<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
- ---- 1934
For the quarterly period ended September 30, 1998
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
- ---- 1934
For the transition period from to
---------- ----------
Commission file number 1-10093
RAMCO-GERSHENSON PROPERTIES TRUST
(Exact name of registrant as specified in its charter)
MARYLAND 13-6908486
- ------- ----------
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
27600 Northwestern Highway, Suite 200, Southfield, Michigan 48034
- ----------------------------------------------------------- -----
(Address of principal executive offices) (Zip code)
248-350-9900
------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Number of common shares of beneficial interest ($.01 par value) of the
Registrant outstanding as of September 30, 1998: 7,123,638
1
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<TABLE>
<CAPTION>
Index
Part I. Financial Information Page No.
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1998 (unaudited) and December 31, 1997............. 3
Consolidated Statements of Operations (unaudited) - Three Months and Nine Months Ended
September 30, 1998 and 1997............................................................... 4
Consolidated Statement of Shareholders' Equity (unaudited) - Nine Months Ended
September 30, 1998........................................................................ 5
Consolidated Statements of Cash Flows (unaudited)- Nine Months Ended
September 30, 1998 and 1997............................................................... 6
Notes to Consolidated Financial Statements (unaudited)......................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................................................... 12
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K............................................................... 19
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- -------------
(unaudited)
<S> <C> <C>
ASSETS
Investment in real estate - net (Note 2) .................... $ 495,340 $ 458,294
Accounts receivable - net ................................... 7,057 6,035
Equity investments in and advances to unconsolidated
entities .................................................... 5,765 6,421
Cash and cash equivalents ................................... 4,743 5,033
Other assets - net (Note 3) ................................. 12,702 8,899
--------- ---------
Total Assets ............................................. $ 525,607 $ 484,682
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgages and notes payable (Note 4) ........................ $ 325,696 $ 295,618
Distributions payable ....................................... 4,784 4,348
Accounts payable and accrued expenses ....................... 13,880 13,145
Due to related entities ..................................... 1,377 1,325
--------- ---------
Total Liabilities .......................................... 345,737 314,436
Minority Interest ............................................. 46,324 42,282
Commitments and Contingencies (Note 7) ........................ - -
SHAREHOLDERS' EQUITY ..........................................
Preferred Shares, par value $.01, 10,000 shares
authorized; 867 and 467 Series A convertible shares issued
and outstanding, $21,666 and $11,666 liquidation value ..... 20,527 11,147
Common Shares of Beneficial Interest, par value $.01, 30,000
shares authorized; 7,124 and 7,123 issued and outstanding .. 71 71
Additional paid-in capital .................................. 150,523 150,513
Cumulative distributions in excess of net income ............ (37,575) (33,767)
--------- ---------
Total Shareholders' Equity .................................... 133,546 127,964
--------- ---------
Total Liabilities and Shareholders' Equity ................. $ 525,607 $ 484,682
========= =========
</TABLE>
See notes to consolidated financial statements.
3
<PAGE> 4
RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
1998 1997 1998 1997
REVENUES ------ ------ ------ ------
<S> <C> <C> <C> <C>
Minimum rents...................................... $ 13,693 $ 9,304 $ 40,134 $ 27,220
Percentage rents................................... 46 341 798 1,123
Recoveries from tenants ........................... 5,058 4,677 14,321 13,273
Interest and other income.......................... 166 139 415 595
-------- -------- -------- --------
Total Revenues................................ 18,963 14,461 55,668 42,211
-------- -------- -------- --------
EXPENSES
Real estate taxes.................................. 1,761 1,551 5,208 4,560
Recoverable operating expenses..................... 3,246 2,970 9,213 8,444
Depreciation and amortization...................... 3,059 1,999 8,935 5,692
Other operating.................................... 183 179 598 722
General and administrative......................... 1,400 1,108 4,349 3,583
Interest expense................................... 6,444 3,476 18,688 9,588
-------- -------- -------- --------
Total Expenses................................ 16,093 11,283 46,991 32,589
-------- -------- -------- --------
Operating income ...................................... 2,870 3,178 8,677 9,622
Loss from unconsolidated entities...................... 65 85 228 240
-------- -------- -------- --------
Income before minority interest........................ 2,805 3,093 8,449 9,382
Minority interest...................................... 810 806 2,372 2,500
-------- -------- -------- --------
Net income............................................. 1,995 2,287 6,077 6,882
Preferred dividends.................................... (345) - (908) -
-------- -------- -------- --------
Net income available to common shareholders............ $ 1,650 $ 2,287 $ 5,169 $ 6,882
======== ======== ======== ========
Basic earnings per share............................... $0.23 $0.32 $0.73 $0.97
======== ======== ======== ========
Diluted earnings per share............................. $0.23 $0.32 $0.72 $0.96
======== ======== ======== ========
Weighted average shares outstanding:
Basic.............................................. 7,124 7,123 7,123 7,123
======== ======== ======== ========
Diluted............................................ 7,144 7,159 7,162 7,145
======== ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
4
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RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional Cumulative Total
--------------- ------------ Paid-In Earnings/ Shareholders'
Shares Amount Shares Amount Capital Distribution Equity
------ ------ ------ ------ ------- ------------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1998........ 467 $11,147 7,123 $71 $150,513 $(33,767) $127,964
Cash distributions declared......... (9,885) (9,885)
Issuance of preferred shares........ 400 9,380 9,380
Exercise of stock options........... 1 10 10
Net income for the Nine Months Ended
September 30, 1998................ 6,077 6,077
--- ------- ----- --- -------- -------- --------
Balance at September 30, 1998....... 867 $20,527 7,124 $71 $150,523 $(37,575) $133,546
=== ======= ===== === ======== ======== ========
</TABLE>
See notes to consolidated financial statements.
5
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RAMCO-GERSHENSON PROPERTIES TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30
1998 1997
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 6,077 $ 6,882
Adjustments to reconcile net income to net cash flows
Provided by operating activities:
Depreciation and amortization .................................... 8,935 5,692
Amortization of deferred financing costs ......................... 804 153
Loss from unconsolidated entities ................................ 228 240
Minority interest................................................. 2,372 2,500
Changes in assets and liabilities that provided (used) cash:
Accounts receivable.......................................... (1,022) (1,289)
Other assets ................................................ (5,187) (4,286)
Accounts payable and accrued expenses ....................... 1,171 8
------- --------
Total adjustments ................................................ 7,301 3,018
------- --------
Cash Flows Provided by Operating Activities ........................ 13,378 9,900
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Real estate acquired ............................................. (24,838) (21,048)
Advances from (to) unconsolidated entities ....................... 428 (623)
------- --------
Cash Flows Used In Investing Activities ............................ (24,410) (21,671)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash distributions to shareholders ............................... (9,885) (8,976)
Cash distributions to operating partnership unit holders ......... (3,603) (3,311)
Purchase of operating partnership units .......................... - (1,416)
Repayment of Credit Facility ..................................... (3,700) (2,430)
Principal repayments on mortgages payable ........................ (3,992) (1,398)
Payment of deferred financing costs .............................. (370) (613)
Borrowings on Credit Facility .................................... 22,600 28,463
Net proceeds from issuance of Preferred Shares ................... 9,380 -
Net advances from related entities ............................... 52 318
Net proceeds from exercise of stock options ...................... 10 -
Refund of deferred financing costs ............................... 250 -
------- --------
Cash Flows Provided by Financing Activities......................... 10,742 10,637
------- --------
Net Decrease in Cash and Cash Equivalents .......................... (290) (1,134)
Cash and Cash Equivalents, Beginning of Period ..................... 5,033 3,541
------- --------
Cash and Cash Equivalents, End of Period ........................... $ 4,743 $ 2,407
======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest during the period ...................... $17,591 $ 9,070
======= ========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Acquisition of Aquia Towne Center:
Debt assumed ............................................. $15,170 -
Value of OP units issued ................................. 5,273 -
</TABLE>
See notes to consolidated financial statements.
6
<PAGE> 7
RAMCO-GERSHENSON PROPERTIES TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
(Unaudited)
1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation - The accompanying interim financial statements and
related notes of the Company are unaudited; however, they have been prepared in
accordance with generally accepted accounting principles for interim financial
reporting, the instructions to Form 10-Q and the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared under
generally accepted accounting principles have been condensed or omitted pursuant
to such rules. The unaudited interim financial statements should be read in
conjunction with the audited financial statements and related notes included in
the Company's Annual Report on Form 10-K for the year ended December 31, 1997.
In the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the financial
statements for the interim periods have been made. The results for interim
periods are not necessarily indicative of the results for a full year.
Impact of Recent Accounting Pronouncements - In May 1998, the Emerging Issues
Task Force of the Financial Accounting Standards Board reached a consensus on
Issue No. 98-9, "Accounting for Contingent Rent in Interim Financial Periods".
This statement establishes standards for when the lessor can recognize
contingent rental income that is based on future specified targets within the
lessor's fiscal year. The consensus requires that contingent rental income in
interim periods should be deferred until the specified target that results in
contingent rental income is achieved. The impact of adopting this consensus was
to decrease percentage rents by approximately $300 or $0.03 per share for the
three months and the nine months ended September 30, 1998.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income",
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information". Readers are referred to the "Impact of Recent Accounting
Pronouncements" section of the Company's 1997 Form 10-K for further discussion.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This Statement
requires companies to record derivatives on the balance sheet as assets and
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. Management has not
determined the impact of the Statement on the Company's financial statements.
This Statement is effective for fiscal year beginning after June 15, 1999, with
earlier adoption encouraged. The Company will adopt this accounting standard as
required by January 1, 2000.
Reclassifications - Certain reclassifications have been made to the 1997
financial statements in order to conform with the 1998 presentation.
2. REAL ESTATE
The Company's real estate consists of the following:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
(unaudited)
<S> <C> <C>
Land $ 63,545 $ 57,075
Buildings and Improvements 451,506 414,115
Construction-in- progress 3,443 2,023
-------- ---------
518,494 473,213
Less: accumulated depreciation (23,154) (14,919)
-------- ---------
Investment in real estate - net $495,340 $458,294
======== ========
</TABLE>
7
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REAL ESTATE ACQUISITIONS
In May 1998 the Company acquired Southbay Fashion Center, a 96,700 square foot
community center located in Sarasota, Florida, for approximately $6,000. In
September 1998 the Company acquired Conyers Crossing, a 166,600 square foot
community shopping center located in Conyers, Georgia for approximately $7,490.
The Company also acquired Aquia Towne Center, a 238,000 square foot shopping
center, located in Stafford County, Virginia. The purchase price was comprised
of $1,430 in cash, issuance of 239,697 operating partnership units with a fair
value of $5,273, and the assumption of a $15,170 existing mortgage. The mortgage
note matures in March 2008 and has an interest rate of 7.39% (Note 4).
The acquisitions have been accounted for using the purchase method of accounting
and, accordingly, the assets and liabilities have been included in the
consolidated balance sheet based upon their respective fair market values.
3. OTHER ASSETS
Other assets are as follows:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
(unaudited)
<S> <C> <C>
Leasing costs and other $ 9,741 $ 5,845
Deferred financing costs 2,926 2,806
Proposed development and acquisition costs 2,505 1,214
-------- --------
15,172 9,865
Less: accumulated amortization (2,470) (966)
-------- --------
Other assets - net $ 12,702 $ 8,899
======== ========
</TABLE>
4. MORTGAGES AND NOTES PAYABLE
MORTGAGES AND NOTES PAYABLE CONSIST OF THE FOLLOWING:
<TABLE>
<CAPTION>
September 30, 1998 December 31, 1997
------------------ -----------------
(unaudited)
<S> <C> <C>
Fixed rate mortgages with interest rates ranging from 6.83% to
8.50% at September 30, 1998 and 6.83% to 8.75% at December 31, 1997,
due at various dates through 2008.................................................... $173,208 $162,030
Floating rate mortgages at 75% of the rate of long-term Capital A
Rated utility bonds, due January 1, 2010, plus supplemental
Interest to equal LIBOR plus 200 basis points. The effective rate at
September 30, 1998 was 7.41% and at December 31, 1997 was 7.33%...................... 7,000 7,000
Unsecured term loan, with an interest rate at LIBOR plus
275 basis points, due May 1, 1999. The effective rate at
September 30, 1998 and December 31, 1997 was 9.38% and
8.75%, respectively.................................................................. 45,000 45,000
Credit Facility, with an interest rate at LIBOR plus 162.5 basis
points at September 30, 1998 and December 31, 1997 due
May 1999, maximum available borrowings of $110,000. The
effective rate at September 30, 1998 and December 31, 1997 was
7.39% and 7.66%, respectively........................................................ 100,488 81,588
-------- --------
$325,696 $295,618
======== ========
</TABLE>
8
<PAGE> 9
The mortgage notes are secured by mortgages on properties that have an
approximate net book value of $274,730 and $276,619 as of September 30, 1998 and
December 31, 1997, respectively. The Credit Facility is secured by mortgages on
various properties that have an approximate net book value of $181,596 and
$172,970 as of September 30, 1998 and December 31, 1997, respectively.
At September 30, 1998, outstanding letters of credit issued under the Credit
Facility, not reflected in the accompanying consolidated balance sheet, total
approximately $836.
The following table presents scheduled principal payments on mortgages and notes
payable as of September 30, 1998:
<TABLE>
<CAPTION>
<S> <C>
Year ended December 31,
1998 (October 1 - December 31) $ 769
1999 148,667
2000 8,336
2001 3,245
2002 3,442
Thereafter 161,237
--------
Total $325,696
========
</TABLE>
During August 1998 the Company executed an interest rate swap agreement to limit
the Company's exposure to increases in interest rates on its floating rate debt.
The notional amount of the agreement was $75,000. Based on rates currently in
effect under the Company's Credit Facility, the agreement provides for a fixed
rate of 7.425% through October 2000. In conjunction with this agreement, the
Company terminated, at no cost, the two interest rate collar agreements
previously in place. These terminated agreements consisted of a $75,000
agreement through May 1, 1999 which had a cap at 8.375% and a floor of 7.125%,
and a $50,000 agreement for the period May 1999 to October 2000 which had a cap
at 8.375% and a floor of 7.225%. The Company is exposed to credit loss in the
event of non-performance by the other parties to the interest rate swap
agreement, however; the Company does not anticipate non-performance by the
counter party.
5. LEASES
The Company is engaged in the operation of shopping center and retail properties
and leases space to tenants and certain anchors pursuant to lease agreements.
The lease agreements provide for initial terms ranging from 3 to 30 years and,
in some cases, for annual rentals which are subject to upward adjustment based
on operating expense levels and sales volume.
Approximate future minimum rentals under noncancelable operating leases in
effect at September 30, 1998, assuming no new or renegotiated leases nor option
extensions on lease agreements, are as follows:
<TABLE>
<CAPTION>
<S> <C>
Year ended December 31,
1998 (July 1 - December 31) $ 12,898
1999 48,933
2000 44,647
2001 39,720
2002 35,713
Thereafter 235,872
--------
Total $417,783
========
</TABLE>
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6. PRO FORMA FINANCIAL INFORMATION
During 1997, the Company acquired properties with an aggregate cost of
approximately $147,700. The acquisitions were accounted for as purchases and,
accordingly, results of operations were included in the consolidated financial
statements since the various dates of acquisitions.
The following pro forma financial data have been presented as if the
acquisitions had occurred on January 1, 1997:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1997 September 30, 1997
------------------ ------------------
<S> <C> <C>
Revenues..................................................................... $18,603 $55,414
======= =======
Net Income................................................................... $ 2,302 $ 6,964
======= =======
Basic Earnings per Share..................................................... $ 0.33 $ 0.98
======= =======
Diluted Earnings per Share................................................... $ 0.32 $ 0.98
======= =======
</TABLE>
7. COMMITMENTS AND CONTINGENCIES
Substantially all of the properties have been subjected to Phase I environmental
audits. Such audits have not revealed nor is management aware of any
environmental liability that management believes would have a material adverse
impact on the Company's financial position or results of operations. Management
is unaware of any instances in which it would incur significant environmental
costs if any or all of the properties were sold, disposed of or abandoned.
During the third quarter of 1994, the Company held more than 25% of the value of
its gross assets in overnight Treasury Bill reverse repurchase transactions
which the United States Internal Revenue Service (the "IRS") may view as
non-qualifying assets for the purposes of satisfying an asset qualification test
applicable to REITs, based on a Revenue Ruling published in 1977 (the "Asset
Issue"). The Company has requested that the IRS enter into a closing agreement
with the Company that the Asset Issue will not impact the Company's status as a
REIT. The IRS has deferred any action relating to the Asset Issue pending the
further examination of the Company's 1991-1995 tax returns (the "Tax Audit").
Based on developments in the law which occurred since 1977, the Company's Tax
Counsel, Battle Fowler LLP, has rendered an opinion that the Company's
investment in Treasury Bill repurchase obligations would not adversely affect
its REIT status. However, such opinion is not binding upon the IRS.
In connection with the spin-off of Atlantic, Atlantic has assumed all liability
arising out of the Tax Audit and the Asset Issue, including liabilities for
interest and penalties and attorney fees relating thereto. In connection with
the assumption of such potential liabilities, Atlantic and the Company have
entered into a tax agreement which provides that the Company (under the
direction of its Continuing Trustees), and not Atlantic, will control, conduct
and effect the settlement of any tax claims against the Company relating to the
Tax Audit and the Asset Issue. Accordingly, Atlantic will not have any control
as to the timing of the resolution or disposition of any such claims. The
Company and Atlantic also received an opinion from Special Tax Counsel, Wolf,
Block, Schorr and Solis-Cohen LLP, that, to the extent there is a deficiency in
the Company's taxable income arising out of the IRS examination and provided the
Company timely makes a deficiency dividend (i.e., declares and pays a
distribution which is permitted to relate back to the year for which each
deficiency was determined to satisfy the requirement that the REIT distribute 95
percent of its taxable income), the classification of the Company as a REIT for
the taxable years under examination would not be affected. Under the tax
agreement referred to above, Atlantic has agreed to reimburse the Company for
the amount of any deficiency dividend so made. If notwithstanding the
above-described opinions of legal counsel, the IRS successfully challenged the
status of the Company as a REIT, its status could be adversely affected. If the
Company lost its status as a REIT, the Company believes that it will be able to
re-elect REIT status for the taxable year beginning January 1, 1999.
