and profit and loss statement of
Borrower, any Guarantors and any Indemnitors within ninety (90) days
after the close of each fiscal year of Borrower, Guarantors and
Indemnitors, as the case may be; and
(v) such other financial statements, and such other information and
reports as may, from time to time, be required by Lender.
(b) Borrower, its Affiliates, any Guarantor and any Indemnitor
shall furnish Lender with such other additional financial or management
information (including State and Federal tax returns) as may, from time to
time, be reasonably required by Lender in form and substance satisfactory to
Lender, including, without limitation, a property management report for the
Property, showing the number of inquiries made and/or rental applications
received from tenants or prospective tenants and deposits received from
tenants and any other information requested by Lender, in reasonable detail
and certified by Borrower as true, correct and complete.
(c) Following the occurrence of an Event of Default, or if Lender
has reason to believe that any item furnished under this Section 3.9 is
materially inaccurate or misleading, Lender shall have the right, but not the
obligation, to obtain any of the financial statements and other items required
to be provided under this Section 3.9 by means of an audit by an independent
certified public accountant selected by Lender, in which event Borrower agrees
to pay, or to reimburse Lender for, any expense of such audit and further
agrees to provide all necessary information to said accountant and otherwise
to cooperate in the performance of such audit.
3.10 MECHANICS' AND OTHER LIENS. Subject to the provisions of Section
3.4(b), Borrower will promptly pay when due all bills and costs of all
mechanics, materialmen, suppliers, vendors and others for labor, materials and
other property incurred in connection with the Property and never permit to
exist beyond the due date thereof in respect of the Property or any part
thereof any lien, charge, encumbrance or security interest, even though
inferior to the liens and the security interests hereof. Subject to the
provisions of Section 3.4(b), Borrower will discharge or promptly cause to be
bonded or discharged by bonding (in the form of cash or a letter of credit),
payment, final order of a court of competent jurisdiction or otherwise, any
other or additional lien, charge, encumbrance or security interest in respect
of the Property or any part thereof, except for the Permitted Exceptions (as
hereinafter defined).
3.11 MANAGEMENT OF THE PROPERTY. The management of the Property shall
be by either: (a) Borrower or an Affiliate of Borrower approved by Lender for
so long as Borrower or said Affiliate is managing the Property in a
commercially reasonable manner satisfactory to Lender; or (b) a professional
property management company approved by Lender, which approval shall not be
unreasonably withheld. Such management by an Affiliate or a professional
property management company shall be pursuant to a written agreement approved
by and collaterally assigned to Lender, which shall provide that all rights of
the manager thereunder shall be subject and subordinate to the lien of this
Security Instrument and Lender's rights hereunder. In no event shall any
manager be removed or replaced by Borrower or the terms of any management
agreement modified or amended in any material respect or terminated by
Borrower without the prior written consent of Lender. If an Event of Default
shall occur, Lender shall have the right to terminate, or to direct Borrower
to terminate, such management contract upon thirty (30) days' notice and to
retain, or to direct Borrower to retain, a new bona-fide, independent third
party management agent approved by Lender in its reasonable discretion to
manage the Property. Borrower shall (i) diligently perform and observe all of
the terms, covenants and conditions of any management agreement on the part of
Borrower to be performed and observed and (ii) promptly deliver to Lender a
copy of any notice of default either given or received by Borrower under any
such management agreement.
3.12 PERFORMANCE OF OTHER AGREEMENTS. Borrower shall observe and perform
each and every term to be observed or performed by Borrower pursuant to the
terms of any agreement or recorded instrument affecting or pertaining to
Borrower or the Property, or given by Borrower to Lender for the purpose of
further securing an Obligation and any amendments, modifications or changes
thereto.
4 - SPECIAL COVENANTS
Borrower covenants and agrees that:
4.1 PROPERTY USE. The Property shall be used only as a warehouse /
office complex and for no other use without the prior written consent of
Lender, which consent may be withheld in Lender's sole and absolute
discretion.
4.2 SINGLE-PURPOSE ENTITY. Borrower has not and shall not:
(a) dissolve, terminate or otherwise fail to do all things
necessary to preserve its existence as a Single-Purpose Entity (as hereinafter
defined), and will not, nor will any partner, limited or general, member or
shareholder thereof, amend, modify or otherwise change its partnership
certificate, partnership agreement, articles of organization, operating
agreement, articles of incorporation or by-laws in a manner which adversely
affects Borrower's existence as a Single-Purpose Entity;
(b) enter into any transaction of merger or consolidation, or
liquidate or dissolve itself (or suffer any liquidation, dissolution or
winding up, in whole or in part), or acquire by purchase or otherwise all or
substantially all the business or assets of, or any Stock (as hereinafter
defined) or other evidence of beneficial ownership of, any Person (as
hereinafter defined);
(c) guarantee or otherwise become liable on or in connection with
any obligation of any other Person;
(d) at any time own any asset other than (i) the Property, (ii)
incidental personal property necessary for the operation of the Property,
(iii) cash, cash equivalents or obligations issued by the Federal Government
of the United States and (iv) nonvoting preferred stock (the "Preferred
Stock") of Excal Enterprises, Inc. ("Excal").
(e) at any time be engaged directly or indirectly, in any business
other than the ownership, management and operation of the Property;
(f) enter into any contract or agreement with any general partner,
principal, member or Affiliate of Borrower or any Affiliate of the general
partner or member of Borrower except upon terms and conditions that are
intrinsically fair and substantially similar to those that would be available
on an arm's-length basis with third parties other than an Affiliate;
(g) incur, create or assume any indebtedness, secured or unsecured,
direct or contingent (including guaranteeing any obligation), other than
(i) the Loan, (ii) indebtedness which represents trade payables or accrued
expenses incurred in the ordinary course of business of owning and operating
the Property and deferred not more than forty-five (45) days; no other debt
will be secured (senior, subordinate or pari passu) by the Property and (iii)
financing in the form of reduced discounts for electrical costs provided by
Jacksonville Electric Authority ("JEA") not to exceed $500,000 which financing
shall be subordinate to the terms of this Security Instrument pursuant to the
terms hereof and pursuant to that certain Loan Subordination Agreement, dated
the date hereof, executed by Borrower and Lender, any lien created in
connection with such financing shall encumber only the equipment installed
pursuant to such financing, and all of the costs relating to such transaction,
including, without limitation, any and all repayment obligations relating
thereto shall be passed through directly or indirectly to the tenants of the
Property;
(h) make any loans or advances to any third party (excepting
therefrom (i) distributions to Borrower's shareholders and (ii) a conversion
by Borrower of all or a portion of the Preferred Stock into a debt obligation
of Excal, as borrower, to Borrower, as lender);
(i) become insolvent or fail to pay its debt from its assets as the
same shall become due;
(j) fail to conduct and operate its business in all material
respects as presently conducted and operated;
(k) fail to maintain books and records and bank accounts separate
from those of its Affiliates, including its members or general partners, as
applicable;
(l) fail to at all times hold itself out to the public as a legal
entity separate and distinct from any other entity (including any Affiliate
thereof, including the general partner or any member of Borrower or any
Affiliate of the general partner or any member of Borrower, as applicable);
(m) [intentionally omitted];
(n) fail to 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;
(o) commingle the funds and other assets of Borrower with those of
any general partner, any member, any Affiliate or any other Person;
(p) fail to 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; and
(q) hold itself out to be responsible for the debts or obligations
of any other Person.
4.3 CONDEMNATION AND CASUALTY. (a) Borrower shall promptly give Lender
notice of the actual or threatened commencement of any condemnation or eminent
domain proceeding and shall deliver to Lender copies of any and all papers
served in connection with such proceedings. Notwithstanding any taking by any
public or quasi-public authority through eminent domain or otherwise
(including, without limitation, any transfer made in lieu of or in
anticipation of the exercise of such taking), Borrower shall continue to pay
the Debt at the time and in the manner provided for its payment in the Note
and in this Security Instrument, and the Debt shall not be reduced until any
award or payment therefor shall have been actually received and applied by
Lender, after the deduction of expenses of collection, to the reduction or
discharge of the Debt. Lender shall not be limited to the interest paid on
the award by the condemning authority but shall be entitled to receive out of
the award interest at the rate or rates provided herein or in the Note.
Lender may apply any award or payment to the reduction or discharge of the
Debt whether or not then due and payable or to the Restoration (as hereinafter
defined) of the Property in its sole and absolute discretion. If the Property
is sold, through foreclosure or otherwise, prior to the receipt by Lender of
the award or payment, Lender shall have the right, whether or not a deficiency
judgment on the Note shall have been sought, recovered or denied, to receive
the award or payment, or a portion thereof sufficient to pay the Debt.
(b) If the Property shall be damaged, destroyed or rendered
unusable, in whole or in part, by fire or other casualty or become in need of
repair or restoration because of any condemnation or similar proceeding,
Borrower shall give prompt notice of such event to Lender and, subject to the
following sentence, shall promptly commence and diligently prosecute the
completion of the repair and restoration of the Property as nearly as possible
to the condition the Property was in immediately prior to such casualty or
condemnation (the "Restoration"), with such alterations as may be approved by
Lender and otherwise in accordance with this Security Instrument. Borrower
shall pay all costs of such Restoration whether or not such costs are covered
by insurance proceeds or condemnation awards, except to the extent, but only
to the extent, that Lender elects to apply the condemnation award or Net
Proceeds, as the case may be, to reduce the Debt in accordance with the
provisions of this Security Instrument.
4.4 RESTORATION. (a) In the event that each of the following
conditions is satisfied, Lender shall make the net amount of all insurance
proceeds actually received by Lender pursuant to this Security Instrument as a
result of any fire or other casualty, after deduction of its reasonable costs
and expenses (including, without limitation, architects', attorneys',
engineers' and other consultants' and professionals' fees and disbursements),
if any, in connection therewith (the "Net Proceeds"), available to Borrower
for the Restoration in accordance with the provisions of this Subsection
4.4(a):
(i) no Event of Default shall have occurred and be continuing
under the Note, this Security Instrument or any of the other Loan
Documents;
(ii) the Net Proceeds in connection with such casualty shall
not exceed the outstanding amount of the Debt;
(iii) if the Net Proceeds shall exceed Fifty Thousand
Dollars ($50,000), a licensed engineer or architect acceptable to
Lender shall have delivered to Lender a certificate estimating the
cost of fully completing the Restoration and a schedule of the time
required therefor, which schedule shall indicate that the
Restoration can be completed prior to the Maturity Date (as defined
in the Note), and (ii) the date occurring twelve (12) months after
the date of the casualty;
(iv) Borrower shall commence the Restoration as soon as
reasonably practicable (but in no event later than forty-five (45)
days after reciept of a building permit for the Restoration) such
damage or destruction occurs) and shall diligently pursue the same
to satisfactory completion in a good and workmanlike manner;
(v) Lender shall be satisfied that any operating deficits
which will be incurred with respect to the Property as a result of
the occurrence of any such fire or other casualty, including a
reasonable period thereafter for leasing the Property, will be
covered out of (A) the Net Proceeds, (B) the rental or business
income insurance coverage referred to in Section 3.3, or (C) other
funds of Borrower;
(vi) Lender shall be satisfied in its sole discretion that,
upon the completion of the Restoration, the gross cash flow and the
net cash flow of the Property, taking into consideration any Leases
which may be terminated as a result of such casualty, will be
restored to a level sufficient to cover all carrying costs and
operating expenses of the Property, including, without limitation,
debt service on the Note at a coverage ratio (after deducting
replacement reserve requirements and reserves for tenant
improvements and leasing commissions, if applicable from net
operating income) of at least 1.30 to 1.0, which coverage ratio
shall be determined by Lender in its sole and absolute discretion on
the basis of the Applicable Interest Rate (as defined in the Note);
(vii) the Restoration shall be performed and completed by
Borrower in an expeditious and diligent fashion in a good and
workmanlike manner in accordance with plans and specifications
therefor approved by Lender (as provided in subsection (b) below)
and in compliance with all Applicable Laws;
(viii) Borrower shall deliver to Lender evidence
satisfactory to Lender (which may include certificates of
governmental authorities, endorsements to Lender's title insurance
policy and/or legal opinions) that, following the completion of the
Restoration, the Property and the use thereof will be in compliance
with and permitted under all Applicable Laws; and
(ix) Lender shall have received from Borrower a certificate
certifying that all applicable conditions contained in this
Subsection 4.4(a) have been satisfied.