Although the IRS agent conducting the examination has not issued his final
examination report with respect to the tax issues raised in the Tax Audit,
including the Asset Issue (collectively, the "Tax Issues"), the Company has
received a preliminary draft of the examining agent's report. The draft sets
forth a number of positions which the examining agent has taken with respect to
the Company's taxes for the years that are subject to the Tax Audit, which the
Company believes are not consistent with applicable law and regulations of the
IRS. If the final report were issued in its current form, the liability of
Atlantic to indemnify the Company may be substantial. The Continuing Trustees of
the Company are engaged in ongoing discussions with the examining agent and his
supervisors with regard to the positions set forth in the draft report. There
can be no assurance that, after conclusion of discussions
10
<PAGE> 11
with such agent and his supervisors regarding the draft report, the examining
agent will not issue the proposed report in the form previously delivered to the
Company (or another form). Issuance of the revenue agent's report constitutes
only the first step in the IRS administrative process for determining whether
there is any deficiency in the Company's tax liability for the years at issue
and any adverse determination by the examining agent is subject to
administrative appeal within the IRS and, thereafter, to judicial review. As
noted above, pursuant to the tax agreement between Atlantic and the Company,
Atlantic has assumed all liability arising out of the Tax Audit and the Tax
Issues. Based on the amount of Atlantic's assets, as disclosed in its Annual
Report on Form 10-K for the year ended December 31, 1997, and its Quarterly
Report on Form 10-Q for the period ended June 30, 1998, the Company does not
believe that the ultimate resolution of the Tax Issues will have a material
adverse effect on the financial position, results of operations or cash flows of
the Company.
During July 1997 Montgomery Ward ("Wards") a tenant at three of the Company's
properties, (Tel-Twelve Mall, Clinton Valley Mall and Shoppes of Lakeland),
filed for protection under Chapter 11 of the Bankruptcy Code. In October 1997,
Wards issued a list of anticipated store closings which included the stores at
the Company's Clinton Valley Mall. This location consists of a 101,200 square
foot department store and a 7,480 square foot TBA store (Tires, Batteries and
Automotive). The Company was notified in March 1998 that Wards rejected the
lease. On an annual basis, Wards paid, in the aggregate, approximately $1,000 in
base rent and operating and real estate tax expense reimbursements for the
Clinton Valley Mall. The Company has leased 30,900 square feet of the former
department store and rental income is expected to commence during the first
quarter of 1999.
11
<PAGE> 12
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS Of FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
(Dollars in Thousands, except per Share and per Unit amounts)
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the Consolidated Financial
Statements of the Company, including the respective notes thereto which are
included in this Form 10-Q.
CAPITAL RESOURCES AND LIQUIDITY
The Company generated $13,378 in cash flows from operating activities and
$10,742 in cash flows from financing activities for the nine months ended
September 30, 1998. These combined cash flows of $24,120 were used to fund
$24,410 of investing activities which were primarily the acquisition of real
estate assets.
The Company's mortgages and notes payable amounted to $325,696 at September 30,
1998, with a weighted average interest rate of 7.84%. The debt consists of nine
loans secured by various properties, one unsecured term loan, and the Credit
Facility which is secured by various properties. Eight of the mortgage loans
amounting to $173,208 have maturities ranging from 2000 to 2008, monthly
payments which include regularly scheduled amortization, and have fixed interest
rates ranging between 6.83% to 8.50%. One of the mortgage loans, evidenced by
tax free bonds, amounting to $7,000 secured by Oak Brook Square Shopping Center
is non-amortizing, matures in 2010, and carries a floating interest rate equal
to 75% of the new issue long term Capital A rated utility bonds, plus interest
to the lender sufficient to cause the lender's overall yield on its investment
in the bonds to be equal to 200 basis points over their applicable LIBOR rate
(7.41% at September 30, 1998). Another mortgage loan with an interest rate of
8.75%, matured in June 1998.
In connection with the acquisition of Aquia Towne Center shopping center, the
Company assumed an existing $15,170 mortgage loan. The loan matures in March
2008 and has an interest rate of 7.39%. In addition, Ramco-Gershenson
Properties, L.P. (the "Operating Partnership"), the Company's operating
partnership, issued 239,697 OP Units valued at approximately $5,300.
Variable rate debt accounted for $152,488 of outstanding debt with a weighted
average interest rate of 7.98%. Variable rate debt accounted for approximately
46.8% of the Company's total debt and 29.8% of its total capitalization. The
Company has an interest rate protection agreement in place relative to $75,000
of floating rate debt as discussed below. After taking into account the impact
of converting the variable rate debt into fixed rate debt by use of the interest
rate swap agreement discussed below, the Company's variable rate debt would
account for approximately 23.8% of the Company's total debt and 15.1% of its
total capitalization.
The Company has an unsecured term loan amounting to $45,000, maturing May 1999,
which may under certain circumstances be extended to October 2000 at the
election of the Operating Partnership. This term loan bears interest between 250
and 275 basis points over LIBOR, depending on certain debt ratios (9.38% at
September 30, 1998).
The Company currently has a $110,000 Credit Facility, of which $100,488 was
outstanding as of September 30, 1998. This Credit Facility bears interest
between 137.5 and 162.5 basis points over LIBOR depending on certain debt ratios
(weighted average 7.39% interest rate at September 30, 1998) and matures May
1999. The maturity date may under certain circumstances be extended to October
2000 at the election of the Operating Partnership. The credit facility is
secured by mortgages on various properties and contains financial covenants
relating to liabilities-to-asset ratio, minimum operating coverage ratios and a
minimum equity value. As of September 30, 1998 the Company was in compliance
with the covenant terms. At September 30, 1998, outstanding letters of credit
issued under the credit facility total $836.
The Company used proceeds from the borrowings under the Credit Facility, the
assumption of the existing mortgage on Aquia Towne Center, the issuance of
$10,000 of Series A Preferred Shares and the issuance of 239,697 OP Units with a
fair value of approximately $5,300 to finance the acquisitions of Southbay
Fashion Center, Conyers Crossing and Aquia Towne Center, the development of
White Lake MarketPlace, the repayment of a mortgage loan in June 1998, and to
pay for other capital expenditures.
During August 1998, the Company executed an interest rate swap agreement to
limit the Company's exposure to increases in interest rates on its floating rate
debt. The notional amount of the agreement was $75,000. Based on rates currently
in effect under the Company's Credit Facility, the agreement provides for a
fixed rate of 7.425% through October 2000. In conjunction with this agreement,
the Company terminated, at no cost, the two interest rate collar agreements
previously in place. These terminated agreements consisted of a $75,000
agreement through May 1, 1999 which had a cap at 8.375% and a floor of 7.125%,
and a $50,000
12
<PAGE> 13
agreement for the period May 1999 to October 2000 which had a cap
at 8.375% and a floor of 7.225%. The Company is exposed to credit loss in the
event of non-performance by the other parties to the interest rate swap
agreement, however; the Company does not anticipate non-performance by the
counter parties.
Based on the debt and the market value of equity, the Company's debt to total
market capitalization (debt plus market value equity) ratio was 63.6% at
September 30, 1998. On a pro forma basis, if the full MSAM/Kimco equity
investment were infused, the debt to total market capitalization would be 61.1%
at September 30, 1998.
The two properties in which the Operating Partnership owns an interest and are
accounted for on the equity method of accounting are subject to non-recourse
mortgage indebtedness. At September 30, 1998, the pro rata share of non-recourse
mortgage debt on the unconsolidated properties (accounted for on the equity
method) was $6,215 with a weighted average interest rate of 9.14%.
In October, 1997, the Company entered into an agreement with certain clients
advised by Morgan Stanley Asset Management, Inc. ("MSAM"), and Kimco Realty
Corporation ("Kimco") pursuant to which such entities agreed to invest up to an
aggregate of $35,000 in the Operating Partnership. The equity investment
involves the issuance of up to 1.4 million Series A Convertible Preferred
Shares, ("Series A Preferred Shares") issued by the Company at a price of $25.00
per share. The Series A Preferred Shares are convertible, under certain
circumstances, into Common Shares of the Company at a conversion price of $17.50
per Common Share. The initial investment of $11,667 was made in October 1997. An
additional investment of $10,000 was made in September 1998. The remaining
commitment of $13,333 may be drawn by through February 28, 1999 and may be used
to help fund strategic acquisitions, retenanting or redevelopment activities, or
to reduce outstanding debt. The dividend rate on the Series A Preferred Shares
is expected to equal the dividend rate presently being paid to the Company's
common shareholders.
After the closing of this transaction, the MSAM clients are required to purchase
19.4% of the first $50,000 in a follow-on public offering of the Company's
Common Shares at the offering price less the underwriter's fees, commissions,
and discounts per share. Upon consummation of such public offering, all
outstanding Series A Preferred Shares will be exchanged into Common Shares of
the Company, at a conversion price of $17.50 per share, which conversion price
is subject to adjustment in certain circumstances.
The Company's current capital structure includes property specific mortgages,
the unsecured term loan, the Credit Facility, Series A Preferred Shares, Common
Shares and minority interest in the Operating Partnership. Minority interest
increased to 29.9%, from 26.5% at December 31, 1997. The increase to minority
interest resulted from the OP Units assumed to be issued in conjunction with the
earnout calculation for the Jackson Crossing shopping center, and the issuance
of 239,697 OP Units in connection with the acquisition of Aquia Towne Center.
The minority interest computation assumes the issuance of an additional 238,965
OP Units to the Ramco Group relative to increases in net operating income at the
Jackson Crossing shopping center. The computation is subject to due diligence
procedures and to Board of Director approval. Currently, the minority interest
in the Operating Partnership represents the 29.9% ownership in the Operating
Partnership which may, under certain conditions, be exchanged for approximately
3,042,185 Common Shares.
The OP Units owned by the Ramco Principals are subject to lock-up agreements
which provide that the Units cannot be transferred, except under certain
conditions until November 1998. In addition, the OP Units issued are
exchangeable for Common Shares of the Company on a one-for-one basis. The
Company, as sole general partner of the Operating Partnership, has the option to
exchange such Units for cash based on the current trading price of the Common
Shares. Assuming the exchange of all limited partnership interests in the
Operating Partnership, there would be outstanding approximately 10,170,443
Common Shares with a market value of approximately $166,592 at September 30,
1998 (based on the closing price of $16.38 per share on September 30, 1998).
In July 1998, the Company commenced the construction of its newest development,
White Lake MarketPlace, a 350,000 square foot community shopping center, located
in the metro Detroit area. Management anticipates this $15,500 development will
be funded utilizing the Credit Facility, other borrowings, and/or the remaining
$13,333 MSAM/Kimco equity commitment for Series A Preferred Shares, or the
issuance of equity securities or warrants under the Company's shelf registration
statement.
The principal uses of the Company's liquidity and capital resources are for
acquisitions, development, including expansion and renovation programs, and debt
repayment. To maintain its qualification as a real estate investment trust under
the Internal Revenue Code of 1986, as amended (the "Code"), the Company is
required to distribute to its shareholders at least 95% of its "Real Estate
Investment Trust Taxable Income" as defined in the Code.
The Company anticipates that the combination of the availability under the
Credit Facility, potential new borrowings relative to the acquired properties
and development properties, construction loans, the remaining MSAM/Kimco equity
commitment for Series A
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<PAGE> 14
Preferred Shares, joint ventures, and potential future offering of securities
under the shelf registration statement will provide adequate liquidity for the
foreseeable future to fund future acquisitions, developments, expansions,
repositionings, and to continue its currently planned capital programs and to
make distributions to its shareholders in accordance with the Code's
requirements applicable to REIT's. Although the Company believes that the
combination of factors discussed above will provide sufficient liquidity, no
such assurance can be given.
During July 1997 Wards, a tenant at three of the Company's properties,
Tel-Twelve Mall, Clinton Valley Mall and Shoppes of Lakeland, filed for
protection under Chapter 11 of the Bankruptcy Code. In October 1997, Wards
issued a list of anticipated store closings which included the stores at the
Company's Clinton Valley Mall. This location consists of a 101,200 square foot
department store and a 7,480 square foot TBA store (Tires, Batteries and
Automotive). The Company was notified in March 1998 that Wards rejected the
lease. On an annual basis, Wards paid, in the aggregate, approximately $1,000 in
base rent and operating and real estate tax expense reimbursement for the
Clinton Valley Mall. The Company has leased 30,900 square feet of the former
department store and rental income is expected to commence during the first
quarter of 1999.
The Company recognizes that Year 2000 issues may have an impact on its business,
operations and financial condition. The Company has completed an assessment of
its Year 2000 readiness with respect to all of its information technology ("IT")
systems and is currently addressing the reliability and condition of its non-IT
systems. These assessments will continue to be updated as additional information
becomes available and as new concerns are identified.
The Company's IT systems generally consist of file servers, operating systems,
application programs and workstations that utilize purchased and customized
systems. The Company continues to evaluate the Year 2000 compliance status of
each vendor and believes that its existing systems or planned upgrades during
1998 will be Year 2000 compliant. Implementation and upgrades of non-Year 2000
compliant systems will not result in significant additional cost to the Company.
The Company's non-IT systems which may be subject to Year 2000 issues are
facility related and encompass areas such as HVAC systems, elevators, security,
lighting, telecommunications, electrical, plumbing, fire and sprinkler controls.
The Company is currently addressing the potential impact of Year 2000 in these
areas and has not identified any instances where Year 2000 issues will require
material costs to repair or replace any of these systems.
The significant risks to the Company in the event that Year 2000 issues are not
identified and corrected could cause delays or errors in processing financial
and operation information while non-IT system problems could result in forced
closure of certain facilities which could limit the efficient operation of the
Company's properties.
While the Company believes its planning and remediation efforts are adequate to
address its Year 2000 concerns, there can be no guarantee that the systems of
other companies on which the Company's systems and operations rely will be
converted on a timely basis and will not have a material effect on the Company.
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1998 TO NINE MONTHS ENDED
SEPTEMBER 30, 1997.
Total revenues for the nine months ended September 30, 1998 increased by 31.9%,
or $13,457, to $55,668 as compared to $42,211 for the nine months ended
September 30, 1997. The increase was a result of a $12,914 increase in minimum
rents, a $1,048 increase in recoveries from tenants, offset by a $325 decrease
in percentage rents and a $180 decrease in interest and other income.
Minimum rents increased 47.4%, or $12,914, to $40,134 for the nine months ended
September 30, 1998 as compared to $27,220 for the nine months ended September
30, 1997. Recoveries from tenants increased 7.9%, or $1,048, to $14,321 as
compared to $13,273 for the nine months ended September 30, 1997. These
increases are primarily attributable to the acquisition of the Madison, Pelican
and Village Lakes shopping centers effective May, June and December 1997,
respectively, and the acquisition of the Southeast Portfolio on October 30,
1997. The operating results for the nine months ended September 30, 1998 include
the impact of these acquisitions for the full nine months in 1998, while the
results for the nine months ended September 30, 1997 included the impact of four
months for the Madison acquisition, three months for the Pelican acquisition and
no impact from the other acquisitions. The recovery ratio for the nine months
ended September 30, 1998 decreased to 99.3% as compared to 102.1% for the nine
months ended September 30, 1997.
The decrease in percentage rent is primarily the result of the Company adopting
consensus Issue No. 98-9, "Accounting for Contingent Rent in Interim Periods".
14
<PAGE> 15
Interest and other income decreased 30.3%, or $180, to $415 as compared to $595
for the nine months ended September 30, 1997. This decrease was primarily
attributable to non-recurring tenant lease buyouts in 1997.
Total expenses for the nine months ended September 30, 1998 increased by 44.2%,
or $14,402, to $46,991 as compared to $32,589 for the nine months ended
September 30, 1997. The increase was due to a $1,417 increase in total
recoverable expenses, including real estate taxes and recoverable operating
expenses, a $3,243 increase in depreciation and amortization, a $124 decrease in
other operating expenses, a $766 increase in general and administrative
expenses, and a $9,100 increase in interest expense.
Total recoverable expenses, including real estate taxes and recoverable
operating expenses, increased by 10.9%, or $1,417, to $14,421 as compared to
$13,004 for the nine months ended September 30, 1997, depreciation and
amortization increased by 57.0%, or $3,243, to $8,935 as compared to $5,692 for
the nine months ended September 30, 1997, and other operating expenses decreased
17.2%, or $124 to $598 as compared to $722 for the nine months ended September
30, 1998. General and administrative expenses increased 21.4%, or $766, to
$4,349 as compared to $3,583 for the nine months ended September 30, 1997. The
increase in recoverable expenses of $1,417, depreciation and amortization of
$3,243, and interest expense of $9,100, are due to the acquisition of the
Southeast Portfolio and the other property acquisitions in 1997 and acquisitions
and capital expenditures in 1998.
The minority interest of $2,372 for the nine months ended September 30, 1998
represents a 28.1% share of income before minority interest of the operating
partnership compared to a 26.7% share of income before minority interest, or
$2,500 for the nine months ended September 30, 1997. The increase in the
percentage share of income is due to the increase in OP Units assumed to be
issued in connection with the earnout calculation for the Jackson Crossing
shopping center and the issuance of 239,697 OP Units related to the Aquia Towne
Center acquisition.
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1998 TO THREE MONTHS ENDED
SEPTEMBER 30, 1997
Total revenues for the three months ended September 30, 1998 increased 31.1%, or
$4,502, to $18,963 as compared to $14,461 for the three months ended September
30, 1997. The increase was a result of a $4,389 increase in minimum rents, a
$381 increase in recoveries from tenants, a $27 increase in interest and other
income, offset by a $295 decrease in percentage rents.
Minimum rents increased 47.2%, or $4,389, to $13,693 for the three months ended
September 30, 1998 as compared to $9,304 for the three months ended September
30, 1997. Recoveries from tenants increased 8.2%, or $381, to $5,058 as compared
to $4,677 for the three months ended September 30, 1997. These increases are
primarily attributable to the acquisition of the Southeast Portfolio on October
30, 1997. The operating results for the three months ended September 30, 1998
included the impact of these acquisitions for the full three months in 1998,
along with the acquisitions of Southbay Fashion Center, effective May 1998. The
results for the three months ended September 30, 1997 did not included the
impact of Village Lakes and the Southeast Portfolio. The recovery ratio for the
three months ended September 30, 1998 decreased to 101.0% as compared to 103.5%
for the three months ended September 30, 1997.
The decrease in percentage rent is primarily the result of the Company adopting
consensus Issue No. 98-9, "Accounting for Contingent Rent in Interim Periods".
Total expenses for the three months ended September 30, 1998 increased by 42.6%,
or $4,810, to $16,093 as compared to $11,283 for the three months ended
September 30, 1997. The increase was due to a $486 increase in total recoverable
expenses, including real estate taxes and recoverable operating expenses, a
$1,060 increase in depreciation and amortization, a $4 increase in other
operating expenses, a $292 increase in general and administrative expenses, and
a $2,968 increase in interest expense.
Total recoverable expenses, including real estate taxes and recoverable
operating expenses, increased by 10.7%, or $486, to $5,007 as compared to $4,521
for the three months ended September 30, 1997, depreciation and amortization
increased 53.0%, or $1,060, to $3,059 as compared to $1,999 for the three months
ended September 30, 1997, and other operating expenses increased 2.2%, or $4, to
$183 as compared to $179 for the three months ended September 30, 1997. The
increase in recoverable expenses of $486, depreciation and amortization of
$1,060, and interest expense of $2,968, are due to the acquisition of the
Southeast Portfolio and the other property acquisitions in 1997 and acquisitions
and other capital expenditures in 1998.
15
<PAGE> 16
The loss from unconsolidated entities decreased 23.5%, or $20, to $65 for the
three months ended September 30, 1998 as compared to a loss of $85 for the three
months ended September 30, 1997.
The minority interest of $810 for the three months ended September 30, 1998
represents a 28.9% share of income before minority interest of the operating
partnership compared to a 26.1% share of income before minority interest, or
$806 for the three months ended September 30, 1997. The increase in the
percentage share of income is due to an increase in OP Units assumed to be
issued in connection with the earnout calculation for the Jackson Crossing
shopping center and the issuance of 239,697 OP Units related to the Aquia Towne
Center acquisition.
GENERAL AND ADMINISTRATIVE
Following is a breakdown of the general and administrative expenses shown in the
financial statements (unaudited):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Management Fees.............................................. $ 234 $ 264 $ 686 $ 778
Leasing, Brokerage and Development Fees 5 142 147 269
Other Revenues............................................... 216 98 561 410
Leasing/Development Cost Reimbursements 391 357 1,395 952
------ ------ ------ ------
Total Revenues................................ 846 861 2,789 2,409
------ ------ ------ ------
Employee Expenses............................................ 1,213 1,038 3,687 3,033
Office and Other Expenses.................................... 315 252 1,112 873
Depreciation and Amortization................................ 67 60 195 183
------ ------ ------ ------
Total Expenses................................ 1,595 1,350 4,994 4,089
------ ------ ------ ------
Operating Partnership Cost Reimbursement Expenses............ 749 489 2,205 1,680
------ ------ ------ ------
Operating Partnership Administrative Expenses................ 539 524 1,811 1,604
------ ------ ------ ------
Shopping Center Level General and Administrative Expenses.... 112 95 333 299
------ ------ ------ ------
Total General and Administrative Expenses.................... $1,400 $1,108 $4,349 $3,583
====== ====== ====== ======
</TABLE>
The increase in general and administrative expenses, when compared to the nine
months ended September 30, 1997 is primarily due to general salary increases,
including an increase in headcount incurred subsequent to the third quarter of
1997 and an increase in state and local tax expense.
FUNDS FROM OPERATIONS
Management generally considers funds from operations ("FFO") to be one measure
of financial performance of an equity REIT. It has been presented to assist
investors in analyzing the performance of the Company and to provide a relevant
basis for comparison to other REITs.
The Company has adopted the most recent National Association of Real Estate
Investment Trusts ("NAREIT") definition of FFO, which was effective on January
1, 1996. Under the NAREIT definition, FFO represents income (loss) before
minority interest (computed in accordance with generally accepted accounting
principles), excluding gains (losses) from debt restructuring and sales of
property, plus real estate related depreciation and amortization (excluding
amortization of financing costs), and after adjustments for unconsolidated
partnerships and joint ventures.
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<PAGE> 17
Therefore, FFO does not represent cash generated from operating activities in
accordance with generally accepted accounting principles and should not be
considered an alternative to net income as an indication of the Company's
performance or to cash flows from operating activities as a measure of liquidity
or of the ability to pay distributions. Furthermore, while net income and cash
generated from operating, investing and financing activities determined in
accordance with generally accepted accounting principles consider capital
expenditures which have been and will be incurred in the future, the calculation
of FFO does not.
The following table illustrates the calculation of FFO for the three months and
nine months ended September 30, 1998, and 1997 (unaudited):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income $ 1,995 $ 2,287 $ 6,077 $ 6,882
Add: Depreciation and amortization.................. 3,066 1,999 8,956 5,692
Add: Minority interest in partnership............... 810 806 2,372 2,500
------- ------- ------- -------
Funds from operations - diluted........................... $ 5,871 $ 5,092 $17,405 15,074
Less: Preferred share dividends..................... (345) - (908) -
------- ------- ------- -------
Funds from operations - basic............................. $ 5,526 $ 5,092 $16,497 $15,074
======= ======= ======= =======
Weighted average equivalent shares outstanding (1)
Basic................................................ 10,010 9,691 9,931 9,721
======= ======= ======= =======
Diluted.............................................. 10,831 9,727 10,681 9,743
======= ======= ======= =======
Supplemental disclosure:
Straight-line rental income.......................... 662 304 1,413 1,337
======= ======= ======= =======
Amortization of management contracts and covenants
not to compete.................................. $ 124 $ 124 $ 372 $ 372
======= ======= ======= =======
</TABLE>
(1) For basic FFO, represents the weighted average total shares outstanding,
assuming the redemption of all Operating Partnership Units for Common
Shares. For diluted FFO, represents the weighted average total shares
outstanding, assuming the redemption of all Operating Partnership Units for
Common Shares, the Series A Preferred Shares converted to Common Shares,
and the Common Shares issuable under the treasury stock method upon
exercise of stock options.
CAPITAL EXPENDITURES
During the nine months ended September 30, 1998, the Company spent approximately
$5,838 on revenue generating capital expenditures including tenant allowances,
leasing commissions paid to third-party brokers, legal costs relative to lease
documents, and capitalized leasing and construction costs. These types of costs
generate a return through rents from tenants over the term of their leases.
Revenue enhancing capital expenditures, including expansions, renovations or
repositionings, were approximately $3,022. Revenue neutral capital expenditures,
such as roof and parking lot repairs which are anticipated to be recovered from
tenants, amounted to approximately $2,152.
17
<PAGE> 18
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In May 1998, the Emerging Issues Task Force of the Financial Accounting
Standards Board reached a consensus on Issue No. 98-9, "Accounting for
Contingent Rent in Interim Financial Periods". This statement establishes
standards for when the lessor can recognize contingent rental income that is
based on future specified targets within the lessor's fiscal year. The consensus
requires that contingent rental income in interim periods should be deferred
until the specified target that results in contingent rental income is achieved.
This impact of adopting this consensus was to decrease percentage rents by
approximately $300 or $0.03 per share for the three months and the nine months
ended September 30, 1998.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive Income",
and SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information". Readers are referred to the "Impact of Recent Accounting
Pronouncements" section of the Company's 1997 Annual Report to Shareholders for
further discussion.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities". This Statement
requires companies to record derivatives on the balance sheet as assets and
liabilities, measured at fair value. Gains or losses resulting from changes in
the values of those derivatives would be accounted for depending on the use of
the derivative and whether it qualifies for hedge accounting. Management has not
determined the impact of the Statement on the Company's financial statements.
This Statement is effective for fiscal year beginning after June 15, 1999, with
earlier adoption encouraged. The Company will adopt this accounting standard as
required by January 1, 2000.
This Form 10-Q contains forward-looking statements with respect to the operation
of certain of the Company's properties. Management of the Company believes the
expectations reflected in the forward-looking statements made in this document
are based on reasonable assumptions. Certain factors could occur that might
cause actual results to vary. These include general economic conditions, the
strength of key industries in the cities in which the Company's properties are
located, the performance of the Company's tenants at the Company's properties
and elsewhere, and other factors discussed in this report and the Company's
reports filed with the Securities and Exchange Commission.
18
<PAGE> 19
PART II - OTHER INFORMATION
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
See Exhibit Index immediately preceding the exhibits.
(b) REPORTS ON FORM 8-K
No reports on Form 8-K have been filed during the quarter
ending September 30, 1998.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
RAMCO-GERSHENSON PROPERTIES TRUST
Date: November 10, 1998 By: /s/ Dennis E. Gershenson
--------------------------------
Dennis E. Gershenson
President and Trustee
(Chief Executive Officer)
Date: November 10, 1998 By: /s/ Richard J. Smith
--------------------------------
Richard J. Smith
Chief Financial Officer
(Principal Accounting Officer)
20
<PAGE> 21
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
10.1 Promissory Note dated as of February 27, 1998 in the
principal face amount of $15,225,000.00 made by A.T.C., L.L.C.
in favor of GMAC Commercial Mortgage Corporation.
10.2 Deed of Trust and Security Agreement dated as of February 27,
1998 by A.T.C., L.L.C. to Lawyers Title Insurance Company for
the benefit of GMAC Commercial Mortgage Corporation relating
to a $415,225,000.00 loan.
10.3 Assignment and Assumption Agreement dated as of October 8,
1998 among A.T.C., L.L.C., Ramco Virginia Properties, L.L.C.,
A.T. Center, Inc., Ramco-Gershenson Properties Trust and
LaSalle National Bank, as trustee for the registered holders
of GMAC Commercial Mortgage Securities, Inc. Mortgage
Pass-Through Certificates.
10.4 Exchange Rights Agreement dated as of September 4, 1998
between Ramco-Gershenson Properties Trust, and A.T.C., L.L.C.
27.1 Financial Data Schedule
21
<PAGE> 1
EXHIBIT 10.1
PROMISSORY NOTE
$15,225,000.00 February 27, 1998
FOR VALUE RECEIVED, A.T.C., L.L.C., a Virginia limited liability
company, having its principal place of business at A.T.C., L.L.C. c/o Berman
Kappler, Inc., 1010 Wisconsin Avenue, N.W., Suite 250, Washington, D.C. 20007
(hereinafter referred to as "Borrower"), promises to pay to the order of GMAC
COMMERCIAL MORTGAGE CORPORATION, a California corporation, having its principal
place of business at 650 Dresher Road, Horsham, Pennsylvania 19055-8015
(hereinafter referred to as "Lender"), the principal sum of FIFTEEN MILLION TWO
HUNDRED TWENTY FIVE THOUSAND AND NO/100THS DOLLARS ($15,225,000.00), with
interest on the unpaid principal balance to be computed from the date of this
Promissory Note (this "Note") at the Applicable Interest Rate (hereinafter
defined), in lawful money of the United States of America which shall at the
time of payment be legal tender in payment of all debts and dues, public and
private.
1. PAYMENT OF PRINCIPAL AND INTEREST.
A. The principal and interest under this Note shall be payable at the
office of Lender as set forth above, Attn: Mr. Barry Moore, or at such other
place as Lender may from time to time designate in writing, in equal consecutive
monthly installments of $106,454.33 each, on the first day of April, 1998, and
on the first day of each calendar month thereafter up to and including the first
day of March, 2008 (or if such day is not a Business Day (hereinafter defined)
the next Business Day thereafter); and the balance of said principal sum
together with accrued and unpaid interest and any other amounts due under this
Note, the Security Instrument and the Other Security Documents (each as
hereinafter defined) shall be due and payable on the 1st day of March, 2008 (the
"Maturity Date"). The term "Business Day" shall mean a day on which commercial
banks are not authorized or required by law to close in the State of New York.
B. Interest on the principal sum of this Note shall accrue in arrears
and be calculated on the basis of an actual three hundred sixty (360) day year
except that interest due and payable for a period less than a full month shall
be calculated by multiplying the actual number of days elapsed in such period by
a daily rate based on said 360 day year. In computing the number of days during
which interest accrues, the day on which funds are initially advanced shall be
included regardless of the time of day such advance is made, and the day on
which funds are repaid shall be included unless repayment is credited prior to
close of business. Payments in federal funds immediately available in the place
designated for payment which are received by Lender prior to 2:00 p.m. local
time at said place of payment shall be credited prior to close of business,
while other payments may, at the option of Lender, not be credited until
immediately available to Lender in federal funds in the place designated for
payment prior to 2:00 p.m. local time
<PAGE> 2
at said place of payment on a day on which Lender is open for business. On the
date of the closing of the loan evidenced by this Note, Borrower shall pay to
Lender an interest payment equal to the product of the number of days remaining
in the month from the date on which the loan is closed multiplied by the
interest per diem. Payments under this Note shall be applied first to the
payment of interest and other costs and charges due in connection with this Note
or the Debt (as hereinafter defined), as Lender may determine in its sole
discretion, and the balance applied toward the reduction of the principal sum in
inverse order of maturity (but such application shall not reduce the amount of
the fixed monthly installments required to be paid pursuant to Section 3.A.
above). All amounts due under this Note shall be payable without set off,
counterclaim or any other deduction whatsoever by the Borrower, unless
authorized by Lender or an unappealable judgment of a court of competent
jurisdiction.
C. The term "Applicable Interest Rate" as used in this Note shall mean
from the date of this Note through and including the Maturity Date, a rate of
7.390% per annum.
2. DEFAULT.
A. If any sum payable under this Note is not paid within five (5) days
on 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 sum or the
maximum amount permitted by applicable law to defray the expenses 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 the Security Instrument and the Other Security Documents.
B. The entire outstanding principal sum of this Note, together with all
interest accrued and unpaid thereon and all other sums due under the Security
Instrument, the Other Security Documents and this Note (all such sums
hereinafter collectively referred to as the "Debt"), or any portion thereof,
shall without notice become immediately due and payable at the option of Lender
if any payment required under this Note is not paid on the date when due or on
the happening of any other default, each after the expiration of any applicable
notice and grace periods, herein or under the terms of the Security Instrument
or the Other Security Documents (hereinafter each an "Event of Default"). Time
is of the essence in this Note, the Security Instrument and the Other Security
Documents. All of the terms, covenants and conditions contained in the Security
Instrument and the Other Security Documents are hereby made part of this Note to
the same extent and with the same force as if they were fully set forth herein.
In the event that Lender employs counsel to collect the Debt or to protect or
foreclose the security hereof, Borrower also agrees to pay on demand all costs
of collection incurred by Lender, including reasonable attorneys' fees for the
services of counsel whether or not suit be brought.
C. Borrower does hereby agree that upon the occurrence of an Event of
Default which is not cured within any applicable grace or notice period, or upon
the failure of Borrower to pay the Debt in full on the Maturity Date, or upon
the failure of Borrower to pay the Debt on the date specified in any notice
given pursuant to Section 3.A.(i) hereof,
2
<PAGE> 3
Lender shall be entitled to receive and Borrower shall pay interest on the
entire unpaid principal sum at the Applicable Interest Rate plus five percent
(5%) (the "Default Rate"); provided, however, that in the event Lender permits
Borrower to cure such Event of Default, then the rate of interest on the unpaid
principal balance of this Note shall be the Applicable Interest Rate and shall
be computed from the date such Event of Default is cured. The Default Rate shall
be computed from the occurrence of the Event of Default until the actual receipt
and collection of the Debt or, if permitted by Lender, the date such Event of
Default is cured. This charge 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. In the event the Default Rate would
otherwise exceed the maximum rate permitted by applicable law, the Default Rate
shall be the maximum rate permitted by applicable law.
3. PREPAYMENT AND DEFEASANCE.
A. Except as otherwise set forth herein, prepayments of this
Note shall not be permitted. Provided no Event of Default exists, the principal
balance of this Note may be prepaid in whole but not in part (except as
otherwise specifically provided herein) at any time after the date which is
thirty (30) days prior to the scheduled Maturity Date (the "Defeasance
Expiration Date") provided (i) written irrevocable notice of such prepayment
specifying the intended date of prepayment is received by Lender not more than
sixty (60) days and not less than thirty (30) days prior to the date of such
prepayment, and (ii) such prepayment is received on a scheduled payment date
(or, if such prepayment is not received on a scheduled payment date, interest is
paid through the last day of such calendar month) and is accompanied by all
interest accrued hereunder and all other sums due hereunder or under the
Security Instrument and Other Security Documents. With regard to any prepayment
made hereunder, if the prior written notice required in (i) above has not been
received by Lender, the required prepayment amount shall be increased by an
amount equal to the lesser of (i) thirty (30) days' unearned interest computed
on the outstanding principal balance of this Note so prepaid and (ii) unearned
interest computed on the outstanding principal balance of this Note so prepaid
for the period from, and including, the date of prepayment through the Maturity
Date. Notwithstanding anything to the contrary in this Note, the Security
Instrument or the Other Security Documents, the principal balance of the Note
shall be absolutely and unconditionally due and payable on the date specified in
any notice given pursuant to Section 3.A.(i) hereof.
B. Partial prepayments of this Note shall not be permitted, except
partial prepayments resulting from Lender applying insurance or condemnation
proceeds to reduce the outstanding principal balance of this Note as provided in
the Security Instrument, in which event no premium shall be due. No notice of
prepayment shall be required under the circumstance specified in the preceding
sentence. No principal amount repaid may be reborrowed. Partial payments of
principal shall be applied to the unpaid principal payments in inverse order of
maturity but such application shall not
3
<PAGE> 4
reduce the amount of the fixed monthly installments required to be paid pursuant
to Section 1.A. above.
C. (1) Provided no Event of Default exists, notwithstanding any
provision of this Note to the contrary, on or after April 1, 2001 (the "Optional
Defeasance Date"), and subject to a Rating Confirmation (hereinafter defined)
having been obtained therefor and subject to the terms and conditions set forth
in this Section 3.C., Borrower may defease all (but not less than all) of the
principal of this Note (hereinafter, a "Defeasance"). For purposes herein,
"Rating Confirmation," with respect to the matter in question, shall mean that
as a condition thereto the Rating Agencies (hereinafter defined) shall have
confirmed in writing that (i) such investment, replacement or action shall not
result, in and of itself, in a reduction, withdrawal or qualification of any
rating then assigned to any outstanding certificates issued with respect to a
Securitization (as defined in the Security Instrument) (collectively,
"Certificates") (if the Securitization has occurred), or (ii) such investment,
replacement or action would not result, in and of itself, in a reduction,
withdrawal or qualification of any rating for proposed Certificates then under
consideration by the Rating Agencies (if the Securitization has not yet
occurred); provided that if the Securitization has not taken (or as certified by
Lender, will not take) the form of a transaction rated by the Rating Agencies,
then "Rating Confirmation" shall instead mean that the matter in question shall
be subject to the prior approval of the Lender. For purposes herein "Rating
Agencies" shall mean each of Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc., Moody's Investors Service, Inc., Duff & Phelps Credit Rating
Co. and Fitch Investors Service, L.P. or any other nationally-recognized
statistical rating agency selected by Lender. No Defeasance shall be permitted
on or after the Defeasance Expiration Date. Each Defeasance shall be subject, in
each case, to the satisfaction of the following conditions precedent:
(a) Borrower shall provide not less than thirty (30) days' prior
written notice to Lender specifying a date (the "Defeasance Date")
on which the Defeasance Deposit (hereinafter defined) is to be made
and on which the Defeasance is to occur, as well as the anticipated
outstanding principal amount of this Note as of the Defeasance Date.