(b) The Net Proceeds shall be held by Lender and, until disbursed in
accordance with the provisions of this Section 4.4, shall constitute
additional security for the Obligations. Provided all of the conditions set
forth in Subsection 4.4(a) have been and remain satisfied, then the following
shall apply:
(i) The Net Proceeds shall be disbursed by Lender to, or as
directed by, Borrower from time to time during the course of the
Restoration, upon receipt of evidence satisfactory to Lender that
(A) all materials installed and work and labor performed (except to
the extent that they are to be paid for out of the requested
disbursement) in connection with the Restoration have been paid for
in full, and (B) there exist no notices of pendency, stop orders,
mechanic's or materialman's liens or notices of intention to file
same, or any other liens or encumbrances of any nature whatsoever on
the Property arising out of the Restoration which have not either
been fully bonded to the satisfaction of Lender and discharged of
record or in the alternative fully insured to the satisfaction of
Lender by the title company insuring the lien of this Security
Instrument.
(ii) All plans and specifications in connection with the
Restoration shall be subject to prior review and approval in all
respects by Lender and by an independent consulting engineer
selected by Lender (the "Casualty Consultant"), which approval shall
not be unreasonably withheld or delayed. Lender shall have the use
of the plans and specifications and all permits, licenses and
approvals required or obtained in connection with the Restoration.
All costs and expenses incurred by Lender in connection with making
the Net Proceeds available for the Restoration including, without
limitation, reasonable counsel fees and disbursements and the
Casualty Consultant's fees, shall be paid by Borrower.
(iii) Until such time as the Restoration has been completed
and Lender shall have received copies of any and all final
certificates of occupancy or other certificates, licenses and
permits required for the ownership, occupancy and operation of the
Property in accordance with all Applicable Laws, Lender shall be
entitled to retain, and not disburse, up to ten percent (10%) of the
cost of the Restoration, as determined by the Casualty Consultant
(the "Casualty Retainage"). Borrower hereby covenants diligently to
seek to obtain any such certificates, licenses and permits.
Promptly after the completion of the Restoration and delivery of
such certificates, licenses and permits in accordance with the
provisions hereof, provided no Event of Default shall then be
continuing, Lender shall disburse the Casualty Retainage to or as
directed by Borrower, subject, however, to Lender's right to apply
any excess proceeds remaining after the completion of the
Restoration to the payment of the Debt.
(iv) If at any time the Net Proceeds or the undisbursed balance
thereof shall not, in the opinion of Lender, be sufficient to pay in
full the balance of the costs which are estimated by the Casualty
Consultant to be incurred in connection with the completion of the
Restoration, Borrower shall deposit the deficiency with Lender,
which shall thereafter be treated as Net Proceeds, before any
further disbursement of the Net Proceeds shall be made.
(v) The excess, if any, of the Net Proceeds remaining after
the Casualty Consultant certifies to Lender that the Restoration has
been completed in accordance with the provisions of this Section
4.4, and the receipt by Lender of evidence satisfactory to Lender
that all costs incurred in connection with the Restoration have been
paid in full, shall be retained and applied by Lender toward the
payment of the Debt whether or not then due and payable in such
order, priority and proportions as Lender in its discretion shall
deem proper.
(c) Notwithstanding any provision of this Security Instrument to the
contrary, all Net Proceeds not required to be made available for the
Restoration may be retained and applied by Lender toward the payment of the
Debt whether or not then due and payable in such order, priority and
proportions as Lender in its discretion shall deem proper or, at the
discretion of Lender, the same may be paid, either in whole or in part, to
Borrower for such purposes as Lender shall designate, in its sole discretion.
If Lender shall receive and retain Net Proceeds, the lien of this Security
Instrument shall be reduced only by the amount thereof received and retained
by Lender and actually applied by Lender in reduction of the Debt.
5 - REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to and covenants with Lender:
5.1 WARRANTY OF TITLE. Borrower has good title to the Property and
has the right to mortgage, grant, bargain, sell, pledge, assign, warrant,
transfer and convey the same. Borrower possesses a good, marketable and
insurable fee simple absolute estate in the Land and the Improvements and owns
the Property free and clear of all liens, encumbrances and charges whatsoever
except for those shown in the title insurance policy accepted by Lender
insuring the lien of this Security Instrument (the "Permitted Exceptions").
The Permitted Exceptions do not materially interfere with the security
intended to be provided by this Security Instrument or the current use of the
Property. Borrower shall forever warrant, defend and preserve the title and
the validity and priority of the lien of this Security Instrument and shall
forever warrant and defend the same to Lender against the claims of all
persons whomsoever.
5.2 AUTHORITY. Borrower (and the undersigned representative of
Borrower, if any) has full power, authority and legal right to execute this
Security Instrument, and to mortgage, grant, bargain, sell, pledge, assign,
warrant, transfer and convey the Property pursuant to the terms hereof and to
keep and observe all of the terms of this Security Instrument on Borrower's
part to be performed.
5.3 LEGAL STATUS AND AUTHORITY. Borrower (a) is duly organized,
validly existing and in good standing under the laws of its state of
organization or incorporation; (b) is duly qualified to transact business and
is in good standing in the State or Commonwealth where the Property is
located; and (c) has all necessary approvals, governmental and otherwise, and
full power and authority to own the Property and carry on its business as now
conducted and proposed to be conducted. Borrower now has and shall continue
to have the full right, power and authority to operate and lease the Property,
to encumber the Property as provided herein and to perform all of the other
obligations to be performed by Borrower under the Loan Documents.
5.4 VALIDITY OF DOCUMENTS. (a) The execution, delivery and
performance of the Loan Documents and the borrowing evidenced by the Note (i)
are within the power of Borrower; (ii) have been authorized by all requisite
action; (iii) have received all necessary approvals and consents, corporate,
governmental or otherwise; (iv) will not violate, conflict with, result in a
breach of or constitute (with notice or lapse of time, or both) a default
under any provision of law, any order or judgment of any court or governmental
authority, the articles of incorporation, by-laws, partnership, operating or
trust agreement, or other governing instrument of Borrower, or any indenture,
agreement or other instrument to which Borrower is a party or by which it or
any of its assets or the Property is or may be bound or affected; (v) will not
result in the creation or imposition of any lien, charge or encumbrance
whatsoever upon any of its assets, except the lien and security interest
created hereby; and (vi) will not require any authorization or license from,
or any filing with, any governmental or other body (except for the recordation
of this Security Instrument and any other Loan Document intended to be
recorded in the appropriate land records in the State or Commonwealth where
the Property is located and except for UCC filings relating to the security
interest created hereby); and (b) the Loan Documents constitute the legal,
valid and binding obligations of Borrower, enforceable against Borrower in
accordance with their respective terms, except as may be limited by
(i) bankruptcy, insolvency or other similar laws affecting the rights of
creditors generally, and (ii) general principles of equity (regardless of
whether considered in a proceeding in equity or at law).
5.5 LITIGATION. There is no material action, suit or proceeding,
judicial, administrative or otherwise (including any condemnation or similar
proceeding), pending or, to the best of Borrower's knowledge, threatened or
contemplated against, or affecting, Borrower, any Guarantor, or any
Indemnitor, or against or affecting the Property, except as may have been
disclosed in writing to Lender on the date hereof.
5.6 STATUS OF PROPERTY. (a) No portion of the Improvements is
located in an area identified by the Secretary of Housing and Urban
Development or the Federal Emergency Management Agency or any successor
thereto as an area having special flood hazards, or, if located within any
such area, Borrower has obtained and will maintain the insurance prescribed in
Section 3.3 hereof.
(b) Borrower has obtained all necessary certificates, licenses,
permits and other approvals, governmental and otherwise, necessary for the
operation of the Property and the conduct of its business and all required
zoning, building code, land use, environmental and other similar permits or
approvals, all of which are in full force and effect as of the date hereof and
not subject to revocation, suspension, forfeiture or modification.
(c) The Property and the present and contemplated use and occupancy
thereof are in full compliance with all applicable zoning ordinances, building
codes, land use and environmental laws and other similar laws. None of the
Improvements lies outside of the boundaries of the Land or the applicable
building restriction lines. No improvements on adjoining properties
materially encroach upon the Land.
(d) The Property is served by all utilities required for the
current or contemplated use thereof. All utility service is provided by
public utilities and the Property has accepted or is equipped to accept such
utility service. The Property is served by public water and sewer systems.
(e) All public roads and streets necessary for service of and
access to the Property for the current or contemplated use thereof have been
completed, are serviceable and all-weather and are physically and legally open
for use by the public.
(f) The Property is free from damage caused by fire or other
casualty.
(g) All costs and expenses of any and all labor, materials,
supplies and equipment used in the construction of the Improvements have been
paid in full. Borrower has paid in full for, and is the owner of, all
furnishings, fixtures and equipment (other than tenants' property) used in
connection with the operation of the Property, free and clear of any and all
security interests, liens or encumbrances, except the lien and security
interest created hereby.
(h) All liquid and solid waste disposal, septic and sewer systems
located on the Property are in a good and safe condition and repair and in
compliance with all Applicable Laws.
5.7 NO FOREIGN PERSON. Borrower is not a "foreign person" within the
meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986, as amended
and the related Treasury Department regulations, including temporary
regulations.
5.8 SEPARATE TAX LOT. The Property is assessed for real estate tax
purposes as one or more wholly independent tax lot or lots, separate from any
adjoining land or improvements not constituting a part of such lot or lots,
and no other land or improvements is assessed and taxed together with the
Property or any portion thereof.
5.9 ERISA COMPLIANCE. As of the date hereof and throughout the term
of the Loan, (i) Borrower is not and will not be an "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), which is subject to Title I of ERISA, (ii) the
assets of Borrower do not and will not constitute "plan assets" of one or more
such plans for purposes of Title I of ERISA, (iii) Borrower is not and will
not be a "governmental plan" within the meaning of Section 3(32) of ERISA, and
(iv) transactions by or with Borrower are not and will not be subject to state
statutes applicable to Borrower regulating investments of and fiduciary
obligations with respect to governmental plans.
5.10 LEASES. (a) Borrower is the sole owner of the entire lessor's
interest in the Leases; (b) the Leases are valid, enforceable and in full
force and effect; (c) the terms of all alterations, modifications and
amendments to the Leases are reflected in the certified occupancy statement
delivered to and approved by Lender; (d) none of the Rents reserved in the
Leases have been assigned or otherwise pledged or hypothecated; (e) none of
the Rents have been collected for more than one (1) month in advance; (f)
except as previously disclosed by Borrower to Lender in writing, the premises
demised under the Leases have been completed and the tenants under the Leases
have accepted the same and have taken possession of the same on a rent-paying
basis; (g) except as previously disclosed by Borrower to Lender in writing,
there exist no offsets or defenses to the payment of any portion of the Rents;
(h) except as previously disclosed by Borrower to Lender in writing, Borrower
has received no notice from any tenant challenging the validity or
enforceability of any Lease; (i) there are no agreements with the tenants
under the Leases other than expressly set forth in each Lease, except as may
have been disclosed in writing to Lender on the date hereof; (j) no Lease
contains an option to purchase, right of first refusal to purchase, or any
other similar provision; (k) no Person has any possessory interest in, or
right to occupy, the Property except under and pursuant to a Lease; (l) each
Lease is subordinate to this Security Instrument, either pursuant to its terms
or a subordination agreement; (m) no brokerage commissions or finders fees are
due and payable regarding any Lease.