(b) Borrower shall pay to Lender all accrued and unpaid interest
on the principal balance of this Note to but not including the
Defeasance Date.
(c) Borrower shall pay to Lender all other sums, not including
scheduled interest or principal payments, then due under this Note,
the Security Instrument and the other documents executed in
connection therewith.
(d) No Event of Default shall exist on the Defeasance Date.
(e) Borrower shall pay to Lender the required Defeasance Deposit
for the Defeasance. For purposes herein, "Defeasance Deposit" shall
mean an amount equal to the sum of (i) the remaining principal
4
<PAGE> 5
amount of this Note, (ii) without duplication, all costs and
expenses (including the purchase price) incurred or to be incurred
in the purchase of U.S. Government Securities (hereinafter defined)
necessary to meet the Scheduled Defeasance Payments (hereinafter
defined) and (iii) any revenue, documentary stamp or intangible
taxes or any other tax or charge due in connection with the transfer
of this Note, or otherwise required to accomplish the agreements of
this Section 3.C. For purposes herein, "U.S. Government Securities"
shall mean securities evidencing an obligation to pay principal and
interest in a full and timely manner that are (y) direct obligations
of the United States of America for the payment of which its full
faith and credit is pledged, or (z) obligations of an entity
controlled or supervised by and acting as an agency or
instrumentality of and guaranteed as a full faith and credit
obligation by the United States of America, which in either case are
not callable or redeemable at the option of the issuer thereof
(including a depository receipt issued by a bank (as defined in
Section 3(a)(2) of the Securities Act of 1933, as amended) as
custodian with respect to any such securities or a specific payment
of principal of or interest on any such securities held by such
custodian for the account of the holder of such depository receipt;
provided that (except as required by law) such custodian is not
authorized to make any deduction from the amount payable to the
holder of such depository receipt from any amount received by the
custodian in respect of the securities or the specific payment of
principal of or interest on the securities evidenced by such
depository receipt).
(f) Borrower shall execute and deliver one or more security
agreements, in form and substance satisfactory to Lender in its sole
and absolute discretion, creating a first priority lien on the
Defeasance Deposit and the U.S. Government Securities purchased with
the Defeasance Deposit in accordance with the provisions of this
Section 3.C. (the "Defeasance Security Agreement").
(g) Borrower shall deliver to Lender an opinion of counsel for
Borrower in form satisfactory to Lender in its sole and absolute
discretion, stating, among other things, that Lender has a perfected
first priority security interest in the U.S. Government Securities
purchased with the Defeasance Deposit.
(h) If this Note and the Security Instrument is included in any
"real estate mortgage investment conduit" ("REMIC") within the
meaning of Section 860D of the Internal Revenue Code of 1986, as
amended and any successor statutes thereto, and applicable U.S.
Department of Treasury regulations issued pursuant thereto (the
"Code"), formed pursuant to a Securitization, Borrower shall also
deliver or cause to be delivered an opinion of counsel, in form and
substance satisfactory to Lender in its sole and absolute discretion
stating that, after a Defeasance, the Security Instrument will
continue to be a "qualified mortgage" within the meaning
5
<PAGE> 6
of Section 860G of the Code and the REMIC will not fail to maintain
its status as a "real estate mortgage investment conduit" within the
meaning of Section 860D of the Code as a result of such Defeasance.
(i) Borrower shall deliver to Lender an Officer's Certificate
certifying that the requirements set forth in this Section 3.C. have
been satisfied.
(j) Borrower shall deliver such other certificates, documents or
instruments as Lender may reasonably request.
(k) Borrower shall pay all reasonable costs and expenses of
Lender incurred in connection with the Defeasance, including any
costs and expenses associated with a release of the Security
Instrument as provided in this Section 3.C. hereof and reasonable
attorneys' fees and expenses.
(l) Borrower shall deliver to Lender a confirmation, in form and
substance satisfactory to Lender in its sole and absolute
discretion, by a "Big Four" independent certified public accounting
firm, that the Defeasance Deposit is sufficient to pay all Scheduled
Defeasance Payments and other amounts required to be paid by
Borrower hereunder in connection with the proposed Defeasance.
(m) Borrower shall deliver to Lender confirmation, in form and
substance satisfactory to Lender in its sole and absolute
discretion, that all conditions to defeasance have been met from any
applicable Rating Agency that has required as a condition to
defeasance that such conditions have been met.
(n) In the event an Event of Default arises after notice of
Defeasance is given but before Defeasance occurs, Borrower shall pay
a premium equal to one percent (1%) of the principal balance of this
Note.
(2) In connection with the Defeasance of this Note, Borrower hereby
appoints Lender as its agent and attorney-in-fact for the purpose of using the
Defeasance Deposit to purchase U.S. Government Securities (which purchases, if
made by Lender, shall be made on an arms-length basis at then prevailing market
rates) which provide payments on or prior to, but as close as possible to the
first day of each calendar month after the Defeasance Date, and in amounts equal
to the monthly installments due under this Note (the "Scheduled Defeasance
Payments"). Borrower, pursuant to the Defeasance Security Agreement or other
appropriate document, shall irrevocably authorize and direct that the payments
received from the U.S. Government Securities may be made directly to Lender and
applied to satisfy the obligations of Borrower under this Note. In connection
with the Defeasance of this Note, any portion of the Defeasance Deposit in
excess of the amount necessary to purchase the U.S. Government Securities
required by this Section 3.C. and (b) and satisfy Borrower's obligations under
this Section 3.C. shall be remitted to
6
<PAGE> 7
Borrower. Any amounts received in payment on the U.S. Government Securities in
excess of the amounts necessary to make monthly installment payments shall be
applied to reduce the outstanding principal amount of this Note.
(3) (a) If Borrower has elected Defeasance, and the requirements of this
Section 3.C. have been satisfied, the Property (as defined in the Security
Instrument) shall be released from the lien of the Security Instrument and the
U.S. Government Securities, pledged pursuant to the Defeasance Security
Agreement, shall be the sole source of collateral securing this Note.
(b) In connection with the release of the Security Instrument,
Borrower shall submit to Lender, not less than twenty (20) days prior to the
Defeasance Date, a release of lien for the Property (for execution by Lender) in
a form appropriate in the applicable state and otherwise satisfactory to Lender
in its reasonable discretion and all other documentation Lender reasonably
requires to be delivered by Borrower in connection with such release, together
with an Officer's Certificate certifying that such documentation (i) is in
compliance with all applicable laws, and (ii) will effect such releases in
accordance with the terms of the Security Instrument.
4. SECURITY. This Note is secured by the Security Instrument and the
Other Security Documents. The term "Security Instrument" as used in this Note
shall mean that certain Deed of Trust and Security Agreement dated the date
hereof, given by Borrower to Lender covering the fee estate of Borrower in
certain premises located in Stafford County, State of Virginia, and other
property, as more particularly described therein and intended to be duly
recorded in said County, as the same may be amended, supplemented, replaced or
otherwise modified from time to time. The term "Other Security Documents" as
used in this Note shall mean all and any of the documents other than this Note
or 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 guarantee
payment of the Debt.
5. EXCULPATION. Notwithstanding anything to the contrary contained in
this Note, the liability of Borrower and of any general partner or member of
Borrower to pay the Debt and for the performance of the other agreements,
covenants and obligations contained herein and in the Security Instrument and
the other Security Documents shall be limited as set forth in Article 15 of the
Security Instrument.
6. GENERAL
A. This Note is subject to the express condition that at no time shall
Borrower be obligated or required to pay interest on the Debt or any portion
thereof at a rate which could subject Lender to either civil or criminal
liability as a result of being in excess of the maximum interest rate which
Borrower is permitted by applicable law to contract or agree to pay. If by the
terms of this Note, Borrower is at any time required or obligated to pay
interest on the Debt or any portion thereof at a rate in excess of such maximum
rate, the rate of interest under this Note shall be deemed to be immediately
reduced to such maximum rate and the interest payable shall be computed at such
maximum rate and
7
<PAGE> 8
all prior interest payments in excess of the maximum rate shall be deemed to
have been payments in reduction of principal and not on account of the interest
due hereunder.
B. This Note may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower or Lender, but only by an agreement in writing signed by the party
against whom enforcement of any modification, amendment, waiver, extension,
change, discharge or termination is sought.
C. 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, notice of
non-payment and notice of intent to accelerate the maturity hereof (and of such
acceleration). 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 and the Other
Security Documents made by agreement between Lender and any other person or
party shall release, modify, amend, waive, extend, change, discharge, terminate
or affect the liability of Borrower, and any other who may become liable for the
payment of all or any part of the Debt, under this Note, the Security Instrument
and the Other Security Documents. Lender may release any guarantor or indemnitor
of the Debt from liability, in every instance without the consent of the
Borrower hereunder, and without waiving any rights the Lender may have hereunder
or by virtue of the laws of the State in which the Property (as defined in the
Security Instrument) is located or any other state of the United States.
D. Borrower (and the undersigned representative of Borrower, if any)
represents that Borrower has full power, authority and legal right to execute,
deliver and perform its obligations pursuant to this Note, the Security
Instrument and the Other Security Documents and that this Note, the Security
Instrument and the Other Security Documents constitute valid and binding
obligations of Borrower.
E. Lender shall have the right to transfer, sell and assign this Note,
the Security Instrument and the Other Security Documents, and the obligations
hereunder.
F. Borrower shall not, without the prior written consent of Lender,
sell, convey, alienate, mortgage, encumber, pledge or otherwise transfer, or
permit the transfer of, directly or indirectly, the Property or ownership
interests in Borrower, except as permitted in accordance with the Security
Instrument.
G. All notices or other written communications hereunder shall be given
and become effective as provided in the Security Instrument.
H. Borrower is and shall be obligated to pay principal, interest and any
and all other amounts which become payable hereunder or under the Other Security
Documents absolutely and unconditionally and without any abatement,
postponement, diminution or deduction and without any reduction for counterclaim
or setoff. In the event that at any time any payment received by Lender
hereunder shall be deemed by a court of competent
8
<PAGE> 9
jurisdiction to have been a voidable preference or fraudulent conveyance under
any bankruptcy, insolvency or other debtor relief law, then the obligation to
make such payment shall survive any cancellation or satisfaction of this Note or
return thereof to Borrower and shall not be discharged or satisfied with any
prior payment thereof or cancellation of this Note, but shall remain a valid and
binding obligation enforceable in accordance with the terms and provisions
hereof, and such payment shall be immediately due and payable upon demand.
I. This Note shall be interpreted, construed and enforced according to
the laws of the State where the Property is located. The terms and provisions
hereof shall be binding upon and inure to the benefit of Borrower and Lender and
their respective heirs, executors, legal representatives, successors,
successors-in-title and assigns, whether by voluntary action of the parties or
by operation of law. As used herein, the terms "Borrower" and "Lender" shall be
deemed to include their respective heirs, executors, legal representatives,
successors, successors-in-title and assigns, whether by voluntary action of the
parties or by operation of law. If Borrower consists of more than one person or
entity, each shall be jointly and severally liable to perform the obligations of
Borrower under this Note. All personal pronouns used herein, whether used in the
masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural and vice versa. Titles of articles and
sections are for convenience only and in no way define, limit, amplify or
describe the scope or intent of any provisions hereof. This Note, the Security
Instrument and the Other Security Documents contain the entire agreements
between the parties hereto relating to the subject matter hereof and thereof and
all prior agreements relative hereto and thereto which are not contained herein
or therein are terminated.
J. BORROWER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE
RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, WHETHER IN
CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN
EVIDENCED BY THIS NOTE, THE APPLICATION FOR THE LOAN EVIDENCED BY THIS NOTE,
THIS NOTE, THE SECURITY INSTRUMENT OR THE OTHER SECURITY DOCUMENTS OR ANY ACTS
OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES, DIRECTORS OR AGENTS IN
CONNECTION THEREWITH.
K. If any term of this Note or any application thereof shall be invalid
or unenforceable, the remainder of this Note and any other application of the
term shall not be affected thereby.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
9
<PAGE> 10
IN WITNESS WHEREOF, Borrower has duly executed this Note the day and
year first above written.
BORROWER:
A.T.C., L.L.C., a Virginia limited liability company
By: A.T. Center, Inc., a Virginia corporation
By: /s/ Thomas Kappler
-----------------------------------------------
Thomas Kappler, President
10
<PAGE> 1
EXHIBIT 10.2
A.T.C., L.L.C., as trustor
(Borrower)
to
LAWYERS TITLE INSURANCE COMPANY, as trustee
(Trustee)
for the benefit of
GMAC COMMERCIAL MORTGAGE CORPORATION, as beneficiary
(Lender)
-----------------------------------
DEED OF TRUST AND
SECURITY AGREEMENT
-----------------------------------
Dated: February 27, 1998
Location:
Aquia Towne Center
Stafford, Virginia
PREPARED BY AND UPON
RECORDATION RETURN TO:
Weil Gotshal & Manges LLP
100 Crescent Court
Suite 1300
Dallas, Texas 75201
Attention: C. Craig Lilly, Esq.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Article 1. GRANTS OF SECURITY...........................................................1
Section 1.1 Property Mortgaged...........................................................1
(a) Land.........................................................................1
(b) Additional Land..............................................................1
(c) Improvements.................................................................1
(d) Easements....................................................................2
(e) Fixtures and Personal Property...............................................2
(f) Leases and Rents.............................................................2
(g) Condemnation Awards..........................................................2
(h) Insurance Proceeds...........................................................3
(i) Tax Certiorari...............................................................3
(j) Rights.......................................................................3
(k) Agreements...................................................................3
(l) Intangibles..................................................................3
(m) Conversion...................................................................3
(n) Other Rights.................................................................3
Section 1.2 Assignment of Leases and Rents...............................................3
Section 1.3 Security Agreement...........................................................4
Section 1.4 Pledge of Monies Held........................................................4
Article 2. DEBT AND OBLIGATIONS SECURED.................................................4
Section 2.1 Debt.........................................................................4
Section 2.2 Other Obligations............................................................5
Section 2.4 Debt and Other Obligations...................................................5
Section 2.5 Payments.....................................................................5
Article 3. BORROWER COVENANTS...........................................................5
Section 3.1 Payment of Debt..............................................................5
Section 3.2 Incorporation by Reference...................................................6
Section 3.3 Insurance....................................................................6
Section 3.4 Payment of Taxes, Etc.......................................................10
</TABLE>
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TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 3.5 Escrow Fund.................................................................11
Section 3.6 Condemnation................................................................11
Section 3.7 Leases and Rents............................................................12
Section 3.8 Maintenance of Property.....................................................13
Section 3.9 Waste.......................................................................13
Section 3.10 Compliance With Laws........................................................14
Section 3.11 Books and Records...........................................................14
Section 3.12 Payment For Labor and Materials.............................................16
Section 3.13 Performance of Other Agreements.............................................16
Section 3.14 Change of Name, Identity or Structure.......................................16
Section 3.15 Existence...................................................................16
Article 4. SPECIAL COVENANTS...........................................................16
Section 4.1 Property Use................................................................16
Section 4.2 ERISA.......................................................................16
Section 4.3 Single Purpose Entity.......................................................17
Section 4.4 Restoration After Casualty/Condemnation.....................................20
Article 5. REPRESENTATIONS AND WARRANTIES..............................................24
Section 5.1 Warranty of Title...........................................................24
Section 5.2 Authority...................................................................25
Section 5.3 Legal Status and Authority..................................................25
Section 5.4 Validity of Documents.......................................................25
Section 5.5 Litigation..................................................................25
Section 5.6 Status of Property..........................................................26
Section 5.7 No Foreign Person...........................................................27
Section 5.8 Separate Tax Lot............................................................27
Section 5.9 ERISA Compliance............................................................27
Section 5.10 Leases......................................................................27
Section 5.11 Financial Condition.........................................................28
Section 5.12 Business Purposes...........................................................28
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 5.13 Taxes.......................................................................28
Section 5.14 Mailing Address.............................................................28
Section 5.15 No Change in Facts or Circumstances.........................................28
Section 5.16 Disclosure..................................................................28
Section 5.17 Third Party Representations.................................................28
Section 5.18 Illegal Activity............................................................29
Article 6. DEBTOR/CREDITOR RELATIONSHIP................................................29
Section 6.1 Relationship of Borrower and Lender.........................................29
Section 6.2 Servicing of the Loan.......................................................29
Article 7. FURTHER ASSURANCES..........................................................29
Section 7.1 Recording of Security Instrument, Etc.......................................29
Section 7.2 Further Acts, Etc...........................................................29
Section 7.3 Changes in Tax, Debt Credit and Documentary
Stamp Laws..................................................................30
Section 7.4 Estoppel Certificates.......................................................30
Section 7.5 Flood Insurance.............................................................31
Section 7.6 Splitting of Security Instrument............................................31
Section 7.7 Replacement Documents.......................................................32
Section 7.8 Amended Financing Statements................................................32
Article 8. DUE ON SALE/ENCUMBRANCE.....................................................32
Section 8.1 No Sale/Encumbrance.........................................................32
Section 8.2 Sale/Encumbrance Defined....................................................32
Section 8.3 Lender's Rights.............................................................33
Article 9. PREPAYMENT..................................................................33
Section 9.1 Prepayment Only in Accordance with Note.....................................33
Article 10. DEFAULT.....................................................................34
Section 10.1 Events of Default...........................................................34
Section 10.2 Late Payment Charge.........................................................35
Section 10.3 Default Interest............................................................35
Article 11. RIGHTS AND REMEDIES.........................................................35
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
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Section 11.1 Remedies....................................................................35
Section 11.2 Application of Proceeds.....................................................39
Section 11.3 Right to Cure Defaults......................................................39
Section 11.4 Actions and Proceedings.....................................................39
Section 11.5 Recovery of Sums Required To Be Paid........................................39