5.11 FINANCIAL CONDITION. (a) Borrower is solvent, and no bankruptcy,
reorganization, insolvency or similar proceeding under any state or federal
law with respect to Borrower has been initiated, and (b) it has received
reasonably equivalent value for the granting of this Security Instrument.
5.12 BUSINESS PURPOSES. The proceeds of the Loan will be used by
Borrower solely for business purposes and not for personal, family, household
or agricultural purposes. No part of the proceeds of the Loan will be used
for the purpose of purchasing or acquiring any "margin stock" within the
meaning of Regulations G, T, U or X of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent with such
Regulations G, T, U or X or any other Regulations of such Board of Governors,
or for any purposes prohibited by legal requirements or by the terms and
conditions of the Loan Documents.
5.13 TAXES. Borrower, any Guarantor and any Indemnitor have filed
all federal, state, county, municipal, and city income and other tax returns
required to have been filed by them and have paid all taxes and related
liabilities which have become due pursuant to such returns or pursuant to any
assessments received by them. Neither Borrower, any Guarantor nor any
Indemnitor knows of any basis for any additional assessment in respect of any
such taxes and related liabilities for prior years.
5.14 MAILING ADDRESS. Borrower's mailing address, as set forth in the
opening paragraph hereof or as changed in accordance with the provisions
hereof, is true and correct.
5.15 NO CHANGE IN FACTS OR CIRCUMSTANCES. All information in the
application for the Loan submitted to Lender and in all financing statements,
rent rolls, reports, certificates and other documents submitted in connection
with the such loan application or in satisfaction of the terms thereof, are
accurate, complete and correct in all material respects. There has been no
adverse change in any condition, fact, circumstance or event that would make
any such information inaccurate, incomplete or otherwise materially
misleading.
5.16 DISCLOSURE. Borrower has disclosed to Lender all material facts
and has not failed to disclose any material fact that could cause any
representation or warranty made herein to be materially misleading.
5.17 THIRD PARTY REPRESENTATIONS. Each of the representations and the
warranties made by each Guarantor and Indemnitor herein or in any of the other
Loan Documents is true and correct in all material respects.
Borrower recognizes and acknowledges that in accepting the Loan Documents,
Lender is expressly and primarily relying on the truth and accuracy of the
warranties and representations set forth in this Article 5 without any
obligation to investigate the Property and notwithstanding any investigation
of the Property by Lender; that such reliance existed on the part of Lender
prior to the date hereof; that the warranties and representations are a
material inducement to Lender in accepting the Loan Documents; and that Lender
would not be willing to make the Loan and accept this Security Instrument in
the absence of the warranties and representations as set forth in this Article
5.
6 - FURTHER ASSURANCES
6.1 FURTHER ACTS, ETC. Borrower will, at the cost of Borrower, and
without expense to Lender, do, execute, acknowledge and deliver all and every
such further acts, deeds, conveyances, mortgages, assignments, notices of
assignments, transfers and assurances as Lender shall, from time to time,
require for the better assuring, conveying, assigning, transferring and
confirming unto Lender the Property and rights hereby mortgaged, granted,
bargained, sold, conveyed, confirmed, pledged, assigned, warranted and
transferred or intended now or hereafter so to be, or which Borrower may be or
may hereafter become bound to convey or assign to Lender, or for carrying out
the intention or facilitating the performance of the terms of this Security
Instrument or for filing, registering or recording this Security Instrument,
or for complying with all Applicable Laws. Upon receipt of an affidavit of an
officer of Lender as to the loss, theft, destruction or mutilation of the Note
or any other Loan Document which is not of public record, and, in the case of
any such mutilation, upon surrender and cancellation of such Note or other
Loan Document, Borrower will issue, in lieu thereof, a replacement Note or
other Loan Document, dated the date of such lost, stolen, destroyed or
mutilated Note or other Loan Document in the same principal amount thereof and
otherwise of like tenor. Borrower, on demand, will execute and deliver and
hereby authorizes Lender to execute in the name of Borrower or without the
signature of Borrower to the extent Lender may lawfully do so, one or more
financing statements, chattel mortgages or other instruments, to evidence more
effectively the security interest of Lender in the Property. Borrower grants
to Lender an irrevocable power of attorney coupled with an interest for the
purpose of exercising and perfecting any and all rights and remedies available
to Lender at law and in equity, including, without limitation, such rights and
remedies available to Lender pursuant to this Section 6.1. Borrower will pay
all taxes, filing, registration or recording fees, and all expenses incident
to the preparation, execution, acknowledgment and/or recording of the Loan
Documents, any note or mortgage supplemental hereto, any security instrument
with respect to the Property and any instrument of further assurance, and any
modification or amendment of the foregoing documents, and all federal, state,
county and municipal taxes, duties, imposts, assessments and charges arising
out of or in connection with the execution and delivery of this Security
Instrument, any mortgage supplemental hereto, any security instrument with
respect to the Property or any instrument of further assurance, and any
modification or amendment of the foregoing documents, except where prohibited
by law so to do.
6.2 CHANGES IN TAX, DEBT CREDIT AND DOCUMENTARY STAMP LAWS. (a) If any law
is enacted or adopted or amended after the date of this Security Instrument
which deducts the Debt from the value of the Property for the purpose of
taxation or which imposes a tax, either directly or indirectly, on the Debt or
Lender's interest in the Property, Borrower will pay the tax, with interest
and penalties thereon, if any. If Lender is advised by counsel chosen by it
that the payment of tax by Borrower would be unlawful or taxable to Lender or
unenforceable or provide the basis for a defense of usury, then Lender shall
have the option by written notice of not less than ninety (90) days to declare
the Debt immediately due and payable. Borrower will not claim or demand or be
entitled to any credit or credits on account of the Debt for any part of the
Taxes or Other Charges assessed against the Property, or any part thereof, and
no deduction shall otherwise be made or claimed from the assessed value of the
Property, or any part thereof, for real estate tax purposes by reason of this
Security Instrument or the Debt. If such claim, credit or deduction shall be
required by law, Lender shall have the option, by written notice of not less
than ninety (90) days, to declare the Debt immediately due and payable.
(b) If at any time the United States of America, any State thereof
or any subdivision of any such State shall require revenue or other stamps to
be affixed to any of the Loan Documents or impose any other tax or charge on
the same, Borrower will pay for the same, with interest and penalties thereon,
if any.
6.3 ESTOPPEL CERTIFICATES. (a) After request by Lender, Borrower,
within ten (10) days, shall furnish Lender or any proposed assignee with a
statement, duly acknowledged and certified, setting forth (i) the amount of
the original principal amount of the Note, (ii) the unpaid principal amount of
the Note, (iii) the rate of interest of the Note, (iv) the terms of payment
and maturity date of the Note, (v) the date installments of interest and/or
principal were last paid, (v) that, except as provided in such statement,
there are no defaults or events which with the passage of time or the giving
of notice or both, would constitute an event of default under the Note or this
Security Instrument, (vi) that the Note and this Security Instrument have not
been modified, or, if modified, giving particulars of such modification, (vii)
whether any offsets or defenses exist against the obligations secured hereby
and, if any are alleged to exist, a detailed description thereof, (viii) that
all Leases are in full force and effect and have not been modified (or if
modified, setting forth all modifications), (ix) the date to which the Rents
thereunder have been paid pursuant to the Leases, (x) whether or not, to the
best knowledge of Borrower, any of the lessees under the Leases are in default
under the Leases, and, if any of the lessees are in default, setting forth the
specific nature of all such defaults, (xi) the amount of security deposits
held by Borrower under each Lease and that such amounts are consistent with
the amounts required under each Lease, and (xii) as to any other matters
reasonably requested by Lender and reasonably related to the Leases, the
obligations secured hereby, the Property or this Security Instrument.
(b) Borrower shall use commercially reasonable efforts to deliver
to Lender, promptly upon request, duly executed estoppel certificates from any
one or more lessees as required by Lender attesting to such facts regarding
the Lease as Lender may reasonably require.
7 - DUE ON TRANSFER/ENCUMBRANCE
7.1 LENDER RELIANCE. Borrower acknowledges that Lender has examined
and relied on the experience of Borrower and its general partners, principals,
members and (if Borrower is a trust) beneficial owners in owning and operating
properties such as the Property in agreeing to make the Loan and will continue
to rely on Borrower's ownership of the Property as a means of maintaining the
value of the Property as security for repayment of the Debt and the
performance of the other Obligations. Borrower acknowledges that Lender has a
valid interest in maintaining the value of the Property so as to ensure that,
should Borrower default in the repayment of the Debt or the performance of the
other Obligations, Lender can recover the Debt by a sale of the Property.
7.2 NO TRANSFER/ENCUMBRANCE. (a) Except as otherwise permitted under
this Section 7.2, Transfers (as hereinafter defined) shall not be permitted.
Any Transfer made in violation of this Section 7.2 shall constitute an Event
of Default. Notwithstanding any provision of this Section 7.2 to the
contrary, in no event shall a Transfer resulting in a change in control of
Borrower or the Property be permitted without Lender's prior written consent,
which may be granted or denied in Lender's sole, absolute and unreviewable
discretion.
(b) Subject to the provisions of Section 7.2(c) below, the following
Transfers shall be permitted, subject to Lender's prior written consent, which
consent shall not be unreasonably withheld or delayed, provided that (1) no
such Transfer (in a series of one or more transactions) shall result in a
change in control of Borrower, (2) in no event shall Borrower or, if Borrower
is a limited partnership, the general partner of Borrower (or the general
partner of the general partner of Borrower) or, if Borrower is a limited
liability company, any corporate member of Borrower which is a Single-Purpose
Entity, cease to be a Single-Purpose Entity, and (3) in no event shall any
such Transfer result in the dissolution or termination of Borrower, any
general partner of Borrower or any general partner of any general partner of
Borrower, if applicable, or, if Borrower is a limited liability company, any
corporate member of Borrower:
i) Transfers of Stock in any corporation which is Borrower, any
general or limited partner or member of Borrower or any Person
holding an interest therein;
ii) Transfers of limited partnership interests in any limited
partnership which is Borrower, any general or limited partner or
member of Borrower or any Person holding an interest therein; and
iii) Transfers of membership interests in any limited liability
company which is Borrower, any general or limited partner or member
of Borrower or any Person holding an interest therein.
(c) Notwithstanding any provision herein to the contrary, no Transfer
otherwise permitted under this Section 7.2 shall occur unless Borrower shall
have given Lender not less than ten (10) Business Days (as hereinafter
defined) prior notice of the intended Transfer together with a certificate of
the Chief Financial Officer of Borrower (or comparable individual) stating
(i) the nature and size of the interest to be the subject of the Transfer,
(ii) the name and address of the Person to which such interest shall be
conveyed, sold or transferred unless such interest is to be conveyed, sold or
transferred pursuant to a registered public sale pursuant to applicable
securities laws, and (iii) that the proposed transaction is a bona fide sale,
transfer or conveyance solely for cash or equivalent consideration, if
applicable. Lender reserves the right to condition any consent required
pursuant to this Section 7.2 with respect to a Transfer upon (A) the payment
of all expenses incurred by Lender as set forth below and, in connection with
the Transfer of any fee interest in the Property, an assumption fee equal to
one percent (1.0%) of the outstanding balance of the Loan, (B) Lender's
approval of the financial condition, managerial capabilities and ownership
structure of the proposed transferee, including requiring that the transferee
of any fee interest in the Property be a Single-Purpose Entity, (C) if the
Transfer shall result in a change in control of Borrower or the Property,
execution of an assumption agreement by the proposed transferee, in form and
content acceptable to Lender, (D) the Loan being in good standing and free
from any default, (E) if required by Lender, receipt of an opinion of counsel
reasonably satisfactory to Lender stating that if effected, the proposed
Transfer would have no effect on the enforceability of the Security Instrument
or the other Loan Documents, would not result in the substantive consolidation
by a bankruptcy court of the assets and liabilities of the transferee with the
assets and liabilities of Borrower and such other entities as Lender may
specify, and would not result in the dissolution or termination of Borrower,
any general partner of Borrower or any general partner of any general partner
of Borrower, if applicable, (F) the approval by a Rating Agency of the
qualifications of the proposed transferee, and (G) such other conditions as
Lender shall determine in its sole discretion. Borrower agrees to pay on
demand all expenses (including, without limitation, reasonable attorney's fees
and disbursements, title search costs and title insurance endorsement
premiums) incurred by Lender in connection with the review, approval and
documentation of any Transfer. In no event shall any Transfer otherwise
permitted under this Section occur if such Transfer is required to be
registered under the Securities Act of 1933, as amended or offered pursuant to
Rule 144A under such Act, or registered under any state securities or Blue Sky
laws.
(d) Notwithstanding any other provision of this Section 7.2 to the
contrary, Transfers of partnership interests, membership interests or
corporate shares in Borrower or any Person holding an interest in Borrower
between or among partners, members or shareholders existing as such on the
date hereof, or Transfers of such interests to immediate family members of
existing partners, members or shareholders or to trusts for estate planning
purposes for the benefit of existing partners, members or shareholders or
members of the transferor's immediate family shall be permitted without
Lender's consent, provided that in no event shall Borrower and any Person
holding an interest in Borrower who is a Single-Purpose Entity cease to be a
Single-Purpose Entity and provided no such Transfer results in a change of
control of Borrower.
(e) Notwithstanding any other provision of this Section to the contrary,
any transfers of stock of Excal Enterprises, Inc. ("Excal") shall not result
in a change of control and shall not require Lender's consent so long as such
transfers are effectuated through public trades over the NASDAQ OTC Bulletin
Board or other such similar stock exchange.
8 - DEFAULT
8.1 EVENTS OF DEFAULT. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(a) if any portion of the Debt is not paid prior to the tenth
(10th) day after the same is due or if the entire Debt is not paid on or
before the Maturity Date;
(b) if any of the Taxes or Other Charges is not paid at least five
(5) days prior to the date upon which any fine, penalty, interest or cost
for nonpayment is imposed, except to the extent sums sufficient to pay
such Taxes and Other Charges have been deposited with Lender in
accordance with the terms of this Security Instrument;
(c) if the Policies are not kept in full force and effect, or if
the Policies are not delivered to Lender upon request;
(d) if the Property is subject to actual waste or hazardous
nuisance;
(e) if Borrower violates or does not comply with any of the
provisions of Section 4.2 or Articles 7, 10 or 11;
(f) if any representation or warranty of Borrower, Indemnitor or
any Guarantor, or otherwise contained in any guaranty, certificate,
report, financial statement or other instrument or document furnished to
Lender in connection with the Loan, shall have been materially false or
misleading when made;
(g) if (i) Borrower or any general partner of Borrower, or any
Guarantor or Indemnitor shall commence any case, proceeding or other
action (A) under any existing or future law of any jurisdiction, domestic
or foreign, relating to bankruptcy, insolvency, reorganization,
conservatorship or relief of debtors, seeking to have an order for relief
entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, arrangement, adjustment, winding-
up, liquidation, dissolution, composition or other relief with respect to
it or its debts, or (B) seeking appointment of a receiver, trustee,
custodian, conservator or other similar official for it or for all or any
substantial part of its assets, or the Borrower or any general partner of
Borrower, or any Guarantor or Indemnitor shall make a general assignment
for the benefit of its creditors; or (ii) there shall be commenced
against Borrower or any general partner of Borrower, or any Guarantor or
Indemnitor any case, proceeding or other action of a nature referred to
in clause (i) above which (A) results in the entry of an order for relief
or any such adjudication or appointment or (B) remains undismissed,
undischarged or unbonded for a period of sixty (60) days; or (iii) there
shall be commenced against the Borrower or any general partner of
Borrower, or any Guarantor or Indemnitor any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of its assets
which results in the entry of any order for any such relief which shall
not have been vacated, discharged, or stayed or bonded pending appeal
within sixty (60) days from the entry thereof; or (iv) Borrower or any
general partner of Borrower, or any Guarantor or Indemnitor shall take
any action in furtherance of, or indicating its consent to, approval of,
or acquiescence in, any of the acts set forth in clause (i), (ii), or
(iii) above; or (v) Borrower or any general partner of Borrower, or any
Guarantor or Indemnitor shall generally not, or shall be unable to, or
shall admit in writing its inability to, pay its debts as they become
due;
(h) if Borrower shall be in default under any other mortgage, deed
of trust, deed to secure debt or other security agreement covering any
part of the Property whether it be superior or junior in lien to this
Security Instrument;
(i) if the Property becomes subject to any mechanic's,
materialman's or other lien other than a lien for local real estate taxes
and assessments not then due and payable and the lien shall remain
undischarged of record (by payment, bonding or otherwise) for a period of
thirty (30) days, except to the extent being contested in accordance with
the provisions of Section 3.4(b) hereof;
(j) if any federal tax lien is filed against Borrower, any general
partner of Borrower, any Guarantor, any Indemnitor or the Property and
same is not discharged of record within thirty (30) days after same is
filed;
(k) if Borrower fails to cure promptly any violations of Applicable
Laws, except to the extent being contested in accordance with the
provisions of Section 3.8(b) hereof;
(l) if any condemnation proceeding is instituted which would, in
Lender's reasonable judgment, materially impair the use and enjoyment of
the Property for its intended purposes;
(m) if Borrower shall fail to reimburse Lender on demand, with
interest calculated at the Default Rate, for all Insurance Premiums,
Taxes or Other Charges, together with interest and penalties imposed
thereon, paid by Lender pursuant to this Security Instrument;
(n) if Borrower shall fail to deliver to Lender, within ten (10)
days following request by Lender, the statements referred to in Section
3.9 in accordance with the terms thereof; or
(o) if for more than ten (10) days after notice from Lender,
Borrower, Indemnitor or Guarantor shall continue to be in default under
any other term, covenant or condition of the Note, this Security
Instrument or any of the other Loan Documents in the case of any default
which can be cured by the payment of a sum of money or for thirty (30)
days after notice from Lender in the case of any other default, provided
that if such default cannot reasonably be cured within such thirty (30)
day period and Borrower, Indemnitor or Guarantor, as the case may be,
shall have commenced to cure such default within such thirty (30) day
period and thereafter diligently and expeditiously proceeds to cure the
same, such thirty (30) day period shall be extended for so long as it
shall require Borrower, Indemnitor or Guarantor, as the case may be, in
the exercise of due diligence to cure such default, it being agreed that
no such extension shall be for a period in excess of sixty (60) days.
8.2 LATE PAYMENT CHARGE. If any payment required hereunder is not
paid prior to the tenth (10th) day after the date on which it is due, Borrower
shall pay to Lender upon demand an amount equal to the lesser of five percent
(5%) of such unpaid portion of the outstanding monthly installment of
principal and interest then due or the maximum amount permitted by applicable
law, to defray the expense incurred by Lender in handling and processing such
delinquent payment and to compensate Lender for the loss of the use of such
delinquent payment, and such amount shall be secured by this Security
Instrument and the Other Security Documents.
8.3 DEFAULT INTEREST. Borrower will pay, from the date of an Event
of Default through the earlier of the date upon which the Event of Default is
cured or the date upon which the Debt is paid in full, interest on the unpaid
principal balance of the Note at a per annum rate equal to the lesser of (a)
eighteen percent (18%) and (b) the maximum interest rate which Borrower may by
law pay or Lender may charge and collect (the "Default Rate").
8.4 ADDITIONAL ADMINISTRATIVE FEE. In addition to the Default Rate
provided for in Section 8.3 above, upon the failure of Borrower, Indemnitor or
any Guarantor to deliver any of the reports, statements or other items
required to be delivered to Lender as provided in Section 3.9 above upon their
due dates, if any such failure shall continue for ten (10) days following
notice thereof from Lender, Borrower shall pay to Lender together with the
scheduled monthly payments of principal and interest on the Note, for each
month or portion thereof that any such report, statement or other item remains
undelivered, an administrative fee in the amount of One Thousand Dollars
($1,000) multiplied by the number of such undelivered reports, statements or
other items. Borrower agrees that such administrative fee is a fair and
reasonable fee necessary to compensate Lender for its additional
administrative costs under the circumstances and is not a penalty.