Section 11.6 Examination of Books and Records............................................39
Section 11.7 Other Rights, Etc...........................................................40
Section 11.8 Right to Release Any Portion of the Property................................40
Section 11.9 Violation of Laws...........................................................41
Section 11.10 Right of Entry..............................................................41
Article 12. ENVIRONMENTAL HAZARDS.......................................................41
Section 12.1 Environmental Representations and Warranties................................41
Section 12.2 Environmental Covenants.....................................................42
Section 12.3 Lender's Rights.............................................................43
Article 13. INDEMNIFICATION.............................................................44
Section 13.1 General Indemnification.....................................................44
Section 13.2 Mortgage and/or Intangible Tax..............................................45
Section 13.3 ERISA Indemnification.......................................................45
Section 13.4 Environmental Indemnification...............................................45
Section 13.5 Duty to Defend; Attorneys' Fees and Other Fees
and Expenses................................................................46
Article 14. WAIVERS.....................................................................47
Section 14.1 Waiver of Counterclaim......................................................47
Section 14.2 Marshalling and Other Matters...............................................47
Section 14.3 Waiver of Notice............................................................47
Section 14.4 Waiver of Statute of Limitations............................................47
Section 14.5 Sole Discretion of Lender...................................................47
Section 14.6 Survival....................................................................47
Section 14.7 Waiver of Trial By Jury.....................................................48
Article 15. EXCULPATION.................................................................48
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Section 15.1 Exculpation.................................................................48
Section 15.2 Reservation of Certain Rights...............................................49
Section 15.3 Exceptions to Exculpation...................................................49
Section 15.4 Recourse....................................................................49
Section 15.5 Bankruptcy Claims...........................................................49
Article 16. NOTICES.....................................................................50
Section 16.1 Notices.....................................................................50
Article 17. APPLICABLE LAW..............................................................51
Section 17.1 Choice of Law...............................................................51
Section 17.2 Usury Laws..................................................................51
Section 17.3 Provisions Subject to Applicable Law........................................52
Section 17.4 Inapplicable Provision......................................................52
Article 18. SECONDARY MARKET............................................................52
Section 18.1 Dissemination of Information................................................52
Section 18.2 Conversion to Registered Form...............................................53
Article 19. COSTS.......................................................................53
Section 19.1 Performance at Borrower's Expense...........................................53
Section 19.2 Attorney's Fees for Enforcement.............................................54
Article 20. DEFINITIONS.................................................................54
Section 20.1 General Definitions.........................................................54
Section 20.2 Headings, Etc...............................................................54
Article 21. MISCELLANEOUS PROVISIONS....................................................54
Section 21.1 No Oral Change..............................................................54
Section 21.2 Liability...................................................................55
Section 21.3 Duplicate Originals; Counterparts...........................................55
Section 21.4 Number and Gender...........................................................55
Section 21.5 Subrogation.................................................................55
Section 21.6 Entire Agreement............................................................55
Article 22. TRUSTEE PROVISIONS..........................................................55
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Section 22.1 The Trustee.................................................................55
Article 23. LOCAL LAW PROVISIONS........................................................57
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Exhibits -
Exhibit A - Description of Land
Exhibit B - Local Law Provisions
Definitions
The terms set forth below are defined in the following Sections of this Security
Instrument:
a. ADA: Subsection 3.10(a);
b. Applicable Law: Subsection 3.10(a);
c. Attorneys' Fees/Counsel Fees: Section 20.1;
d. Bankruptcy Code: Subsection 1.1(f);
e. Borrower: Preamble;
f. Business Day: Section 16.1;
g. Casualty Consultant: Subsection 4.4(b)(iii);
h. Casualty Retainage: Subsection 4.4(b)(iv);
i. Collateral: Section 1.3;
j. Debt: Section 2.1;
k. Default Rate: Section 10.3;
l. Environmental Indemnity: Subsection 10.1(c);
m. Environmental Law: Section 12.1;
n. Environmental Liens: Section 12.2;
o. Environmental Report: Section 12.1;
p. ERISA: Subsection 4.2(a);
q. Escrow Fund: Section 3.5;
r. Event: Section 19.1;
s. Event of Default: Section 10.1;
t. Exculpated Parties: Section 15.1;
u. Force Majeure: Subsection 4.4(b);
v. Guarantor: Section 5.5;
w. Hazardous Substances: Section 12.1;
x. Improvements: Subsection 1.1(c);
y. Indemnified Parties: Section 13.1;
z. Indemnitor: Subsection 10.1(c);
aa. Independent Director: Subsection 4.3(c);
bb. Insurance Premiums: Subsection 3.3(b);
cc. Investor: Section 18.1;
dd. Land: Subsection 1.1(a);
ee. Lease Guaranty: Subsection 3.7(a);
ff. Leases: Subsection 1.1(f);
gg. Lender: Preamble;
hh. Loan Application: Section 5.15;
ii. Losses: Section 13.1;
jj. Net Proceeds: Subsection 4.4(b);
kk. Net Proceeds Deficiency: Subsection 4.4(b)(vi);
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ll. Note: Recitals;
mm. Obligations: Section 2.3;
nn. Other Charges: Subsection 3.4(a);
oo. Other Obligations: Section 2.2;
pp. Other Security Documents: Section 3.2;
qq. Participations: 18.1;
rr. Permitted Exceptions: Section 5.1;
ss. Person: Section 20.1;
tt. Personal Property: Subsection 1.1(e);
uu. Policies/Policy: Subsection 3.3(b);
vv. Property: Section 1.1;
ww. Qualified Insurer: Subsection 3.3(b);
xx. Rating Agency: Subsection 3.3(b);
yy. Registrar: Section 18.2;
zz. Release: Section 12.1;
aaa. Remediation: Section 12.1;
bbb. Rents: Subsection 1.1(f);
ccc. Restoration: Subsection 3.3(d);
ddd. Securities: Section 18.1;
bd Securitization: Section 18.1;
eee. Security Instrument: Preamble;
fff. Servicer: Section 6.2;
ggg. SPE Member: Subsection 4.3(b);
hhh. Taxes: Subsection 3.4(a);
iii. Trustee: Preamble; and
jjj. Uniform Commercial Code: Subsection 1.1(e).
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<PAGE> 10
THIS DEED OF TRUST AND SECURITY AGREEMENT (the "Security Instrument")
is made as of the 27th day of February, 1998, by A.T.C., L.L.C., a Virginia
limited liability company, having its principal place of business at A.T.C.,
L.L.C. c/o Berman Kappler, Inc., 1010 Wisconsin Avenue, N.W., Suite 250,
Washington, D.C. 20007, as trustor ("Borrower") to LAWYERS TITLE INSURANCE
COMPANY, having an address at 804 Charles Street, Fredericksburg, Virginia,
22404, as trustee ("Trustee"), for the benefit of GMAC COMMERCIAL MORTGAGE
CORPORATION, a California corporation, having an address at 650 Dresher Road,
Horsham, Pennsylvania 19055-8015, as beneficiary ("Lender").
RECITALS:
Borrower by its promissory note of even date herewith given to Lender is
indebted to Lender in the principal sum of $15,225,000.00 in lawful money of the
United States of America (the note together with all extensions, renewals,
modifications, consolidations, substitutions, replacements, restatements and
increases thereof shall collectively be referred to as the "Note"), with
interest from the date thereof at the rates set forth in the Note, principal and
interest to be payable in accordance with the terms and conditions provided in
the Note.
Borrower desires to secure the payment of the Debt (as defined in
Article 2) and the performance of all of its obligations under the Note and the
Other Obligations (as defined in Article 2).
ARTICLE 1. GRANTS OF SECURITY
Section 1.1 Property Mortgaged. Borrower does hereby irrevocably (i)
mortgage, grant, bargain, sell, pledge, assign, warrant, transfer and convey to
Trustee and to its successors and assigns in trust with power of sale in
accordance with the terms and conditions hereof, for the use and benefit of
Lender, and (ii) grant a security interest to Trustee and to its successors and
assigns in trust with power of sale, in accordance with the terms and conditions
hereof, for the use and benefit of Lender, in, the following property, rights,
interests and estates now owned, or hereafter acquired by Borrower
(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 that may, from time to time, by
supplemental mortgage or otherwise be expressly made subject to the lien of this
Security Instrument;
(c) Improvements. The buildings, structures, fixtures,
additions, enlargements, extensions, modifications, repairs, replacements and
improvements now or hereafter erected or located on the Land (the
"Improvements");
<PAGE> 11
(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 and 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, but not limited to 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 used in connection with the present or future operation
and occupancy of the Land and 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
and the Improvements, or appurtenant thereto, or used in connection with the
present or future operation and occupancy of the Land and the Improvements
(collectively, the "Personal Property"), and the right, title and interest of
Borrower in and to any of the Personal Property which may be subject to any
security interests, as defined in the Uniform Commercial Code, as adopted and
enacted by the state or states where any of the Property is located (the
"Uniform Commercial Code"), superior in lien to the lien of this Security
Instrument 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 part of the Land or the
Improvements heretofore or hereafter entered into whether before or after the
filing by or against Borrower of any petition for relief under 11 U.S.C. ss. 101
et seq. (the "Bankruptcy Code"), as the same may be amended from time to time
(the "Leases") and all right, title and interest of Borrower, its successors and
assigns therein and thereunder, including, without limitation, all guarantees,
letters of credit and any other credit support given by any guarantor in
connection therewith, cash or securities deposited under the Leases 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 to the payment of the Debt;
(g) Condemnation Awards. All awards or payments, including
interest thereon, which may heretofore and hereafter be made with respect to the
Property,
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<PAGE> 12
whether from the exercise of the right of eminent domain (including, but not
limited to any transfer made in lieu of or in anticipation of the exercise of
the right), or for a change of grade, or for any other injury to or decrease in
the value of the Property;
(h) Insurance Proceeds. All proceeds of and any unearned
premiums on any insurance policies covering the Property, including, without
limitation, the right to receive and apply the proceeds of any insurance
judgments, or settlements made in lieu thereof, for damage to 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;
(j) Rights. The right, in the name and on behalf of Borrower,
to commence any action or proceeding to protect the interest of Lender or
Trustee in the Property and while an Event of Default (defined in Section 10.1)
remains uncured, to appear in and defend any action or proceeding brought with
respect to 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, while an Event of Default remains uncured, to receive and
collect any sums payable to Borrower thereunder;
(l) Intangibles. All accounts, escrows, chattel paper, claims,
deposits, trade names, trademarks, servicemarks, logos, copyrights, goodwill,
books and records and all other general intangibles specific to or used in
connection with the operation of the Property, if any; and
(m) Conversion. All proceeds of the conversion, voluntary or
involuntary, of any of the foregoing including, without limitation, proceeds of
insurance and condemnation awards, into cash or liquidation claims;
(n) Other Rights. Any and all other rights of Borrower in and
to the items set forth in Subsections (a) through (m) above.
Section 1.2 Assignment of Leases and 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 assignment and not an
assignment for additional security only. Nevertheless, subject to the terms of
this Section 1.2 and Section 3.7, Lender grants to Borrower a revocable license
to collect and receive the Rents. Borrower shall hold the Rents, or a portion
thereof, sufficient to discharge all current sums due on the Debt, for use in
the payment of such sums.
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Section 1.3 Security Agreement. This Security Instrument is both a real
property mortgage and a "security agreement" within the meaning of the Uniform
Commercial Code. The Property includes both real and personal property and all
other rights and interests, whether tangible or intangible in nature, of
Borrower in the Property. By executing and delivering this Security Instrument,
Borrower hereby grants to Lender, as security for the Obligations (defined in
Section 2.3), a security interest in the Property to the full extent that the
Property may be subject to the Uniform Commercial Code (said portion of the
Property so subject to the Uniform Commercial Code, the "Collateral").
Section 1.4 Pledge of Monies Held. Borrower hereby pledges to Lender,
and grants to Lender a security interest in, any and all monies now or hereafter
held by Lender, including, without limitation, any sums deposited in the Escrow
Fund (defined in Section 3.5) and the Net Proceeds (defined in Section 4.4), 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 the
Trustee and its successors and assigns, in trust with power of sale in
accordance with the terms and conditions hereof, for the use and benefit of
Lender, and the successors and assigns of Lender, 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 and in the Note, these presents and the estate hereby granted
shall cease, terminate and be void.
ARTICLE 2. DEBT AND OBLIGATIONS SECURED
Section 2.1 Debt. This Security Instrument and the grants, assignments
and transfers made in Article 1 are given for the purpose of securing the
following, in such order of priority as Lender may determine in its sole
discretion (the "Debt"):
(a) the payment of the indebtedness evidenced by the Note in
lawful money of the United States of America;
(b) the payment of interest, default interest, late charges
and other sums, as provided in the Note, this Security Instrument or the Other
Security Documents (defined in Section 3.2);
(c) Prepayment Consideration (as defined in the Note);
(d) the payment of all other monies agreed or provided to be
paid by Borrower in the Note, this Security Instrument or the Other Security
Documents;
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(e) the payment of all sums advanced pursuant to this Security
Instrument to protect and preserve the Property and the lien and the security
interest created hereby; and
(f) the payment of all sums advanced and costs and expenses
incurred by Lender or Trustee in connection with the Debt or any part thereof,
any renewal, extension, modification, consolidation, change, substitution,
replacement, restatement or increase of 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.
Section 2.2 Other Obligations. This Security Instrument and the grants,
assignments and transfers made in Article 1 are also given for the purpose of
securing the following (the "Other Obligations"):
(a) the performance of all other obligations of Borrower
contained herein;
(b) the performance of each obligation of Borrower contained
in the Note in addition to the payment of the Debt and of Borrower and of any
Guarantor (defined in Section 5.5) contained in the Other Security Documents;
and
Section 2.3 the performance of each obligation of Borrower and any
Guarantor contained in any renewal, extension, modification, consolidation,
change, substitution, replacement for, restatement or increase of all or any
part of the Note, this Security Instrument or the Other Security Documents.
Section 2.4 Debt and Other Obligations. Borrower's obligations for the
payment of the Debt and the performance of the Other Obligations shall be
referred to collectively below as the "Obligations."
Section 2.5 Payments. Unless payments are made in the required amount
in immediately available funds at the place where the Note is payable,
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 at the
place where the Note is payable (or any other place as Lender, in Lender's sole
discretion, may have established by delivery of written notice thereof to
Borrower) 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 then due shall be and continue to be an Event
of Default.
ARTICLE 3. BORROWER COVENANTS
Borrower covenants and agrees with Trustee and Lender that:
Section 3.1 Payment of Debt. Borrower will pay the Debt at the
time and in the manner provided in the Note and in this Security Instrument.
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Section 3.2 Incorporation by Reference. All the covenants, conditions
and agreements contained in (a) the Note and (b) all and any of the documents
other than the Note or 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 Note or the other Obligations (the "Other
Security 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.
Section 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:
(i) Property Insurance. Insurance with respect to the
Improvements and building equipment insuring against any peril included
within the classification "All Risks of Physical Loss" in amounts at
all times sufficient to prevent Lender from becoming a co-insurer
within the terms of the applicable policies and under applicable law,
but in any event such insurance shall be maintained in an amount equal
to the full insurable value of the Improvements and building equipment,
the term "full insurable value" to mean the actual replacement cost of
the Improvements and building equipment (without taking into account
any depreciation, and exclusive of excavations, footings and
foundations, landscaping and paving) determined annually by an insurer,
a recognized independent insurance broker or an independent appraiser
selected and paid by Borrower and in no event less than the coverage
required pursuant to the terms of any Lease. Absent such annual
adjustment, each policy shall contain inflation guard coverage insuring
that the policy limit will be increased over time to reflect the effect
of inflation. Borrower shall also maintain insurance against loss or
damage to such furniture, furnishings, fixtures, equipment and other
items (whether personalty or fixtures) included in the Property and
owned by Borrower from time to time, to the extent applicable, in the
amount of the cost of replacing the same, in each case, with inflation
guard coverage to reflect the effect of inflation, or annual valuation.
Each policy or policies shall contain a replacement cost endorsement
and either an agreed amount endorsement (to avoid the operation of any
co-insurance provisions) or a waiver of any co-insurance provisions,
all subject to Lender's approval. The maximum deductible shall be
$10,000.00;
(ii) Liability Insurance. Comprehensive general liability
insurance, including personal injury, bodily injury, death and property
damage liability, insurance against any and all claims, including all
legal liability to the extent insurable and imposed upon Lender and all
court costs and attorneys' fees and expenses, arising out of or
connected with the possession, use, leasing, operation, maintenance or
condition of the Property in such amounts as are generally available at
commercially reasonable premiums and are generally required by
institutional lenders for properties comparable to the Property but in
no event for a combined single limit of less than $2,000,000.00. During
any
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<PAGE> 16
construction of the Property, Mortgagor's general contractor for such
construction shall also provide the insurance required in this
Subsection b. Lender hereby retains the right to periodically review
the amount of said liability insurance being maintained by Borrower and
to require an increase in the amount of said liability insurance should
Lender deem an increase to be reasonably prudent under then existing
circumstances;
(iii) Workers' Compensation Insurance. Statutory workers'
compensation insurance with respect to any work on or about the
Property covering all persons subject to the workers' compensation laws
of the state in which the Property is located;
(iv) Business Interruption. Business interruption and/or
loss of "rental income" insurance in an amount sufficient to avoid any
co-insurance penalty and to provide proceeds which will cover a period
of not less than one (1) year from the date of casualty or loss, the
term "rental income" to mean the sum of (A) the total then
ascertainable Rents payable under the Leases and (B) the total
ascertainable amount of all other amounts to be received by Borrower
from third parties which are the legal obligation of the tenants,
reduced to the extent such amounts would not be received because of
operating expenses not incurred during a period of non-occupancy of
that portion of the Property then not being occupied. The amount of
coverage shall be adjusted annually to reflect the rents payable during
the succeeding twelve (12) month period.
(v) Boiler and Machinery Insurance. Broad form boiler and
machinery insurance (without exclusion for explosion) covering all
boilers or other pressure vessels, machinery, and equipment located in,
on or about the Property and insurance against loss of occupancy or use
arising from any breakdown in such amount per accident equal to the
replacement value of the improvements housing the machinery or
$10,300,000.00 or such other amount reasonably determined by Lender. If
one or more large HVAC units is in operation at the Property, "System
Breakdowns" coverage shall be required, as determined by Mortgagee.
Minimum liability coverage per accident must equal the value of such
unit(s);
(vi) Flood Insurance. If required by Subsection 5.6(a)
hereof, flood insurance in an amount at least equal to the lesser of
(A) the minimum amount required, under the terms of coverage, to
compensate for any damage or loss on a replacement basis (or the unpaid
balance of the indebtedness secured hereby if replacement cost coverage
is not available for the type of building insured); or (B) the maximum
insurance available under the appropriate National Flood Insurance
Administration program. The maximum deductible shall be $3,000.00 per
building or a higher minimum amount as required by the Federal
Emergency Management Agency or other applicable law.
(vii) During the period of any construction, renovation or
alteration of the Improvements which exceeds the lesser of 10% of the
principal
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amount of the Note or $500,000, at Lender's request, a completed value,
"All Risk" Builder's Risk form, or "Course of Construction" insurance
policy in non-reporting form for any Improvements under construction,
renovation or alteration in an amount approved by Lender may be
required. During the period of any construction of any addition to the
existing Improvements, a completed value, "All Risk" Builder's Risk
form or "Course of Construction" insurance policy in non-reporting
form, in an amount approved by Lender, shall be required.
(viii) Other Insurance. Such other insurance with respect
to the Property or on any replacements or substitutions thereof or
additions thereto as may from time to time be required by Lender
against other insurable hazards or casualties which at the time are
commonly insured against in the case of property similarly situated,
including, without limitation, sinkhole, mine subsidence, earthquake
and environmental insurance, due regard being given to the height and
type of buildings, their construction, location, use and occupancy.
(b) All insurance provided for in Subsection 3.3(a) hereof
shall be obtained under valid and enforceable policies (the "Policies" or in the
singular, the "Policy"), and shall be issued by one or more domestic primary
insurer(s) having (i) an investment grade rating or a claims paying ability
assigned by one or more credit rating agencies approved by Lender (a "Rating
Agency") and (ii) a general policy rating of A or better and a financial class
of VI or better by A.M. Best Company, Inc. (each such insurer shall be referred
to below as a "Qualified Insurer"). All insurers providing insurance required by
this Security Instrument shall be authorized to issue insurance in the state in
which the Property is located. The Policy referred to in Subsection 3.3(a)(ii)
above shall name Lender as an additional named insured and the Policy referred
to in Subsection 3.3(a)(i), (iv), (v) and (vi) above shall provide that all
proceeds be payable to Lender as set forth in Section 4.4 hereof. The Policies
referred to in Subsections 3.3(a)(i), (v) and (vi) shall also contain: (i) a
standard "non-contributory mortgagee" endorsement or its equivalent relating,
inter alia, to recovery by Lender notwithstanding the negligent or willful acts
or omission of Lender; (ii) to the extent available at commercially reasonable
rates, a waiver of subrogation endorsement as to Lender; and (iii) an
endorsement providing for a deductible per loss of an amount not more than that
which is customarily maintained by prudent owners of similar properties in the
general vicinity of the Property, but in no event in excess of $250,000. All
Policies described in Subsection 3.3(a) above shall contain (i) a provision that
such Policies shall not be cancelled or terminated, nor shall they expire,
without at least thirty (30) days' prior written notice to Lender in each
instance; and (ii) include effective waivers by the insurer of all claims for
Insurance Premiums (defined below) against any loss payees, additional insureds
and named insureds (other than Borrower). In the event that the Property or the
Improvements constitutes a legal non-conforming use under applicable building,
zoning or land use laws or ordinances, the policy shall include an ordinance or
law coverage endorsement which will contain Coverage A: "Loss Due to Operation
of Law" (with a minimum liability limit equal to Replacement Cost With Agreed
Value Endorsement), Coverage B: "Demolition Cost" and Coverage C: "Increased
Cost of Construction" coverages. Certificates of insurance with respect to all
renewal and replacement Policies shall be delivered to Lender not less than
thirty (30) days prior to the expiration date of any of the
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<PAGE> 18
Policies required to be maintained hereunder which certificates shall bear
notations evidencing payment of applicable premiums (the "Insurance Premiums").
Originals or certificates of such replacement Policies shall be delivered to
Lender promptly after Borrower's receipt thereof but in any case within thirty
(30) days after the effective date thereof. If Borrower fails to maintain and
deliver to Lender the original Policies or certificates of insurance required by
this Security Instrument, upon ten (10) days' prior notice to Borrower, Lender
may procure such insurance at Borrower's sole cost and expense.
(c) Borrower shall comply with all insurance requirements and
shall not knowingly bring or keep or permit to be brought or kept any article
upon any of the Property or intentionally or negligently cause or permit any
condition to exist thereon which would be prohibited by an insurance
requirement, or would invalidate the insurance coverage required hereunder to be
maintained by Borrower on or with respect to any part of the Property pursuant
to this Section 3.3.
(d) If the Property shall be damaged or destroyed, in whole or
in part, by fire or other casualty, Borrower shall give prompt notice of such
damage to Lender and provided that Borrower shall have received the Net
Proceeds, Borrower shall promptly commence and diligently prosecute the
completion of the repair and restoration of the Property as nearly as possible
to the condition the Property was in immediately prior to such fire or other
casualty, with such alterations as may be approved by Lender (the "Restoration")
and otherwise in accordance with Section 4.4 of this Security Instrument.
(e) The insurance coverage required under Section 3.3(a) may
be effected under a blanket policy or policies covering the Property and other
properties and assets not constituting a part of the security hereunder;
provided that any such blanket policy shall specify, except in the case of
public liability insurance, the portion of the total coverage of such policy
that is allocated to the Property, and any sublimit in such blanket policy
applicable to the Property, and shall in any case comply in all other respects
with the requirements of this Section 3.3.
(f) The insurance coverage required under Subsection
3.3(a)(ii) may be satisfied by a layering of Comprehensive General Liability,
Umbrella and Excess Liability Policies, but in no event will the Comprehensive
General Liability policy be written for an amount less than $2,000,000.00
combined single limit for bodily injury and property damage liability.
(g) The delivery to Lender of the insurance policies or the
certificates of insurance as provided above shall constitute an assignment of
all proceeds payable under such insurance as relating to the Property by
Borrower to Lender as further security for the indebtedness secured hereby. In
the event of foreclosure of this Deed of Trust, or other transfer of title to
the Property in extinguishment in whole or in part of the secured indebtedness,
all right, title and interest of Borrower in and to all proceeds payable under
such policies then in force concerning the Property shall thereupon vest in the
purchaser at such foreclosure, or in Lender or other transferee in the event of
such other transfer of
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title. Approval of any insurance by Lender shall not be a representation of the
solvency of any insurer or the sufficiency of any amount of insurance.
(h) Lender shall not be responsible for nor incur any
liability for the insolvency of the insurer or other failure of the insurer to
perform, even though Lender has caused the insurance to be placed with the
insurer after failure of Borrower to furnish such insurance. Borrower shall not
obtain insurance for the Property in addition to that required by Lender without
the prior written consent of Lender, which consent will not be unreasonably
withheld provided that (i) Lender is named insured on such insurance, (ii)
Lender receives complete copies of all policies evidencing such insurance, and
(iii) such insurance complies with all of the applicable requirements set forth
herein.
Section 3.4 Payment of Taxes, Etc.
(a) Borrower shall pay by their due date 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 as same become due and payable. Borrower will deliver to Lender,
promptly upon Lender's request, evidence satisfactory to Lender that the Taxes,
Other Charges and utility service charges have been so paid or are not then
delinquent. 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. 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 furnish to Lender paid receipts for the
payment of the Taxes and Other Charges prior to the date the same shall become
delinquent.
(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 the Other Charges,
provided that (i) no Event of Default has occurred and is continuing under the
Note, this Security Instrument or any of the Other Security Documents, (ii)
Borrower is permitted to do so under the provisions of any other mortgage, deed
of trust or deed to secure debt affecting the Property, (iii) such proceeding
shall suspend the collection of the Taxes or Other Charges from Borrower and
from the Property or Borrower shall have paid all of the Taxes or Other Charges
under protest, (iv) such proceeding shall be permitted under and be conducted in
accordance with the provisions of any other instrument to which Borrower is
subject and shall not constitute a default thereunder, (v) neither the Property
nor any part thereof or interest therein will be in danger of being sold,
forfeited, terminated, cancelled or lost, (vi) Borrower shall have set aside
adequate reserves for the payment of the Taxes or Other Charges, together with
all interest and penalties thereon, unless Borrower has paid all of the Taxes or
Other Charges under protest, and (vii) Borrower shall have furnished
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the security as may be required in the proceeding, or as may be reasonably
requested by Lender to insure the payment of any contested Taxes or Other
Charges, together with all interest and penalties thereon, taking into
consideration the amount in the Escrow Fund available for payment of Taxes or
Other Charges.
Section 3.5 Escrow Fund. At the option of Lender, Lender may require
Borrower to establish an Escrow Fund (defined below) sufficient to discharge its
obligations for the payment of Insurance Premiums and Taxes pursuant to Sections
3.3 and 3.4 hereof. Initial deposits of Taxes and Insurance Premiums shall be
made by Borrower to Lender in amounts determined by Lender in its discretion on
the date hereof to be held by Lender in escrow. Additionally, 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, upon the due dates established by the appropriate taxing authority
during the next ensuing twelve (12) months and (b) one-twelfth of an amount
which would be sufficient to pay the Insurance Premiums due for the renewal of
the coverage afforded by the Policies upon the expiration thereof (the initial
deposits together with the amounts in (a) and (b) above shall be called the
"Escrow Fund"). 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 obtained knowledge and authorizes Lender or its agent
to obtain the bills for Taxes and Other Charges directly from the appropriate
tax authority. The Escrow 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 there are sufficient amounts in
the Escrow Fund and no Event of Default exists, Lender shall be obligated to pay
the Taxes and Insurance Premiums as they become due on their respective due
dates on behalf of Borrower by applying the Escrow Fund to the payments of such
Taxes and Insurance Premiums required to be made by Borrower pursuant to
Sections 3.3 and 3.4 hereof. If the amount of the Escrow Fund shall exceed the
amounts due for Taxes and Insurance Premiums pursuant to Sections 3.3 and 3.4
hereof, Lender shall, in its discretion, return any excess to Borrower or credit
such excess against future payments to be made to the Escrow Fund. In allocating
such excess, Lender may deal with the person shown on the records of Lender to
be the owner of the Property. If the Escrow 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 reasonably estimate as sufficient to
make up the deficiency. The Escrow Fund shall not constitute a trust fund and
may be commingled with other monies held by Lender. Unless otherwise required by
Applicable Law (defined in Section 3.10), no earnings or interest on the Escrow
Fund shall be payable to Borrower.
Section 3.6 Condemnation. 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. Lender may participate in any such proceedings
to the extent permitted by law. Upon an Event of Default, Borrower shall deliver
to Lender all instruments requested by it to permit such participation. Borrower
shall, at its expense, diligently prosecute any such proceedings, and shall
consult with Lender, its attorneys and experts,
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and cooperate with them in the carrying on or defense of any such proceedings.
Borrower shall not make any agreement in lieu of condemnation of the Property or
any portion thereof without the prior written consent of Lender in each
instance, which consent shall not be unreasonably withheld or delayed in the
case of a taking of an insubstantial portion of the Property. Notwithstanding
any taking by any public or quasi-public authority through eminent domain or
otherwise (including, but not limited to any transfer made in lieu of or in
anticipation of the exercise of such taking), 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. If the Property or any
portion thereof is taken by the power of eminent domain, Borrower shall promptly
commence and diligently prosecute the Restoration of the Property and otherwise
comply with the provisions of in accordance with Section 4.4 of this Security
Instrument. 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.
Section 3.7 Leases and Rents. Except as otherwise consented to by
Lender, all Leases shall be written on a standard form of lease which shall have
been approved by Lender. Upon request, Borrower shall furnish Lender with
executed copies of all Leases. By its acceptance hereof, Lender acknowledges its
receipt and approval of the form of lease used by Borrower and the tenants
currently in possession of the Mortgaged Property thereunder. No material
changes may be made to the Lender-approved standard lease without the prior
written consent of Lender, which consent shall not be unreasonably withheld or
delayed. All proposed leases shall be subject to the prior approval of Lender
except that all proposed leases which (i) are on the same form of lease which
has been approved by Lender, (ii) are the result of an arms-length transaction,
(iii) which provide for rental rates comparable to existing market rates, (iv)
where space to be leased does not exceed more than ten percent (10%) of total
rentable space of the Property, (v) where the proposed tenant is an independent
third party not affiliated with the Borrower, and (vi) do not contain any terms
which would materially affect Lender's rights under this Security Instrument,
the Note or the Other Security Documents, shall not be subject to the prior
approval of Lender. Borrower (i) shall observe and perform all the obligations
imposed upon the lessor under the Leases if the failure to perform or observe
the same would materially and adversely affect the value of the Property taken
as a whole 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 in a commercially reasonable manner all of the terms, covenants
and conditions contained in the Leases upon the part of the lessee thereunder to
be observed or performed; provided, however, with respect to multifamily
residential property, a residential Lease may be terminated in the event of a
default by the tenant thereunder; (iv) shall not collect any of the Rents more
than one (1) month in advance (provided that a security deposit shall not be
deemed
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<PAGE> 22
rent collected in advance); (v) shall not execute any other assignment of
the lessor's interest in the Leases or the Rents; (vi) shall not (A) materially
alter, modify or change the terms of the Leases without the prior written
consent of Lender, which consent shall not be unreasonably withheld or delayed
if the alteration, modification or change does not materially and adversely
affect the value of the Property taken as a whole and provided further that such
Lease, as altered, modified or changed, is otherwise in compliance with the
requirements of this Security Instrument, or (B) cancel or terminate any Lease
(except for defaults thereunder) of more than ten (10%) percent of the rentable
space of the Property or accept a surrender thereof 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 (the "Lease Guaranty") or cancel or terminate
such Lease Guaranty without the prior written consent of Lender; and (viii)
shall not consent to any assignment of or subletting under the Leases not in
accordance with their terms, without the prior written consent of Lender.
Notwithstanding the foregoing, subdivisions (ii), (vi), (vii) and (viii) shall
not apply to residential Leases for space in a multifamily residential property.
Section 3.8 Maintenance of Property. Borrower shall cause the Property
to be maintained in a good and safe condition and repair. 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. Borrower shall promptly repair, replace or rebuild any part of the
Property which may be destroyed by any casualty, or become damaged, worn or
dilapidated or which may be affected by any proceeding of the character referred
to in Section 3.6 hereof and shall complete and pay for any structure at any
time in the process of construction or repair on the Land. 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. 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 or Improvement to be discontinued or abandoned
without the express written consent of Lender.
Section 3.9 Waste. Borrower shall not commit or suffer any waste of the
Property or make any change in the use of the Property which will in any way
materially increase the risk of fire or other hazard arising out of the
operation of the Property, or take any action that might invalidate or give
cause for cancellation of any Policy, or do or permit to be done thereon
anything that may in any way impair the value of the Property or the security of
this Security Instrument. Borrower will not, without the prior written consent
of Lender, permit any drilling or exploration for or extraction, removal, or
production of any minerals from the surface or the subsurface of the Land,
regardless of the depth thereof or the method of mining or extraction thereof.
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Section 3.10 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 the Property, or the use thereof
including, but not limited to, the Americans with Disabilities Act ("ADA")
(collectively, "Applicable Law").
(a) Borrower shall from time to time, upon Lender's request,
provide Lender with evidence reasonably satisfactory to Lender that the Property
complies with all Applicable Laws or is exempt from compliance with Applicable
Laws.
(b) Notwithstanding any provisions set forth herein or in any
document regarding Lender's approval of alterations of the Property, Borrower
shall not alter the Property in any manner which would materially increase
Borrower's responsibilities for compliance with Applicable Laws without the
prior written approval of Lender. Lender's approval of the plans,
specifications, or working drawings for alterations of the Property shall create
no responsibility or liability on behalf of Lender for their completeness,
design, sufficiency or their compliance with Applicable Laws. The foregoing
shall apply to tenant improvements constructed by Borrower or by any of its
tenants. Lender may condition any such approval upon receipt of a certificate of
compliance with Applicable Laws from an independent architect, engineer, or
other person acceptable to Lender.
(c) 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.
(d) After prior written notice to Lender, Borrower, at its own
expense, a contest by appropriate legal proceeding, promptly initiated and
conducted in good faith and with due diligence, the Applicable Laws affecting
the Property, provided that (i) no Event of Default has occurred and is
continuing under the Note, this Security Instrument or any of the Other Security
Documents; (ii) Borrower is permitted to do so under the provisions of any other
mortgage, deed of trust or deed to secure debt affecting the Property; (iii)
such proceeding shall be permitted under and be conducted in accordance with the
provisions of any other instrument to which Borrower is subject and shall not
constitute a default thereunder; (iv) neither the Property nor any part thereof
or interest therein nor any of the tenants or occupants thereof shall be
affected in any material adverse way as a result of such proceeding; and (v)
Borrower shall have furnished to Lender all other items reasonably requested by
Lender.
Section 3.11 Books and Records.
(a) Borrower and any Guarantors and Indemnitors shall keep
adequate books and records of account in accordance with methods acceptable to
Lender in its sole discretion, consistently applied and furnish to Lender:
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<PAGE> 24
(i) quarterly certified rent rolls signed and dated
by Borrower, 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 as is
reasonably required by Lender, within thirty (30) days after the end of
each fiscal quarter;
(ii) a quarterly 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, together with a balance sheet for such quarter, to be prepared
and certified by Borrower in the form required by Lender, and if
available, any quarterly operating statement and/or balance sheet
prepared by an independent certified public accountant within thirty
(30) days after the close of each fiscal quarter.
(iii) an annual balance sheet and profit and loss
statement of Borrower, any Guarantors and any Indemnitors, in the form
required by Lender, prepared and certified by the respective Borrower,
Guarantor and/or Indemnitor, as applicable, within ninety (90) days
after the close of each fiscal year;
(iv) an annual certified rent roll presented on a
quarterly basis consistent with the quarterly certified rent rolls
described above within ninety (90) days after the close of each fiscal
year;
(v) an annual operating budget presented on a
monthly basis consistent with the annual operating statement described
above for the Property and all proposed capital replacements and
improvements at least thirty (30) days prior to the start of each
calendar year; and
(vi) such other financial statements, including
monthly operating statements and rent rolls, as Lender may reasonably
request.
(b) Upon reasonable request from Lender, Borrower and its
affiliates shall furnish to Lender:
(i) 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 under penalty of perjury to be true
and complete, but no more frequently than quarterly; and
(ii) an accounting of all security deposits held in
connection with any Lease of any part of the Property, including 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.
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(c) Borrower and its affiliates and any Guarantor and
Indemnitor shall furnish Lender with such other additional financial or
management information as may, from time to time, be reasonably required by
Lender in form and substance satisfactory to Lender.