9 - RIGHTS AND REMEDIES
9.1 REMEDIES. Upon the occurrence of any Event of Default, Borrower
agrees that Lender may take such action, without notice or demand, as it deems
advisable to protect and enforce its rights against Borrower and in and to the
Property, including, without limitation, the following actions, each of which
may be pursued concurrently or otherwise, at such time and in such order as
Lender may determine, in its sole discretion, without impairing or otherwise
affecting the other rights and remedies of Lender:
(a) declare the entire unpaid Debt to be immediately due and
payable;
(b) institute proceedings, judicial or otherwise, for the complete
foreclosure of this Security Instrument under any applicable provision of
law in which case the Property or any interest therein may be sold for
cash or upon credit in one or more parcels or in several interests or
portions and in any order or manner;
(c) to the extent permitted and pursuant to the procedures provided
by applicable law, institute proceedings for the partial foreclosure of
this Security Instrument for the portion of the Debt then due and
payable, subject to the continuing lien and security interest of this
Security Instrument for the balance of the Debt not then due, unimpaired
and without loss of priority;
(d) sell for cash or upon credit the Property or any part thereof
and all estate, claim, demand, right, title and interest of Borrower
therein and rights of redemption thereof, pursuant to power of sale or
otherwise, at one or more sales, as an entity or in parcels, at such time
and place, upon such terms and after such notice thereof as may be
required or permitted by law;
(e) institute an action, suit or proceeding in equity for the
specific performance of any covenant, condition or agreement contained
herein, in the Note or in the other Loan Documents;
(f) recover judgment on the Note either before, during or after any
proceedings for the enforcement of this Security Instrument or the Other
Security Documents;
(g) apply for the appointment of a receiver, trustee, liquidator or
conservator of the Property, without notice and without regard for the
adequacy of the security for the Debt and without regard for the solvency
of Borrower, any Guarantor, Indemnitor or of any person, firm or other
entity liable for the payment of the Debt;
(h) subject to any applicable law, the license granted to Borrower
under Section 1.2 shall automatically be revoked and Lender may, but
without any obligation to do so, enter into or upon the Property, either
personally or by its agents, nominees or attorneys and dispossess
Borrower and its agents and servants therefrom, without liability for
trespass, damages or otherwise and exclude Borrower and its agents or
servants wholly therefrom, and take possession of all books, records and
accounts relating thereto, and Borrower agrees to surrender possession of
the Property and of such books, records and accounts to Lender upon
demand, and thereupon Lender may (i) use, operate, manage, control,
insure, maintain, repair, restore and otherwise deal with all and every
part of the Property and conduct the business thereat; (ii) complete any
construction on the Property in such manner and form as Lender deems
advisable; (iii) make alterations, additions, renewals, replacements and
improvements to or on the Property; (iv) exercise all rights and powers
of Borrower with respect to the Property, whether in the name of Borrower
or otherwise, including, without limitation, the right to make,
negotiate, execute, cancel, enforce, extend, renew or modify Leases,
obtain and evict tenants, and demand, sue for, collect and receive all
Rents of the Property and every part thereof; (v) require Borrower to pay
monthly in advance to Lender, or any receiver appointed to collect the
Rents, the fair and reasonable rental value for the use and occupation of
such part of the Property as may be in the possession of Borrower or any
Affiliate of Borrower; (vi) require Borrower to vacate and surrender
possession of the Property to Lender or to such receiver and, in default
thereof, Borrower may be evicted by summary proceedings or otherwise; and
(vii) apply the receipts from the Property to the payment of the Debt, in
such order, priority and proportions as Lender shall deem appropriate in
its sole discretion after deducting therefrom all expenses (including
reasonable attorneys' fees) incurred in connection with the aforesaid
operations and all amounts necessary to pay the Taxes, Other Charges,
Insurance Premiums and other expenses in connection with the Property, as
well as just and reasonable compensation for the services of Lender, its
counsel, agents and employees;
(i) exercise immediately and without demand any and all rights and
remedies granted to a secured party upon default under the UCC,
including, without limitation, to the extent permitted by applicable law:
(i) the right to take possession of the UCC Collateral or any part
thereof, and to take such other measures as Lender may deem necessary for
the care, protection and preservation of the UCC Collateral, and (ii)
request Borrower at its expense to assemble the UCC Collateral and make
it available to Lender at a convenient place acceptable to Lender. Any
notice of sale, disposition or other intended action by Lender with
respect to the UCC Collateral sent to Borrower in accordance with the
provisions hereof at least five (5) days prior to such action shall
constitute commercially reasonable notice to Borrower. Any disposition
pursuant to the UCC of so much of the Property as may constitute UCC
Collateral shall be considered commercially reasonable if made pursuant
to a public sale which is advertised at least twice in a newspaper in
which sheriffs' sales are advertised in the county where the Land is
located. The proceeds of any disposition of the UCC Collateral, or any
part thereof, may be applied by Lender to the payment of the Obligations
in such priority and proportions as Lender in its discretion shall deem
proper;
(j) apply any sums then deposited in the Reserve Fund and any other
sums held in reserve or otherwise by Lender in accordance with the terms
of this Security Instrument or any Other Security Document, together with
interest thereon, to the payment of the following items in any order in
its uncontrolled discretion:
(i) Taxes and Other Charges;
(ii) Insurance Premiums;
(iii) interest on the unpaid principal balance of the Note;
(iv) amortization of the unpaid principal balance of the Note;
(v) all other sums payable pursuant to any of the Loan
Documents, including, without limitation, advances made by
Lender pursuant to the terms of this Security Instrument;
(k) surrender the Policies maintained pursuant to Article 3 hereof,
collect the unearned Insurance Premiums and apply such sums as a credit
on the Debt in such priority and proportion as Lender in its discretion
shall deem proper, and in connection therewith, Borrower hereby appoints
Lender as agent and attorney-in-fact (which is coupled with an interest
and irrevocable) for Borrower to collect such Insurance Premiums;
(l) apply the undisbursed balance of any Net Proceeds, together
with interest thereon, to the payment of the Debt in such order, priority
and proportions as Lender shall deem to be appropriate in its sole
discretion; or
(m) pursue such other remedies as Lender may have under applicable
law.
In the event of a sale, by foreclosure, power of sale, or otherwise, of less
than all of the Property, this Security Instrument shall continue as a lien
and security interest on the remaining portion of the Property unimpaired and
without loss of priority. Notwithstanding the provisions of this Section 9.1
to the contrary, if any Event of Default as described in clause (i) or (ii) of
Subsection 8.1(g) shall occur, the entire unpaid Debt shall be automatically
due and payable, without any further notice, demand or other action by Lender.
9.2 APPLICATION OF PROCEEDS. The proceeds of any disposition of the
Property, or any part thereof, or any other sums collected by Lender pursuant
to the Loan Documents, may be applied by Lender to the payment of the Debt in
such priority and proportions as Lender in its discretion shall deem proper.
9.3 RIGHT TO CURE DEFAULTS. Upon the occurrence of any Event of
Default or if Borrower fails to make any payment or to do any act as herein
provided, Lender may, but without any obligation to do so and without notice
to or demand on Borrower and without releasing Borrower from any obligation
hereunder, make or do the same in such manner and to such extent as Lender may
deem necessary to protect the security hereof. Lender is authorized to enter
upon the Property for such purposes, or appear in, defend, or bring any action
or proceeding to protect its interest in the Property or to foreclose this
Security Instrument or collect the Debt, and the cost and expense thereof
(including reasonable attorneys' fees to the extent permitted by law), with
interest as provided in this Section 9.3, shall constitute a portion of the
Debt and shall be due and payable to Lender upon demand. All such costs and
expenses incurred by Lender in remedying such Event of Default or such failed
payment or act or in appearing in, defending, or bringing any such action or
proceeding shall bear interest at the Default Rate, for the period from that
the incurrence of such cost or expense by Lender to the date of payment to
Lender. All such costs and expenses incurred by Lender together with interest
thereon calculated at the Default Rate shall be deemed to constitute a portion
of the Debt and be secured by this Security Instrument and the Other Security
Documents and shall be immediately due and payable upon demand by Lender
therefor.
9.4 RECOVERY OF SUMS REQUIRED TO BE PAID. Lender shall have the right
from time to time to take action to recover any sum or sums which constitute a
part of the Debt as the same become due, without regard to whether or not the
balance of the Debt shall be due, and without prejudice to the right of Lender
thereafter to bring an action of foreclosure, or any other action, for a
default or defaults by Borrower existing at the time such earlier action was
commenced.
9.5 EXAMINATION OF BOOKS AND RECORDS. Lender, its agents, accountants
and attorneys shall have the right to examine and audit the records, books,
management and other papers of Borrower or of any Guarantor or Indemnitor
which reflect upon their financial condition or which pertain to the income,
expenses and operation of the Property, at the Property or at any office
regularly maintained by Borrower, or any Guarantor or Indemnitor where the
books and records are located at all reasonable times and, except during an
emergency or following the occurrence and during the continuance of an Event
of Default, upon reasonable advance notice (which may, for such purpose alone,
be given orally). Lender and its agents shall have the right to make copies
and extracts from the foregoing records and other papers and, at Borrower's
expense, the right to prepare any of the statements and reports that Borrower,
each Guarantor and each Indemnitor shall be required to deliver hereunder upon
any failure to do so. Borrower, each Guarantor and each Indemnitor shall
furnish to Lender and its agents convenient facilities for the examination and
audit of such books and records.
9.6 OTHER RIGHTS, ETC. (a) The failure of Lender to insist upon
strict performance of any term hereof shall not be deemed to be a waiver of
any term of this Security Instrument. Borrower shall not be relieved of
Borrower's obligations hereunder by reason of (i) the failure of Lender to
comply with any request of Borrower, any Guarantor or any Indemnitor to take
any action to foreclose this Security Instrument or otherwise enforce any of
the provisions hereof or of the Note or the other Loan Documents, (ii) the
release, regardless of consideration, of the whole or any part of the
Property, or of any person liable for the Debt or any portion thereof, or
(iii) any agreement or stipulation by Lender extending the time of payment or
otherwise modifying or supplementing the terms of the Note, this Security
Instrument or the other Loan Documents.
(b) It is agreed that the risk of loss or damage to the Property is
on Borrower, and Lender shall have no liability whatsoever for decline in
value of the Property, for failure to maintain the Policies, or for failure to
determine whether insurance in force is adequate as to the amount of risks
insured. Possession by Lender shall not be deemed an election of judicial
relief, if any such possession is requested or obtained, with respect to any
Property or collateral not in Lender's possession.
(c) Lender may resort for the payment of the Debt to any other
security held by Lender in such order and manner as Lender, in its discretion,
may elect. Lender may take action to recover the Debt, or any portion
thereof, or to enforce any covenant hereof without prejudice to the right of
Lender thereafter to foreclose this Security Instrument. The rights of Lender
under this Security Instrument shall be separate, distinct and cumulative and
none shall be given effect to the exclusion of the others. No act of Lender
shall be construed as an election to proceed under any one provision herein to
the exclusion of any other provision. Lender shall not be limited exclusively
to the rights and remedies herein stated but shall be entitled to every right
and remedy now or hereafter afforded at law or in equity.
9.7 RIGHT TO RELEASE ANY PORTION OF THE PROPERTY. Lender may release any
portion of the Property for such consideration as Lender may require without,
as to the remainder of the Property, in any way impairing or affecting the
lien or priority of this Security Instrument, or improving the position of any
subordinate lienholder with respect thereto, except to the extent that the
obligations hereunder shall have been reduced by the actual monetary
consideration, if any, received by Lender for such release, and may accept by
assignment, pledge or otherwise any other property in place thereof as Lender
may require without being accountable for so doing to any other lienholder.
This Security Instrument shall continue as a lien and security interest in the
remaining portion of the Property.
9.8 VIOLATION OF LAWS. If the Property is not in compliance with
Applicable Laws, Lender may impose additional requirements upon Borrower in
connection therewith including, without limitation, monetary reserves or
financial equivalents.
9.9 RECOURSE AND CHOICE OF REMEDIES. Notwithstanding any other
provision of this Security Instrument, Lender and other Indemnified Parties
(as hereinafter defined) are entitled to enforce the obligations of Borrower,
Guarantor and Indemnitor contained in Section 11.2 without first resorting to
or exhausting any security or collateral and without first having recourse to
the Note or any of the Property, through foreclosure or acceptance of a deed
in lieu of foreclosure or otherwise, and in the event Lender commences a
foreclosure action against the Property, Lender is entitled to pursue a
deficiency judgment with respect to such obligations against Borrower,
Guarantor and Indemnitor. The provisions of Section 11.2 are exceptions to
any non-recourse or exculpation provisions in the Note, this Security
Instrument or the other Loan Documents, and Borrower, Guarantor and Indemnitor
are fully and personally liable for the obligations pursuant to Section 11.2.
The liability of Borrower, Guarantor and Indemnitor are not limited to the
original principal amount of the Note. Notwithstanding the foregoing, nothing
herein shall inhibit or prevent Lender from foreclosing pursuant to this
Security Instrument or exercising any other rights and remedies pursuant to
the Note, this Security Instrument and the other Loan Documents, whether
simultaneously with foreclosure proceedings or in any other sequence. A
separate action or actions may be brought and prosecuted against Borrower,
whether or not action is brought against any other Person or whether or not
any other Person is joined in the action or actions. In addition, Lender
shall have the right but not the obligation to join and participate in, as a
party if it so elects, any administrative or judicial proceedings or actions
initiated in connection with any matter addressed in Article 10 or Section
11.2.
9.10 RIGHT OF ENTRY. Lender and its agents shall have the right to
enter and inspect the Property at all reasonable times and, except during an
emergency or following the occurrence and during the continuance of an Event
of Default, upon reasonable advance notice (which may, for such purpose alone,
be given orally).