Section 3.12 Payment For Labor and Materials. Borrower will promptly
pay when due all bills and costs for labor, materials, and specifically
fabricated materials 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 or security interest, even though inferior to the liens and the
security interests hereof, and in any event never permit to be created or exist
in respect of the Property or any part thereof any other or additional lien or
security interest other than the liens or security interests hereof, except for
the Permitted Exceptions (defined in Section 5.1).
Section 3.13 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
the Property.
Section 3.14 Change of Name, Identity or Structure. Borrower will not
change Borrower's name, identity (including its trade name or names) or, if not
an individual, Borrower's corporate, partnership or other structure without
notifying the Lender of such change in writing at least thirty (30) days prior
to the effective date of such change and, in the case of a change in Borrower's
structure, without first obtaining the prior written consent of the Lender.
Section 3.15 Existence. Borrower will continuously maintain (a) its
existence and shall not dissolve or permit its dissolution, (b) its rights to do
business in the state where the Property is located and (c) its franchises and
trade names.
ARTICLE 4. SPECIAL COVENANTS
Borrower covenants and agrees with Trustee and Lender that:
Section 4.1 Property Use. The Property shall be used only for a
retail/wholesale shopping center and for no other use without the prior written
consent of Lender, which consent may be withheld in Lender's discretion.
Section 4.2 ERISA.
(a) It shall not engage in any transaction which would cause
any obligation, or action taken or to be taken, hereunder (or the exercise by
Lender of any of its rights under the Note, this Security Instrument and the
Other Security Documents) to be a non-exempt (under a statutory or
administrative class exemption) prohibited transaction under the Employee
Retirement Income Security Act of 1974, as amended ("ERISA").
(b) Borrower further covenants and agrees to deliver to Lender
such certifications or other evidence from time to time throughout the term of
the Security
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Instrument, as requested by Lender in its sole discretion, that (i)
Borrower is not an "employee benefit plan" as defined in Section 3(3) of ERISA,
which is subject to Title I of ERISA, or a "governmental plan" within the
meaning of Section 3(3) of ERISA; (ii) Borrower is not subject to state statutes
regulating investments and fiduciary obligations with respect to governmental
plans; and (iii) one or more of the following circumstances is true:
(A) Equity interests in Borrower are publicly offered
securities, within the meaning of 29 C.F.R. Section
2510.3-101(b)(2);
(B) Less than 25 percent of each outstanding class of
equity interests in Borrower are held by "benefit plan
investors" within the meaning of 29 C.F.R. Section
2510.3-101(f)(2); or
(C) Borrower qualifies as an "operating company" or a
"real estate operating company" within the meaning of 29
C.F.R. ss. 2510.3-101(c) or (e) or an investment company
registered under The Investment Company Act of 1940.
Section 4.3 Single Purpose Entity.
(a) It has not and shall not:
(i) engage in any business or activity other than
the ownership, operation and maintenance of the Property, and
activities incidental thereto;
(ii) acquire or own any material assets other than
(A) the Property, and (B) such incidental Personal Property as may be
necessary for the operation of the Property;
(iii) merge into or consolidate with any person or
entity or dissolve, terminate or liquidate in whole or in part,
transfer or otherwise dispose of all or substantially all of its assets
or change its legal structure, without in each case Lender's consent;
(iv) fail to preserve its existence as an entity
duly organized, validly existing and in good standing (if applicable)
under the laws of the jurisdiction of its organization or formation, or
without the prior written consent of Lender, amend, modify, terminate
or fail to comply with the provisions of Borrower's Partnership
Agreement, Articles or Certificate of Incorporation, Operating
Agreement or similar organizational documents, as the case may be, as
same may be further amended or supplemented, if such amendment,
modification, termination or failure to comply would adversely affect
the ability of Borrower to perform its obligations hereunder, under the
Note or under the Other Security Documents;
(v) own any subsidiary or make any investment
in, any person or entity without the consent of Lender;
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<PAGE> 27
(vi) commingle its assets with the assets of any of
its general partners, members, shareholders, affiliates, principals or
of any other person or entity;
(vii) incur any debt, secured or unsecured, direct
or contingent (including guaranteeing any obligation), other than the
Debt and trade payables incurred in the ordinary course of business,
provided same are paid when due;
(viii) fail to maintain its records, books of account
and bank accounts separate and apart from those of the general
partners, members, shareholders, principals and affiliates of Borrower,
the affiliates of a general partner or member, or shareholder of
Borrower, and any other person or entity;
(ix) enter into any contract or agreement with any
general partner, member, shareholder, principal or affiliate of
Borrower, Guarantor or Indemnitor, or any general partner, member,
principal or affiliate thereof, except upon terms and conditions that
are intrinsically fair and substantially similar to those that would be
available on an arms-length basis with third parties other than any
general partner, member, shareholder, principal or affiliate of
Borrower, Guarantor or Indemnitor, or any general partner, member,
principal or affiliate thereof;
(x) seek the dissolution or winding up in whole,
or in part, of Borrower;
(xi) maintain its assets in such a manner that it
will be costly or difficult to segregate, ascertain or identify its
individual assets from those of any general partner, member,
shareholder, principal or affiliate of Borrower, or any general
partner, member, shareholder, principal or affiliate thereof or any
other person;
(xii) hold itself out to be responsible for the
debts of another person;
(xiii) make any loans or advances to any third party,
including any general partner, member, shareholder, principal or
affiliate of Borrower, or any general partner, principal or affiliate
thereof;
(xiv) fail to file its own tax returns;
(xv) agree to, enter into or consummate any
transaction which would render Borrower unable to furnish the
certification or other evidence referred to in Section 4.2(b) hereof;
(xvi) fail either to hold itself out to the public
as a legal entity separate and distinct from any other entity or person
or to conduct its business solely in its own name in order not (A) to
mislead others as to the identity with which such other party is
transacting business, or (B) to suggest that Borrower is
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<PAGE> 28
responsible for the debts of any third party (including any general
partner, principal or affiliate of Borrower, or any general partner,
principal or affiliate thereof);
(xvii) 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; or
(xviii) file or consent to the filing of any
petition, either voluntary or involuntary, to take advantage of any
applicable insolvency, bankruptcy, liquidation or reorganization
statute, or make an assignment for the benefit of creditors.
(b) If Borrower is a limited partnership or a limited
liability company, each general partner or at least one member (the "SPE
Member") of Borrower, as applicable, is a corporation whose sole asset is its
interest in Borrower and each general partner or the SPE Member of Borrower, as
applicable, will at all times comply, and will cause Borrower to comply, with
each of the covenants, terms and provisions contained in Section 4.3(a) as if
such representation, warranty or covenant was made directly by such general
partner or SPE Member. Only the SPE Member may be designated as a manager under
the law where the Borrower is organized.
(c) Borrower shall at all times cause there to be at
least one duly appointed member of the board of directors (an "Independent
Director") of each general partner of Borrower (or of the SPE Member of
Borrower) reasonably satisfactory to Lender who shall not have been at the time
of such individual's initial appointment, and may not have been at any time
during the preceding five years, and shall not be at any time while serving as a
director of the general partner (or SPE Member) either (i) a shareholder of, or
an officer, director, partner or employee of, Borrower or any of its
shareholders, partners, members, subsidiaries or affiliates, (ii) a customer of,
or supplier to, Borrower or any of its shareholders, partners, members,
subsidiaries or affiliates, (iii) a person or other entity controlling or under
common control with any such shareholder, officer, director, partner, member,
employee, supplier or customer, or (iv) a member of the immediate family of any
such shareholder, officer, director, partner, member, employee, supplier or
customer. As used herein, the term "control": means the possession, directly or
indirectly, of the power to direct or cause the direction of the management and
policy of a person or entity, whether through ownership of voting securities, by
contract or otherwise.
(d) Borrower shall not cause or permit the board of directors
of the general partner of Borrower (or of the SPE Member of Borrower) to take
any action which, under the terms of any certificate of incorporation, bylaws or
any voting trust agreement with respect to any common stock, requires a vote of
the board of directors of the general partner of Borrower (or the SPE Member of
Borrower) unless at the time of such action there shall be at least one member
of the board of directors who is an Independent Director.
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Section 4.4 Restoration After Casualty/Condemnation. In the event of a
casualty or a taking by eminent domain, the following provisions shall apply in
connection with the Restoration of the Property:
(a) If (i) the Net Proceeds (defined below) do not exceed
$250,000 ("Casualty Amount"); (ii) the costs of completing the Restoration as
reasonably estimated by Borrower shall be less than or equal to the Casualty
Amount; (iii) no Event of Default shall have occurred and be continuing under
the Note, this Security Instrument or any of the Other Security Documents; (iv)
the Property and the use thereof after the Restoration will be in compliance
with, and permitted under, all applicable zoning laws, ordinances, rules and
regulations (including, without limitation, all applicable Environmental Laws
(defined in Section 12.1); and (v) such fire or other casualty or taking, as
applicable, does not materially impair access to the Property or the
Improvements, then the Net Proceeds will be disbursed directly to Borrower and
Borrower shall commence and diligently prosecute to completion, subject to Force
Majeure (defined herein), the Restoration of the Property to as nearly as
possible the condition it was in immediately prior to such fire or other
casualty or to such taking. Except upon the occurrence and continuance of an
Event of Default, Borrower shall settle any insurance claims with respect to the
Net Proceeds which in the aggregate are less than or equal to the Casualty
Amount. Lender shall have the right to participate in and reasonably approve any
settlement for insurance claims with respect to the Net Proceeds which in the
aggregate are equal to or greater than the Casualty Amount. If an Event of
Default shall have occurred and be continuing, Borrower hereby irrevocably
empowers Lender, in the name of Borrower as its true and lawful
attorney-in-fact, to file and prosecute such claim and to collect and to make
receipt for any such payment. If the Net Proceeds are received by Borrower, such
Net Proceeds shall, until the completion of the related work, be held in trust
for Lender and shall be segregated from other funds of Borrower to be used to
pay for the cost of the Restoration in accordance with the terms hereof.
(b) If the Net Proceeds are greater than the Casualty Amount,
such Net Proceeds shall, subject to the provisions of the Leases that are
superior to the lien of this Security Instrument or with respect to which
subordination, non-disturbance agreements binding upon Lender have entered into
concerning the deposits of Net Proceeds, be forthwith paid to Lender to be held
by Lender in a segregated account to be made available to Borrower for the
Restoration in accordance with the provisions of this Subsection 4.4(b).
Borrower shall commence and diligently prosecute to completion, subject to Force
Majeure (defined below), the Restoration (in the case of a taking, to the extent
the Property is capable of being restored). The term "Net Proceeds" for purposes
of this Section 4.4 shall mean: (i) the net amount of all insurance proceeds
received by Lender under the Policies carried pursuant to Subsections 3.3(a)(i),
(iv), (v), (vi) and (vii) of this Security Instrument as a result of such damage
or destruction, after deduction of its reasonable costs and expenses (including,
but not limited to reasonable counsel fees), if any, in collecting the same, or
(ii) the net amount of all awards and payments received by Lender with respect
to a taking referenced in Section 3.6 of this Security Instrument, after
deduction of its reasonable costs and expenses (including, but not limited to
reasonable counsel fees), if any, in collecting the same, whichever the case may
be. The term "Force Majeure" for the purpose of this Section 4.4 shall have the
following
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meaning: Borrower shall be excused for the period of any delay in the
performance of any obligations hereunder when prevented from so doing by cause
or causes beyond Borrower's control such as, without limitation, all labor
disputes, civil commotion, war, war-like operations, invasion, rebellion,
hostilities, military or usurped power, sabotage, governmental regulations or
controls, fire or other casualty, inability to obtain any materials or services,
and acts of God.
(i) The Net Proceeds shall be made available to
Borrower for payment of, or reimbursement of Borrower's expenses in
connection with, the Restoration, subject to the following conditions:
(A) no Event of Default shall have occurred and be
continuing under the Note, this Security Instrument or any of
the Other Security Documents;
(B) Lender shall, within a reasonable period of time
prior to request for initial disbursement, be furnished with
an estimate of the cost of the Restoration accompanied by an
independent architect's certification as to such costs and
appropriate plans and specifications for the Restoration;
(C) the Net Proceeds, together with any cash or cash
equivalent deposited by Borrower with Lender, are sufficient
to cover the cost of the Restoration as such costs are
certified by the independent architect;
(D) (1) in the event that the Net Proceeds are
insurance proceeds, less than fifty percent (50%) of the total
floor area of the Improvements has been damaged or destroyed,
or rendered unusable as a result of such fire or other
casualty; or (2) in the event that the Net Proceeds are
condemnation awards, less than fifty percent (50%) of the Land
constituting the Property is taken, such Land that is taken is
located along the perimeter or periphery of the Property and
no portion of the Improvements is located in such Lands;
(E) Lender shall be satisfied that any operating
deficits, including all scheduled payments of principal and
interest under the Note which will be incurred with respect to
the Property as a result of the occurrence of any such fire or
other casualty or taking, whichever the case may be, will be
covered out of (1) the Net Proceeds, or (2) other funds of
Borrower;
(F) Lender shall be satisfied that, upon the
completion of the Restoration and related lease-up, if
applicable, the net cash flow of the Property 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 (on a
"normalized" basis, i.e., after deducting replacement reserve
requirements and reserves for tenant
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improvements and leasing commissions from net operating
income, whether or not such sums are escrowed with Lender) of
at least 1.25: 1.0, which coverage ratio shall be equal to or
greater than the coverage ratio existing as of the date of
this Security Instrument or, if lower, the coverage ratio
which existed as of the date immediately preceding such
casualty or taking as the case may be;
(G) the Restoration can reasonably be completed on or
before the earliest to occur of (1) six (6) months prior to
the Maturity Date (as defined in the Note), (2) the earliest
date required for such completion under the terms of any Lease
and (3) such time as may be required under applicable zoning
law, ordinance, rule or regulation in order to repair and
restore the Property to as nearly as possible the condition it
was in immediately prior to such fire or other casualty or to
such taking, as applicable;
(H) the Property and the use thereof after the
Restoration will be in compliance with, and permitted under,
all applicable zoning laws, ordinances, rules and regulations
(including, without limitation, all applicable Environmental
Laws (defined in Section 12.1); and
(I) such fire or other casualty or taking, as
applicable, does not materially impair access to the Property
or the Improvements.
(ii) The Net Proceeds shall be held by Lender and,
until disbursed in accordance with the provisions of this Subsection
4.4(b), shall constitute additional security for the Obligations. The
Net Proceeds other than the Net Proceeds paid under the Policy
described in Subsection 3.3(a)(iv) 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
materialmen'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 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.
(iii) Lender shall have the use of the plans and
specifications and all permits, licenses and approvals required or
obtained in connection with the Restoration. The identity of the
contractors, subcontractors and materialmen engaged in the Restoration,
as well as the contracts under which they have been engaged, shall be
subject to prior review and acceptance by Lender and an independent
consulting engineer selected by Lender (the "Casualty Consultant"),
such acceptance not to be unreasonably withheld or delayed. All costs
and expenses incurred by Lender in connection with making the Net
Proceeds
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<PAGE> 32
available for the Restoration including, without limitation, reasonable
counsel fees and disbursements and the Casualty Consultant's fees,
shall be paid by Borrower.
(iv) In no event shall Lender be obligated to make
disbursements of the Net Proceeds in excess of an amount equal to the
costs actually incurred from time to time for work in place as part of
the Restoration, as certified by the Casualty Consultant, minus the
Casualty Retainage. The term "Casualty Retainage" as used in this
Subsection 4.4(b) shall mean an amount equal to 10% of the costs
actually incurred for work in place as part of the Restoration, as
certified by the Casualty Consultant, until such time as the Casualty
Consultant certifies to Lender that 50% of the required Restoration has
been completed. There shall be no Casualty Retainage with respect to
costs actually incurred by Borrower for work in place in completing the
last 50% of the required Restoration. The Casualty Retainage shall in
no event, and notwithstanding anything to the contrary set forth above
in this Subsection 4.4(b), be less than the amount actually held back
by Borrower from contractors, subcontractors and materialmen engaged in
the Restoration. The Casualty Retainage shall not be released until the
Casualty Consultant certifies to Lender that the Restoration has been
completed in accordance with the provisions of this Subsection 4.4(b)
and that all approvals necessary for the re-occupancy and use of the
Property have been obtained from all appropriate governmental and
quasi-governmental authorities, and Lender receives evidence
satisfactory to Lender that the costs of the Restoration have been paid
in full or will be paid in full out of the Casualty Retainage,
provided, however, that Lender will release the portion of the Casualty
Retainage being held with respect to any contractor, subcontractor or
materialman engaged in the Restoration as of the date upon which the
Casualty Consultant certifies to Lender that the contractor,
subcontractor or materialman has satisfactorily completed all work and
has supplied all materials in accordance with the provisions of the
contractor's, subcontractor's or materialman's contract, and the
contractor, subcontractor or materialman delivers the lien waivers and
evidence of payment in full of all sums due to the contractor,
subcontractor or materialman as may be reasonably requested by Lender
or by the title company insuring the lien of this Security Instrument.
If required by Lender, the release of any such portion of the Casualty
Retainage shall be approved by the surety company, if any, which has
issued a payment or performance bond with respect to the contractor,
subcontractor or materialman.
(v) Lender shall not be obligated to make
disbursements of the Net Proceeds more frequently than once every
calendar month.
(vi) If at any time the Net Proceeds or the
undisbursed balance thereof 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
(the "Net Proceeds Deficiency") with Lender before any further
disbursement of the Net Proceeds shall be made. The Net Proceeds
Deficiency
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deposited with Lender shall be held by Lender and shall be disbursed
for costs actually incurred in connection with the Restoration on the
same conditions applicable to the disbursement of the Net Proceeds, and
until so disbursed pursuant to this Subsection 4.4(b) shall constitute
additional security for the Obligations.
(vii) The excess, if any, of the Net Proceeds and the
remaining balance, if any, of the Net Proceeds Deficiency deposited
with Lender after the Casualty Consultant certifies to Lender that the
Restoration has been completed in accordance with the provisions of
this Subsection 4.4(b), 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 remitted by Lender to
Borrower, provided no Event of Default shall have occurred and shall be
continuing under the Note, this Security Instrument or any of the Other
Security Documents.
(c) All Net Proceeds not required (i) to be made available for
the Restoration or (ii) to be returned to Borrower as excess Net Proceeds
pursuant to Subsection 4.4(b)(vii) 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
or, at the discretion of Lender, the same shall be paid, either in whole or in
part, to Borrower. If Lender shall receive and retain Net Proceeds, the lien of
this Security Instrument shall be reduced only by the amount received and
retained by Lender and actually applied by Lender in reduction of the Debt.