10 - ENVIRONMENTAL HAZARDS
10.1 ENVIRONMENTAL REPRESENTATIONS AND WARRANTIES. Borrower represents and
warrants, based upon an environmental assessment of the Property and
information that Borrower knows or reasonably should have known, that: (a)
there are no Hazardous Substances (as hereinafter defined) or underground
storage tanks in, on, or under the Property, except those that are both (i) in
compliance with all applicable Environmental Laws (as hereinafter defined)
and, if required, with permits issued pursuant thereto, and (ii) either fully
disclosed to Lender in writing pursuant to the written report(s) resulting
from the environmental assessment(s) of the Property delivered to Lender
(collectively, the "Environmental Report") or are used by Borrower or tenants
of the Property in the ordinary course of their business; (b) there are no
past, present or threatened Releases (as hereinafter defined) of Hazardous
Substances in, on, under or from the Property except as described in the
Environmental Report; (c) there is no threat of any Release of Hazardous
Substances migrating to the Property except as described in the Environmental
Report; (d) there is no past or present non-compliance with Environmental
Laws, or with permits issued pursuant thereto, in connection with the Property
except as described in the Environmental Report; (e) Borrower does not know
of, and has not received, any written or oral notice or other communication
from any Person (including, without limitation, a governmental entity)
relating to Hazardous Substances or Remediation (as hereinafter defined)
thereof, of possible liability of any Person pursuant to any Environmental
Law, other environmental conditions in connection with the Property, or any
actual or potential administrative or judicial proceedings in connection with
any of the foregoing; and (f) Borrower has truthfully and fully provided to
Lender, in writing, any and all information relating to conditions in, on,
under or from the Property that is known to Borrower and that is contained in
Borrower's files and records, including, without limitation, any reports
relating to Hazardous Substances in, on, under or from the Property and/or to
the environmental condition of the Property.
"Environmental Law" means any present and future federal, state and
local laws, statutes, ordinances, rules, regulations and the like, as well as
common law, relating to protection of human health or the environment,
relating to Hazardous Substances, relating to liability for or costs of
Remediation or prevention of Releases of Hazardous Substances or relating to
liability for or costs of other actual or threatened danger to human health or
the environment. "Environmental Law" includes, but is not limited to, the
following statutes, as amended, any successor thereto, and any regulations
promulgated pursuant thereto, and any state or local statutes, ordinances,
rules, regulations and the like addressing similar issues: the Comprehensive
Environmental Response, Compensation and Liability Act; the Emergency Planning
and Community Right-to-Know Act; the Hazardous Substances Transportation Act;
the Resource Conservation and Recovery Act (including, without limitation,
Subtitle I relating to underground storage tanks); the Solid Waste Disposal
Act; the Clean Water Act; the Clean Air Act; the Toxic Substances Control Act;
the Safe Drinking Water Act; the Occupational Safety and Health Act; the
Federal Water Pollution Control Act; the Federal Insecticide, Fungicide and
Rodenticide Act; the Endangered Species Act; the National Environmental Policy
Act; the River and Harbors Appropriation Act and the Residential Lead-Based
Paint Hazard Reduction Act. "Environmental Law" also includes, but is not
limited to, any present and future federal, state and local laws, statutes,
ordinances, rules, regulations and the like, as well as common law:
conditioning transfer of property upon a negative declaration or other
approval of a governmental authority of the environmental condition of the
property; requiring notification or disclosure of Releases of Hazardous
Substances or other environmental condition of the Property to any
governmental authority or other Person, whether or not in connection with
transfer of title to or interest in property; imposing conditions or
requirements in connection with permits or other authorization for lawful
activity; relating to nuisance, trespass or other causes of action related to
the Property; and relating to wrongful death, personal injury, or property or
other damage in connection with any Hazardous Substances in, on or under the
Property.
"Hazardous Substances" include but are not limited to any and all
substances (whether solid, liquid or gas) defined, listed, or otherwise
classified as pollutants, hazardous wastes, hazardous substances, hazardous
materials, extremely hazardous wastes, or words of similar meaning or
regulatory effect under any present or future Environmental Laws or that may
have a negative impact on human health or the environment, including, without
limitation, petroleum and petroleum products, asbestos and asbestos-containing
materials, polychlorinated biphenyls, lead, materials containing lead based
paint, radon, radioactive materials, flammables and explosives.
"Release" of any Hazardous Substance includes but is not limited to
any release, deposit, discharge, emission, leaking, spilling, seeping,
migrating, injecting, pumping, pouring, emptying, escaping, dumping, disposing
or other movement of Hazardous Substances.
"Remediation" includes but is not limited to any response, remedial,
removal, or corrective action, any activity to cleanup, detoxify,
decontaminate, contain or otherwise remediate any Hazardous Substance, any
actions to prevent, cure or mitigate any Release of any Hazardous Substance,
any action to comply with any Environmental Laws or with any permits issued
pursuant thereto, any inspection, investigation, study, monitoring,
assessment, audit, sampling and testing, laboratory or other analysis, or
evaluation relating to any Hazardous Substances or to anything referred to in
Article 10.
10.2 ENVIRONMENTAL COVENANTS. Borrower covenants and agrees that: (a)
all uses and operations on or of the Property, whether by Borrower or any
other Person, shall be in compliance with all Environmental Laws and permits
issued pursuant thereto; (b) there shall be no Releases of Hazardous
Substances in, on, under or from the Property; (c) there shall be no Hazardous
Substances in, on, or under the Property, except those that are both (i) in
compliance with all Environmental Laws and, if required, with permits issued
pursuant thereto, and (ii) fully disclosed to Lender in writing or are used by
Borrower or tenants of the Property in the ordinary course of their business;
(d) Borrower shall keep the Property free and clear of all liens and other
encumbrances imposed pursuant to any Environmental Law, whether due to any act
or omission of Borrower or any other Person (the "Environmental Liens"); (e)
Borrower shall, at its sole cost and expense, perform any environmental site
assessment or other investigation of environmental conditions in connection
with the Property, pursuant to any reasonable written request of Lender if
Lender has reason to suspect that a Release of a Hazardous Substance might
have occurred (including, without limitation, sampling, testing and analysis
of soil, water, air, building materials and other materials and substances
whether solid, liquid or gas), and share with Lender the reports and other
results thereof, and Lender and other Indemnified Parties shall be entitled to
rely on such reports and other results thereof; (f) Borrower shall, at its
sole cost and expense, comply with all reasonable written requests of Lender
to (i) reasonably effectuate Remediation of any condition (including, without
limitation, a Release of a Hazardous Substance) in, on, under or from the
Property; (ii) comply with any Environmental Law; (iii) comply with any
directive from any governmental authority; and (iv) take any other reasonable
action necessary or appropriate for protection of human health or the
environment; (g) Borrower shall not do or allow any tenant or other user of
the Property to do any act that materially increases the dangers to human
health or the environment, poses an unreasonable risk of harm to any Person
(whether on or off the Property), impairs or may impair the value of the
Property, is contrary to any requirement of any insurer, constitutes a public
or private nuisance, constitutes waste, or violates any covenant, condition,
agreement or easement applicable to the Property; and (h) Borrower immediately
upon becoming aware of the same shall notify Lender in writing of (A) any
presence or Releases or threatened Releases of Hazardous Substances in, on,
under, from or migrating towards the Property; (B) any non-compliance with any
Environmental Laws related in any way to the Property; (C) any actual or
potential Environmental Lien; (D) any required or proposed Remediation of
environmental conditions relating to the Property; and (E) any written or oral
notice or other communication of which Borrower becomes aware from any source
whatsoever (including, without limitation, a governmental entity) relating in
any way to Hazardous Substances or Remediation thereof, possible liability of
any Person pursuant to any Environmental Law, other environmental conditions
in connection with the Property, or any actual or potential administrative or
judicial proceedings in connection with anything referred to in this Article
10.
10.3 LENDER'S RIGHTS. Lender and any other Person designated by
Lender, including, without limitation, any receiver, any representative of a
governmental entity, and any environmental consultant, shall have the right,
but not the obligation, to enter upon the Property at all reasonable times to
assess any and all aspects of the environmental condition of the Property and
its use, including, without limitation, conducting any environmental
assessment or audit (the scope of which shall be determined in Lender's sole
and absolute discretion) and taking samples of soil, groundwater or other
water, air or building materials, and conducting other invasive testing.
Borrower shall cooperate with and provide access to Lender and any such Person
designated by Lender.
10.4 RELEASE. At Lender's election, from time to time, Borrower
shall accept a release from the lien of this Security Instrument of any
portion of the Property with respect to which Lender believes in good faith
Hazardous Substances have been discovered on, at, in, under, or above and have
or are or reasonably likely to have a material adverse effect on the Property,
Borrower, Lender or the lien or priority of this Security Instrument, or with
respect to which Lender believes in good faith an Environmental Law has been
or may have been violated which has or is reasonably likely to have a material
adverse effect on the Property, Borrower, Lender or the lien or priority of
this Security Instrument. Borrower shall, at Borrower's expense, cause any
consents, agreements and instruments to be entered into that may be reasonably
required by Lender in connection with such release, including, without
limitation, subdivision consents, appropriate surveys, appraisals of the
subdivisions, consents of tenants, access agreements, easement agreements,
consents of parties to existing agreements and consents of subordinate
lienors. Borrower shall pay for any new title insurance policy or endorsement
required by Lender in connection with any such release.
11 - INDEMNIFICATION
11.1 GENERAL INDEMNIFICATION. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all claims, suits, liabilities (including,
without limitation, strict liabilities), actions, proceedings, obligations,
debts, damages, losses, costs, expenses, diminutions in value, fines,
penalties, charges, fees, expenses, judgments, awards, amounts paid in
settlement, punitive damages, foreseeable and unforeseeable consequential
damages, of whatever kind or nature (including, without limitation, attorneys'
fees and other costs of defense) (collectively, "Losses") imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following: (a) ownership of this Security Instrument, the Property or any
interest therein or receipt of any Rents; (b) any amendment to, or
restructuring of, the Debt and any of the Loan Documents; (c) any and all
lawful action that may be taken by Lender in connection with the enforcement
of the provisions of this Security Instrument or the Note or any of the other
Loan Documents, whether or not suit is filed in connection with same, or in
connection with Borrower, any Guarantor or Indemnitor and/or any partner,
joint venturer, member or shareholder thereof becoming a party to a voluntary
or involuntary federal or state bankruptcy, insolvency or similar proceeding;
(d) any accident, injury to or death of persons or loss of or damage to
property occurring in, on or about the Property or any part thereof or on the
adjoining sidewalks, curbs, adjacent property or adjacent parking areas,
streets or ways; (e) any use, nonuse or condition in, on or about the Property
or any part thereof or on the adjoining sidewalks, curbs, adjacent property or
adjacent parking areas, streets or ways; (f) any failure on the part of
Borrower to perform or be in compliance with any of the terms of this Security
Instrument; (g) performance of any labor or services or the furnishing of any
materials or other property in respect of the Property or any part thereof;
(h) any failure of the Property to be in compliance with any Applicable Laws;
(i) the enforcement by any Indemnified Party of the provisions of this Article
11; (j) any and all claims and demands whatsoever which may be asserted
against Lender by reason of any alleged obligations or undertakings on its
part to perform or discharge any of the terms, covenants, or agreements
contained in any Lease; (k) the payment of any commission, charge or brokerage
fee to anyone which may be payable in connection with the funding of the Loan
evidenced by the Note and secured by this Security Instrument; (l) any
misrepresentation made to Lender in this Security Instrument or any other Loan
Document; or (m) any tax on the making and/or recording of this Security
Instrument, the Note or any of the other Loan Documents. Any amounts payable
to Lender by reason of the application of this Section 11.1 shall become
immediately due and payable and shall bear interest at the Default Rate from
the date the Loss is sustained by Lender until paid. For purposes of this
Article 11, the term "Indemnified Parties" means Lender and any Person who is
or will have been involved in the origination of the Loan, any Person who is
or will have been involved in the servicing of the Loan, any Person in whose
name the encumbrance created by this Security Instrument is or will have been
recorded, any Person who may hold or acquire or will have held a full or
partial interest in the Loan (including, without limitation, any investor in
the Securities (as hereinafter defined) and custodians, trustees and other
fiduciaries who hold or have held a full or partial interest in the Loan for
the benefit of third parties), as well as the respective directors, officers,
shareholders, partners, members, employees, agents, servants, representatives,
contractors, subcontractors, affiliates, subsidiaries, participants,
successors and assigns of any and all of the foregoing (including, without
limitation, any other Person who holds or acquires or will have held a
participation or other full or partial interest in the Loan or the Property,
whether during the term of the Loan or as a part of or following a foreclosure
of the Loan and including, without limitation, any successors by merger,
consolidation or acquisition of all or a substantial portion of Lender's
assets and business).
11.2 ENVIRONMENTAL INDEMNIFICATION. Borrower shall, at its sole cost and
expense, protect, defend, indemnify, release and hold harmless the Indemnified
Parties from and against any and all Losses and costs of Remediation (whether
or not performed voluntarily), engineers' fees, environmental consultants'
fees, and costs of investigation (including, without limitation, sampling,
testing, and analysis of soil, water, air, building materials and other
materials and substances whether solid, liquid or gas) imposed upon or
incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following: (i) any presence of any Hazardous Substances in, on, above, or
under the Property; (ii) any past, present or threatened Release of Hazardous
Substances in, on, above, under or from the Property; (iii) any activity by
Borrower, any Affiliate of Borrower or any tenant or other user of the
Property in connection with any actual, proposed or threatened use, treatment,
storage, holding, existence, disposition or other Release, generation,
production, manufacturing, processing, refining, control, management,
abatement, removal, handling, transfer or transportation to or from the
Property of any Hazardous Substances at any time located in, under, on or
above the Property; (iv) any activity by Borrower, any Affiliate of Borrower
or any tenant or other user of the Property in connection with any actual or
proposed Remediation of any Hazardous Substances at any time located in,
under, on or above the Property, whether or not such Remediation is voluntary
or pursuant to court or administrative order, including, without limitation,
any removal, remedial or corrective action; (v) any past, present or
threatened non-compliance or violations of any Environmental Laws (or permits
issued pursuant to any Environmental Law) in connection with the Property or
operations thereon, including, without limitation, any failure by Borrower,
any Affiliate of Borrower or any tenant or other user of the Property to
comply with any order of any governmental authority in connection with any
Environmental Laws; (vi) the imposition, recording or filing or the threatened
imposition, recording or filing of any Environmental Lien encumbering the
Property; (vii) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 10 and
this Section 11.2; (viii) any past, present or threatened injury to,
destruction of or loss of natural resources in any way connected with the
Property, including, without limitation, costs to investigate and assess such
injury, destruction or loss; (ix) any acts of Borrower or other users of the
Property in arranging for disposal or treatment, or arranging with a
transporter for transport for disposal or treatment, of Hazardous Substances
at any facility or incineration vessel containing such or similar Hazardous
Substances; (x) any acts of Borrower or other users of the Property, in
accepting any Hazardous Substances for transport to disposal or treatment
facilities, incineration vessels or sites from which there is a Release, or a
threatened Release of any Hazardous Substance which causes the incurrence of
costs for Remediation; (xi) any personal injury, wrongful death, or property
or other damage arising under any statutory or common law or tort law theory,
including, without limitation, damages assessed for a private or public
nuisance or for the conducting of an abnormally dangerous activity on or near
the Property; and (xii) any material misrepresentation or inaccuracy in any
representation or warranty or material breach or failure to perform any
covenants or other obligations pursuant to Article 10.
(b) Notwithstanding the provisions of Section 11.2(a) or of any
Loan Document to the contrary, Borrower shall have no obligation to indemnify
the Indemnified Parties for Losses and costs of Remediation (i) in connection
with Hazardous Substances which are initially released or placed on, in or
under the Property after the date, if any, upon which Lender (or its designee)
takes title to the Property following the occurrence of an Event of Default,
or (ii) which result directly and solely from Lender's willful misconduct or
gross negligence.
11.3 DUTY TO DEFEND; ATTORNEYS' FEES AND OTHER FEES AND EXPENSES. Upon
written request by any Indemnified Party, Borrower shall defend such
Indemnified Party (if requested by any Indemnified Party, in the name of the
Indemnified Party) by attorneys and other professionals approved by the
Indemnified Parties. Notwithstanding the foregoing, any Indemnified Parties
may, in their sole and absolute discretion, engage their own attorneys and
other professionals to defend or assist them at Borrower's expense if such
Indemnified Party has reason to believe that its interests are not being
adequately represented or diverge from other interests being represented by
such counsel (but Borrower shall be obligated to bear the expense of at most
only one such separate counsel), and, at the option of Indemnified Parties,
their attorneys shall control the resolution of any claim or proceeding. Upon
demand, Borrower shall pay or, in the sole and absolute discretion of the
Indemnified Parties, reimburse, the Indemnified Parties for the payment of
reasonable fees and disbursements of attorneys, engineers, environmental
consultants, laboratories and other professionals in connection therewith.
Nothing contained herein shall prevent an Indemnified Party from employing
separate counsel in any such action at any time and participating in the
defense thereof at its own expense.
11.4 SURVIVAL. Except as expressly set forth in Subsection 11.2(b),
the indemnifications made pursuant to Section 11.2 and the representations and
warranties, covenants, and other obligations arising under Article 10, shall
continue indefinitely in full force and effect and shall survive and in no way
be impaired by: any satisfaction or other termination of this Security
Instrument, any assignment or other transfer of all or any portion of this
Security Instrument or Lender's interest in the Property (but, in such case,
shall benefit both Indemnified Parties and any assignee or transferee), any
exercise of Lender's rights and remedies pursuant hereto including, without
limitation, foreclosure or acceptance of a deed in lieu of foreclosure, any
exercise of any rights and remedies pursuant to the Note or any of the other
Loan Documents, any transfer of all or any portion of the Property (whether by
Borrower or by Lender following foreclosure or acceptance of a deed in lieu of
foreclosure or at any other time), any amendment to this Security Instrument,
the Note or the other Loan Documents, and any act or omission that might
otherwise be construed as a release or discharge of Borrower from the
obligations pursuant hereto, except for an express release delivered by Lender
in writing.
12 - WAIVERS
12.1 MARSHALLING AND OTHER MATTERS. Borrower hereby waives, to the
extent permitted by law, the benefit of all appraisement, valuation, stay,
extension, reinstatement and redemption laws now or hereafter in force and all
rights of marshalling in the event of any sale hereunder of the Property or
any part thereof or any interest therein. Further, Borrower hereby expressly
waives any and all rights of redemption from sale under any order or decree of
foreclosure of this Security Instrument on behalf of Borrower, and on behalf
of each and every person acquiring any interest in or title to the Property
subsequent to the date of this Security Instrument and on behalf of all
persons to the extent permitted by applicable law.
12.2 WAIVER OF NOTICE. Borrower shall not be entitled to any notices
of any nature whatsoever from Lender except with respect to matters for which
this Security Instrument specifically and expressly provides for the giving of
notice by Lender to Borrower and except with respect to matters for which
Lender is required by applicable law to give notice, and Borrower hereby
expressly waives the right to receive any notice from Lender with respect to
any matter for which this Security Instrument does not specifically and
expressly provide for the giving of notice by Lender to Borrower.
12.3 WAIVER OF STATUTE OF LIMITATIONS. To the fullest extent permitted
by law, Borrower hereby expressly waives and releases the pleading of any
statute of limitations as a defense to payment of the Debt or performance of
its other Obligations.
13 - MISCELLANEOUS PROVISIONS
13.1 DOCUMENT PROTOCOLS. This Security Instrument is governed by the
Document Protocols set forth on Appendix I annexed hereto and made a part
hereof, which are incorporated herein as if fully set forth herein.
13.2 USURY LAWS. It is the intention of Borrower and Lender to
conform strictly to the usury and similar laws relating to interest from time
to time in force, and all agreements between Lender and Borrower, whether now
existing or hereafter arising and whether oral or written, are hereby
expressly limited so that in no contingency or event whatsoever, whether by
acceleration of maturity hereof or otherwise, shall the amount paid or agreed
to be paid in the aggregate to Lender as interest hereunder or under the other
Loan Documents or in any other security agreement given to secure the Debt, or
in any other document evidencing, securing or pertaining to the Debt, exceed
the maximum permissible under applicable usury or such other laws (the
"Maximum Amount"). If from any possible construction of any document,
interest would otherwise be payable hereunder or under any other Loan Document
in excess of the Maximum Amount, or in the event for any reason whatsoever any
payment by or act of Borrower pursuant to the terms or requirements hereof or
of any other Loan Document shall result in the payment of interest which would
exceed the Maximum Amount, then any such construction shall be subject to the
provisions of this Section, and ipso facto such document shall be
automatically reformed, without the necessity of the execution of any
amendment or new document, so that the obligation of Borrower to pay interest
or perform such act or requirement shall be reduced to the limit authorized
under the applicable laws, and in no event shall Borrower be obligated to pay
any interest, perform any act, or be bound by any requirement which would
result in the payment of interest in excess of the Maximum Amount. Any amount
received by Lender in excess of the Maximum Amount shall, without further
agreement or notice between or by any party hereto, be deemed applied to
reduce the principal amount of the Note immediately upon receipt of such
moneys by Lender, with the same force and effect as though Borrower had
specifically designated such sums to be applied to principal prepayment. The
provisions of this Section shall supersede any inconsistent provision of this
Security Instrument or any other Loan Document.
13.3 PERFORMANCE AT BORROWER'S EXPENSE. Borrower acknowledges and
confirms that Lender may impose certain administrative, processing or
servicing fees in connection with (a) any extension, renewal, modification,
amendment and termination of the Loan, (b) any release or substitution of
collateral therefor, (c) obtaining certain consents, waivers and approvals
with respect to the Property, (d) the review of any Lease or proposed Lease or
the preparation or review of any subordination, non-disturbance agreement,
(e) collecting, holding and disbursing reserves created under the Loan
Documents pursuant to this Security Instrument, and (f) inspections required
to make certain determinations under the Loan Documents. Borrower further
acknowledges and confirms that it shall be responsible for the payment of all
costs of reappraisal of the Property or any part thereof, whether required by
law, regulation, Lender or any governmental or quasi-governmental authority.
Borrower hereby acknowledges and agrees to pay, immediately upon demand, all
such fees (as the same may be increased or decreased from time to time),, any
additional fees of a similar type or nature which may be imposed by Lender
from time to time and, with respect to inspections performed pursuant to
subsection (f), all reasonable fees and expenses of Lender.
13.4 ATTORNEY'S FEES FOR ENFORCEMENT. Borrower shall pay all reasonable
legal fees and disbursements incurred by Lender in connection with the
preparation of the Loan Documents, and Borrower shall pay to Lender on demand
any and all expenses, including legal expenses and attorneys' fees, incurred
or paid by Lender in protecting its interest in the Property, in collecting
any amount payable hereunder or in enforcing its rights hereunder with respect
to the Property, whether or not any legal proceeding is commenced hereunder or
under any other Loan Document, together with interest thereon at the Default
Rate from the date paid or incurred by Lender until such expenses are paid by
Borrower.
13.5 TRANSFER OF LOAN. Lender may, at any time, sell, transfer or
assign the Loan, the Loan Documents, and any or all servicing rights with
respect thereto, or grant participations therein or issue mortgage pass-
through certificates or other securities evidencing a beneficial interest in a
rated or unrated public offering or private placement (the "Securities").
Lender may forward to each purchaser, transferee, assignee, servicer,
participant or investor in such Securities or any rating agency rating such
Securities or any prospective investor, all documents and information which
Lender now has or may hereafter acquire relating to the Debt and to Borrower,
any Guarantor, any Indemnitors and the Property, as Lender determines
necessary or desirable. Borrower, any Guarantor and any Indemnitor agree to
cooperate with Lender in connection with any transfer made or any Securities
created pursuant to this Section, including, without limitation, the delivery
of an estoppel certificate required in accordance with Section 6.3 hereof and
such other documents as may be reasonably requested by Lender.
13.6 SUBROGATION. If any or all of the proceeds of the Note have been
used to extinguish, extend or renew any indebtedness heretofore existing
against the Property, then, to the extent of the funds so used, Lender shall
be subrogated to all of the rights, claims, liens, titles, and interests
existing against the Property heretofore held by, or in favor of, the holder
of such indebtedness and such former rights, claims, liens, titles, and
interests, if any, are not waived but rather are continued in full force and
effect in favor of Lender and are merged with the lien and security interest
created herein as cumulative security for the repayment of the Debt, the
performance and discharge of Borrower's obligations hereunder, under the Note
and the other Loan Documents and the performance and discharge of the other
Obligations.
13.7 CERTAIN DEFINED TERMS. For all purposes of this Security
Instrument, unless the context clearly indicates a contrary intent or unless
otherwise specifically provided herein:
(a) "Affiliate" shall mean, with respect to any Person, (i) each Person
that controls, is controlled by or is under common control with such Person,
(ii) each Person that, directly or indirectly, owns or controls, whether
beneficially or as a trustee, guardian or other fiduciary, any of the Stock of
such Person, and (iii) each of such Person's officers, directors, members,
joint venturers and partners.
(b) "Borrower" shall mean the Person identified as such in this Security
Instrument, any subsequent owner of the Property who succeeds to the
obligations of Borrower hereunder, and each of their heirs, executors, legal
representatives, successors and assigns.
(c) "Business Day" shall mean a day on which commercial banks are not
authorized or required by law to close in New York, New York.
(d) "Control" shall mean, with respect to any Person, the possession,
directly or indirectly, of the power to direct or cause the direction of its
management or policies, whether through the ownership of voting securities, by
contract or otherwise. For the purpose of this definition, "control" includes
the correlative meanings of "controlled by" and "under common control with."
(e) "Lender" shall mean the Person identified as such in this Security
Instrument and its successors, assigns and transferees.
(f) "Opinion of Counsel" shall mean an opinion or opinions in writing
signed by independent legal counsel to Borrower, designated by Borrower, and
reasonably satisfactory to Lender.
(g) "Person" shall mean any individual, corporation, partnership, joint
venture, estate, trust, limited liability company, unincorporated association,
any federal, state, county or municipal government or any bureau, department
or agency thereof and any fiduciary acting in such capacity on behalf of any
of the foregoing.
(h) "Single-Purpose Entity" shall mean a Person which owns no interest
or property other than the Property or interests in Borrower.
(i) "Stock" shall mean all shares, options, warrants, general or limited
partnership interests, membership interests, participations or other
equivalents (regardless of how designated) in a corporation, limited liability
company, partnership or any equivalent entity, whether voting or nonvoting,
including, without limitation, common stock, preferred stock, or any other
"equity security" (as such term is defined in Rule 3a11-1 of the General Rules
and Regulations promulgated by the Securities and Exchange Commission under
the Securities Exchange Act of 1934, as amended).
(j) "Transfer" shall mean the conveyance, assignment, sale, transfer,
mortgaging, collateral assignment, encumbrance, pledging, alienation,
hypothecation, granting of a security interest in, granting of options with
respect to, or other disposition of (directly or indirectly, voluntarily or
involuntarily, by operation of law or otherwise, and whether or not for
consideration or of record) all or any portion of any legal or beneficial
interest (i) in all or any portion of the Property; and (ii) in Borrower (or
any trust of which Borrower is a trustee), or, if Borrower is a limited or
general partnership, limited liability company, joint venture, trust, nominee
trust, tenancy in common or other unincorporated form of business association
or form of ownership interest, in any Person having a direct or indirect legal
or beneficial ownership in Borrower, excluding any legal or beneficial
interest in any constituent limited partner or member of Borrower but
including the interest of such limited partner or member itself and further
including any legal or beneficial interest in any constituent general partner
of Borrower, if applicable, in any general partner of any constituent general
partner of Borrower, or, if Borrower is a limited liability company, in any
constituent corporate member of Borrower. The term "Transfer" shall include,
without limitation, the following: an installment sales agreement wherein
Borrower agrees to sell the Property or any part thereof or any interest
therein for a price to be paid in installments; an agreement by Borrower
leasing all or a substantial part of the Property to one or more Persons
pursuant to a single transaction or related transactions, or a sale,
assignment or other transfer of, or the grant of a security interest in,
Borrower's right, title and interest in and to any Leases or any Rent; any
instrument subjecting the Property to a condominium regime or transferring
ownership to a cooperative corporation or other form of multiple ownership or
governance; the dissolution or termination of Borrower, any general partner of
Borrower, any general partner of any general partner of Borrower, if
applicable, or, if Borrower is a limited liability company, any corporate
member of Borrower; the issuance of new Stock in any corporation which is
Borrower, a member of Borrower (if Borrower is a limited liability company), a
partner of Borrower or, if applicable, a partner of a general partner of
Borrower; the merger or consolidation with any other Person of Borrower, any
general partner of Borrower, any general partner of any general partner of
Borrower, if applicable, or, if Borrower is a limited liability company, any
corporate member of Borrower; and, if Borrower is a non-member managed limited
liability company, any change in the Person appointed as manager of Borrower.
[THE REMAINDER OF THIS PAGE HAS BEEN LEFT BLANK INTENTIONALLY]
14 - STATE SPECIFIC PROVISIONS
[None]
15 - RELEASE PARCEL
15.1 RELEASE. (a) At any time and from time to time after the date
of this Security Instrument, Borrower may cause the Release Parcel (as
hereinafter defined) to be released from the lien of this Security Instrument,
but only upon the satisfaction of all of the following conditions:
(i) Lender shall have received from Borrower at least thirty (30) days
prior notice of the date proposed for such release (the "Release Date");
(ii) Lender shall have consented to the subdivision of the Property in
order to create a separate tax lot for the Release Parcel, which consent
Lender shall not unreasonably withhold or delay;
(iii) Lender shall have consented to the physical boundaries of the
Release Parcel, including, without limitation, any buffer zones, and to the
access to the property remaining after the release, which consent Lender may
withhold in its sole and absolute discretion;
(iv) in the event a reciprocal operating agreement is necessary for the
continued operation of the Property in the manner in which the Property is
currently operated, Borrower shall have entered into such an agreement with
any owner of the Release Parcel, or a portion thereof, and other ancillary
agreements in order to effect the terms thereof, including, without
limitation, the granting of easements over the Release Parcel, which
agreements shall be satisfactory to Lender in its sole and absolute
discretion;
(v) no Event of Default shall have occurred and be continuing as of the
date of such notice and the Release Date;
(vi) Borrower shall have provided Lender with evidence acceptable to
Lender that the Release Parcel has been formally designated as a distinct tax
lot separate from the remainder of the Property;
(vii) Borrower, at its sole cost and expense, shall have delivered to
Lender one or more endorsements to the mortgagee policy of title insurance
delivered to Lender on the date hereof in connection with this Security
Instrument insuring that, after giving effect to such release, (A) the lien
created hereby and insured under such title policy is a first priority lien on
the remainder of the Property subject only to the Permitted Exceptions
applicable to the remainder of the Property, and (B) such title policy is in
full force and effect and unaffected by such release;
(viii) Borrower, at its sole cost and expense, shall have delivered to
Lender a current ALTA/ACSM survey of the remaining Property without the
Release Parcel in form and substance acceptable to Lender;
(ix) Borrower shall have delivered or caused to be delivered to Lender
evidence satisfactory to Lender from the appropriate governmental authority
that the Property remaining after giving effect to the release of the Release
Parcel, including the location, existence, use, occupancy and operation
thereof, is in compliance with all applicable zoning laws of the jurisdiction
in which the Property is situated;
(x) Borrower shall have delivered or caused to be delivered to Lender an
opinion of counsel acceptable to Lender stating that all conditions precedent
to the release of the Release Parcel contained in this Security Instrument
have been complied with; and
(xi) Borrower shall have paid all of Lender's costs and expenses,
including, without limitation, reasonable attorneys' fees and expenses, in
connection with the release of the Release Parcel.
The conditions set forth in subparagraphs (ii) through and including
(iv) above requiring Lender's consent, shall be considered distinct and
separate, and consent to or waiver of one condition shall not be deemed
consent to or waiver of any other condition.
(b) Upon satisfaction of the other conditions set forth in subparagraph
(a) above for the release of the Release Parcel, the security interests and
liens of Lender under this Security Instrument and the other Loan Documents
shall be released from the Release Parcel, and Lender will execute and deliver
any agreements reasonably requested by Borrower either to release and
terminate or to assign, at Borrower's option, the lien of this Security
Instrument as to the Release Parcel; provided, however, that such release and
termination or assignment shall be without recourse to Lender and made without
any representation or warranty. Upon the release and termination or
assignment of Lender's security interests and liens under this Security
Instrument and the other Loan Documents relating to the Release Parcel, all
references in this Security Instrument and the other Loan Documents relating
to the Property shall be deemed to refer to the Property excluding the Release
Parcel, except as otherwise provided herein with respect to indemnities or
except as otherwise provided in any of the other Loan Documents.
As used herein, the term "Release Parcel" shall mean a portion of the
Property as generally described on Exhibit B attached hereto and made a part
hereof as may be altered to comport with the terms and conditions of this
Article.
IN WITNESS WHEREOF THIS SECURITY INSTRUMENT has been executed by
Borrower as of the day and year first above written.
BORROWER
JACKSONVILLE HOLDINGS, INC.
By:
Name:
Title:
EXHIBIT A
Description of Land
EXHIBIT B
General Description of Release Parcel
APPENDIX I
DOCUMENT PROTOCOLS
I-57
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S QUARTERLY
REPORT ON FORM 10-QSB FOR THE QUARTER ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH CONSOLIDATED FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-30-1997
<CASH> 13,021,495
<SECURITIES> 0
<RECEIVABLES> 374,430
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 13,849,222
<PP&E> 7,987,044
<DEPRECIATION> 749,617
<TOTAL-ASSETS> 23,821,171
<CURRENT-LIABILITIES> 1,454,865
<BONDS> 13,322,949
0
0
<COMMON> 4,738
<OTHER-SE> 7,206,619
<TOTAL-LIABILITY-AND-EQUITY> 23,821,171
<SALES> 2,296,940
<TOTAL-REVENUES> 2,296,940
<CGS> 0
<TOTAL-COSTS> 1,450,930
<OTHER-EXPENSES> 19,602
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 310,771
<INCOME-PRETAX> 515,637
<INCOME-TAX> 212,000
<INCOME-CONTINUING> 303,637
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 303,637
<EPS-PRIMARY> .08
<EPS-DILUTED> .06
</TABLE>