ARTICLE 5. REPRESENTATIONS AND WARRANTIES
Borrower represents and warrants to Trustee and Lender that:
Section 5.1 Warranty of Title. Borrower has good and marketable title
to the Property and has the right to mortgage, grant, bargain, sell, pledge,
assign, warrant, transfer and convey the same and that Borrower possesses an
unencumbered fee simple absolute estate in the Land and the Improvements and
that it owns the Property free and clear of all liens, encumbrances and charges
whatsoever except for those exceptions shown in the title insurance policy
insuring the lien of 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 use and operations 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 Trustee and to Lender against the claims of all
persons whomsoever. Upon the recordation of this Security Instrument and the
filing of a UCC Financing Statement in the office of the Secretary of State for
the state where the Property is located, the Lender will have a first priority
perfected security interest in all personal property owned by Borrower.
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Section 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.
Section 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 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 Note, this Security Instrument and the Other Security
Documents.
Section 5.4 Validity of Documents.
(a) The execution, delivery and performance of the Note, this
Security Instrument and the Other Security Documents and the borrowing evidenced
by the Note (i) are within the power and authority of Borrower; (ii) have been
authorized by all requisite organizational 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
(including, without limitation, any usury laws), any order or judgment of any
court or governmental authority, the articles of incorporation, by-laws,
partnership or operating 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 instrument in appropriate land records in the State where
the Property is located and except for Uniform Commercial Code filings relating
to the security interest created hereby), and (b) the Note, this Security
Instrument and the Other Security Documents constitute the legal, valid and
binding obligations of Borrower.
Section 5.5 Litigation. There is no 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 Borrower, any person guaranteeing the payment of the Debt
or any portion thereof or performance by Borrower of any terms of this Security
Instrument (a "Guarantor"), if any, an Indemnitor (defined in Subsection
10.1(c)), if any, or against or affecting the Property that (a) has not been
disclosed to Lender, and has a material, adverse effect on the Property or
Borrower's, any Guarantor's or any Indemnitor's ability to perform its
obligations under the Note, this Security Instrument or the Other Security
Documents, or
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(b) is not adequately covered by insurance, each as determined by
Lender in its sole and absolute discretion.
Section 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 any successor
thereto as an area having special flood hazards pursuant to the National Flood
Insurance Act of 1968 or the Flood Disaster Protection Act of 1973, or the
National Flood Insurance Reform Act of 1994, as each may be amended, or any
successor law, or, if any portion of the Improvements is now or at any time in
the future 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
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 Laws, including,
without limitation, zoning ordinances, building codes, land use and
Environmental Laws, laws relating to the disabled (including but not limited to,
the ADA) and other similar laws.
(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.
(e) To Borrower's knowledge, 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 served by public water and sewer systems.
(g) The Property is free from damage caused by fire or other
casualty.
(h) To Borrower's knowledge, 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.
(i) 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.
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(j) 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.
(k) All security deposits relating to the Leases reflected on
the certified rent roll delivered to Lender have been collected by Borrower
except as noted on the certified rent roll.
(l) Borrower has received no notice of an actual or threatened
condemnation or eminent domain proceeding by any public or quasi-public
authority.
(m) All the Improvements lie within the boundaries of the
Property.
Section 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.
Section 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.
Section 5.9 ERISA Compliance.
(a) As of the date hereof and throughout the term of this
Security Instrument, (i) Borrower is not and will not be an "employee benefit
plan" as defined in Section 3(3) of ERISA, which is subject to Title I of ERISA,
and (ii) the assets of Borrower do not and will not constitute "plan assets" of
one or more such plans for purposes of Title I of ERISA; and
(b) As of the date hereof and throughout the term of this
Security Instrument, (i) Borrower is not and will not be a "governmental plan"
within the meaning of Section 3(3) of ERISA, and (ii) 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.
Section 5.10 Leases. Except as disclosed in the rent roll for the
Property delivered to and approved by Lender, (a) Borrower is the sole owner of
the entire lessor's interest in the Leases; (b) the Leases are valid and
enforceable; (c) the terms of all alterations, modifications and amendments to
the Leases are reflected in the certified rent roll delivered to and approved by
Lender; (d) none of the Rents reserved in the Leases have been assigned or
otherwise pledged or hypothecated (except to Lender); (e) none of the Rents have
been collected for more than one (1) month in advance (provided that a security
deposit shall not be deemed rent collected in advance); (f) the premises demised
under the Leases have been completed and the tenants under the Leases have
accepted the same and have taken possession of the same on a rent-paying basis;
(g) there exist no offsets or defenses to the payment of any portion of the
Rents; (h) Borrower has received no notice from any tenant challenging the
validity or enforceability of any Lease; (i) there
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are no agreements with the tenants under the Leases other than expressly set
forth in each Lease; (j) the Leases are valid and enforceable against Borrower
and the tenants set forth therein; (k) no Lease contains an option to purchase,
right of first refusal to purchase, or any other similar provision; (l) no
person or entity has any possessory interest in, or right to occupy, the
Property except under and pursuant to a Lease; (m) each Lease (other than a
residential Lease) is subordinate to this Security Instrument, either pursuant
to its terms or a recorded subordination agreement; (n) no Lease has the benefit
of a non-disturbance agreement that would be considered unacceptable to prudent
institutional lenders; and (o) no brokerage commissions or finders fees are due
and payable regarding any Lease.
Section 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, (b) it has received reasonably equivalent value for
the granting of this Security Instrument, and (c) the granting of this Security
Instrument does not constitute a fraudulent conveyance.
Section 5.12 Business Purposes. The loan evidenced by the Note is
solely for the business purpose of Borrower, and is not for personal, family,
household, or agricultural purposes.
Section 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.
Section 5.14 Mailing Address. Borrower's mailing address, as set forth
in the opening paragraph hereof or as changed in accordance with Article 16, is
true and correct.
Section 5.15 No Change in Facts or Circumstances. All information in
the application for the loan submitted to Lender (the "Loan Application") and in
all financing statements, rent rolls, reports, certificates and other documents
submitted in connection with the Loan Application or in satisfaction of the
terms thereof, are accurate, complete and correct in all respects. There has
been no adverse change in any condition, fact, circumstance or event that would
make any such information inaccurate, incomplete or otherwise misleading.
Section 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.
Section 5.17 Third Party Representations. Each of the representations
and the warranties made by each Guarantor and Indemnitor herein or in any Other
Security Document(s) is true and correct in all material respects.
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Section 5.18 Illegal Activity. No portion of the Property has been or
will be purchased, improved, fixtured, equipped or furnished with proceeds of
any criminal or other illegal activity and to the best of Borrower's knowledge,
there are no illegal activities or activities relating to controlled substance
at the Property.
ARTICLE 6. DEBTOR/CREDITOR RELATIONSHIP
Section 6.1 Relationship of Borrower and Lender. The relationship
between Borrower and Lender is solely that of debtor and creditor, and Lender
has no fiduciary or other special relationship with Borrower, and no term or
condition of any of the Note, this Security Instrument and the Other Security
Documents shall be construed so as to deem the relationship between Borrower and
Lender to be other than that of debtor and creditor.
Section 6.2 Servicing of the Loan. At the option of Lender, the loan
secured hereby may be serviced by a servicer/trustee (the "Servicer") selected
by Lender and Lender may delegate all or any portion of its responsibilities
under the Note, this Security Instrument, and the Other Security Documents to
the Servicer.
ARTICLE 7. FURTHER ASSURANCES
Section 7.1 Recording of Security Instrument, Etc. Borrower forthwith
upon the execution and delivery of this Security Instrument and thereafter, from
time to time, will cause this Security Instrument and any of the Other Security
Documents creating a lien or security interest or evidencing the lien hereof
upon the Property and each instrument of further assurance to be filed,
registered or recorded in such manner and in such places as may be required by
any present or future law in order to publish notice of and fully to protect and
perfect the lien or security interest hereof upon, and the interest of Trustee
and of Lender in, the Property. Borrower will pay all taxes, filing,
registration or recording fees, and all expenses incident to the preparation,
execution, acknowledgment and/or recording of the Note, this Security
Instrument, the Other Security Documents, any note or mortgage supplemental
hereto, any security instrument with respect to the Property and any instrument
of further assurance, and any modification or amendment of the foregoing
documents, and all federal, state, county and municipal taxes, duties, imposts,
assessments and charges arising out of or in connection with the execution and
delivery of this 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.
Section 7.2 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,
reasonably require, for the better assuring, conveying, assigning, transferring,
and confirming unto Trustee (where appropriate) and to Lender, the property and
rights hereby mortgaged, granted, bargained, sold, conveyed, confirmed, pledged,
assigned, warranted and transferred or intended now
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or hereafter so to be, or which Borrower may be or may hereafter become bound to
convey or assign to Trustee or 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. Borrower, on demand, will execute and deliver and hereby
authorizes Lender and Trustee to execute in the name of Borrower or without the
signature of Borrower to the extent Lender or Trustee may lawfully do so, one or
more financing statements, chattel mortgages or other instruments, to evidence
or perfect more effectively the security interest of Trustee or Lender in the
Property. Borrower grants to Lender and Trustee an irrevocable power of attorney
coupled with an interest for the purpose of exercising and perfecting any and
all rights and remedies available to Trustee or Lender pursuant to this Section
7.2.
Section 7.3 Changes in Tax, Debt Credit and Documentary Stamp Laws.
(a) If any law is enacted or adopted or amended after the date
of this 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.
(b) 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.
(c) If at any time the United States of America, any State
thereof or any subdivision of any such State shall require revenue or other
stamps to be affixed to the Note, this Security Instrument, or any of the Other
Security Documents or impose any other tax or charge on the same, Borrower will
pay for the same, with interest and penalties thereon, if any.
Section 7.4 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, (vi) 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
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constitute an event of default under the Note or the Security Instrument, (vii)
that the Note and this Security Instrument are valid, legal and binding
obligations and have not been modified or if modified, giving particulars of
such modification, (viii) whether any offsets or defenses exist against the
obligations secured hereby and, if any are alleged to exist, a detailed
description thereof, (ix) that all Leases are in full force and effect and
(provided the Property is not a residential multifamily property) have not been
modified (or if modified, setting forth all modifications), (x) the date to
which the Rents thereunder have been paid pursuant to the Leases, (xi) 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, (xii) 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 (xiii) 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 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 require,
including, but not limited to attestations that each Lease covered thereby is in
full force and effect with no defaults thereunder on the part of any party, that
none of the Rents have been paid more than one month in advance, except as
security, and that the lessee claims no defense or offset against the full and
timely performance of its obligations under the Lease [Not Multifamily].
(c) Upon any transfer or proposed transfer contemplated by
Section 18.1 hereof, at Lender's request, Borrower, any Guarantors and any
Indemnitors shall provide an estoppel certificate to the Investor (defined in
Section 18.1) or any prospective Investor confirming the accuracy of information
provided by such person to Lender under or in respect of this Security
Instrument.
(d) After written request by Borrower not more than twice
annually, Lender shall furnish Borrower a statement 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, and (iv) the balance of the
sums in the Escrow Fund, if any.
Section 7.5 Flood Insurance. After Lender's request, Borrower shall
deliver evidence satisfactory to Lender that no portion of the Improvements is
situated in a federally designated "special flood hazard area" or, if it is,
that Borrower has obtained insurance meeting the requirements of Section
3.3(a)(vi).
Section 7.6 Splitting of Security Instrument. This Security Instrument
and the Note shall, at any time until the same shall be fully paid and
satisfied, at the sole election of Lender, be split or divided into two or more
notes and two or more security instruments, each of which shall cover all or a
portion of the Property to be more particularly described therein. To that end,
Borrower, upon written request of Lender, shall execute, acknowledge and deliver
to Lender and/or its designee or designees substitute notes and security
instruments in such principal amounts, aggregating not more
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than the then unpaid principal amount secured by this Security Instrument, and
containing terms, provisions and clauses no less favorable to Borrower than
those contained herein and in the Note, and such other documents and instruments
as may be required by Lender to effect the splitting of the Note and this
Security Instrument.
Section 7.7 Replacement Documents. Upon receipt of an affidavit of an
officer of Lender as to the loss, theft, destruction or mutilation of the Note
or any Other Security Document which is not of public record, and, in the case
of any such mutilation, upon surrender and cancellation of such Note or Other
Security Document, Borrower will issue, in lieu thereof, a replacement Note or
Other Security Document, dated the date of such lost, stolen, destroyed or
mutilated Note or Other Security Document in the same principal amount thereof
and otherwise of like tenor.
Section 7.8 Amended Financing Statements. Borrower will execute and
deliver to the Lender, prior to or contemporaneously with the effective date of
any such change, any financing statement or financing statement change required
by the Lender to establish or maintain the validity, perfection and priority of
the security interest granted herein. At the request of the Lender, Borrower
shall execute a certificate in form satisfactory to the Lender listing the trade
names under which Borrower intends to operate the Property, and representing and
warranting that Borrower does business under no other trade name with respect to
the Property.
ARTICLE 8. DUE ON SALE/ENCUMBRANCE
Section 8.1 No Sale/Encumbrance. Unless otherwise permitted and all
amounts due and outstanding under the Loan Documents are paid in full thereby,
including without limitation any and all prepayment fees, Borrower agrees that
Borrower shall not, without the prior written consent of Lender, sell, convey,
mortgage, grant, bargain, encumber, pledge, assign, or otherwise transfer the
Property or any part thereof or permit the Property or any part thereof to be
sold, conveyed, mortgaged, granted, bargained, encumbered, pledged, assigned, or
otherwise transferred.
Section 8.2 Sale/Encumbrance Defined. A sale, conveyance, mortgage,
grant, bargain, encumbrance, pledge, assignment, or transfer within the meaning
of this Article 8 shall be deemed to include, but not limited to (a) an
installment sales agreement wherein Borrower agrees to sell the Property or any
part thereof for a price to be paid in installments; (b) an agreement by
Borrower leasing all or a substantial part of the Property for other than actual
occupancy by a space tenant thereunder or a sale, assignment or other transfer
of, or the grant of a security interest in, Borrower's right, title and interest
in and to any Leases or any Rents; (c) if Borrower, any Guarantor, any
Indemnitor, or any general partner or managing member (or if no managing member,
any member) of Borrower, Guarantor or Indemnitor is a corporation, the voluntary
or involuntary sale, conveyance, transfer or pledge of such corporation's stock
(or the stock of any corporation directly or indirectly controlling such
corporation by operation of law or otherwise) or the creation or issuance of new
stock by which an aggregate of more than 49% of such corporation's stock shall
be vested in a party or parties who are not now owners of more than 49% of such
corporation's stock; (d) if Borrower, any
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Guarantor or Indemnitor or any general partner or managing member (or if no
managing member, any member) of Borrower, any Guarantor or Indemnitor is a
limited or general partnership or joint venture, the change, removal or
resignation of a general partner or the transfer or pledge of the partnership
interest of any general partner or any profits or proceeds relating to such
partnership interest; and (e) if Borrower, any Guarantor, any Indemnitor or any
general partner or member of Borrower, any Guarantor or any Indemnitor is a
limited liability company, the change, removal or resignation of a managing
member (or if no managing member, any member) or the transfer of the membership
interest of a managing member (or if no managing member, any member) or any
profits or proceeds relating to such membership interest. Notwithstanding the
foregoing, the following transfers shall not be deemed to be a sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment or transfer within the
meaning of this Article 8: (a) transfer by devise or descent or by operation of
law upon the death of a member, general partner or stockholder of Borrower, any
Guarantor or Indemnitor or any member or general partner thereof, and (b) a
sale, transfer or hypothecation of a membership, partnership or shareholder
interest in Borrower, whichever the case may be, by a current member, general
partner or shareholder, as applicable, to an immediate family member (i.e.,
parents, spouses, siblings, children or grandchildren) of such member, general
partner or shareholder, or to a trust for the benefit of an immediate family
member of such member, general partner or shareholder, provided that, with
respect to any such sale or transfer, Borrower shall deliver a non-consolidation
opinion or an update of the same, in form and substance reasonably satisfactory
to Lender, upon Lender's request to do so.
Section 8.3 Lender's Rights. Lender reserves the right to condition the
consent required hereunder upon a modification of the terms hereof and on
assumption of the Note, this Security Instrument and the Other Security
Documents as so modified by the proposed transferee, payment of a transfer fee
and all of Lender's and Trustee's expenses incurred in connection with such
transfer, or such other conditions as Lender shall determine in its sole
discretion to be in the interest of Lender. Lender shall not be required to
demonstrate any actual impairment of its security or any increased risk of
default hereunder in order to declare the Debt immediately due and payable upon
Borrower's sale, conveyance, mortgage, grant, bargain, encumbrance, pledge,
assignment, or transfer of the Property without Lender's consent. This provision
shall apply to every sale, conveyance, mortgage, grant, bargain, encumbrance,
pledge, assignment, or transfer of the Property regardless of whether voluntary
or not, or whether or not Lender has consented to any previous sale, conveyance,
mortgage, grant, bargain, encumbrance, pledge, assignment, or transfer of the
Property.
ARTICLE 9. PREPAYMENT
Section 9.1 Prepayment Only in Accordance with Note. The Debt may be
prepaid only in strict accordance with the express terms and conditions of the
Note including, without limitation, payment of the Prepayment Consideration if
applicable.
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ARTICLE 10. DEFAULT
Section 10.1 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 within five (5)
days following the date the same is due, or if the entire Debt is not paid on or
before the Maturity Date;
(b) if Borrower violates or does not comply with any of the
provisions of Sections 3.7, 4.3 or 8.1 or if any general partner or the SPE
Member of Borrower violates or does not comply with any of the provisions of
Section 4.3;
(c) if any representation or warranty of Borrower, Indemnitor
(as defined in that certain Environmental Indemnity Agreement dated as of the
date hereof (the "Environmental Indemnity") or any Guarantor, or any member,
general partner, principal or beneficial owner of any of the foregoing, made
herein or in the Environmental Indemnity or in any guaranty, or in any
certificate, report, financial statement or other instrument or document
furnished to Lender shall have been false or misleading in any material respect
when made;
(d) if any default occurs under any guaranty or indemnity
executed in connection herewith and such default continues after the expiration
of applicable grace periods, if any;
(e) except for the specific defaults set forth in this Section
10.1 any other default hereunder or under the Note or any of the Other Security
Documents by Borrower, which default is not cured (i) in the case of any default
which can be cured by the payment of a sum of money, within ten (10) days after
written notice from Lender to Borrower, or (ii) in the case of any other
default, within thirty (30) days after written notice from Lender to Borrower;
provided that if such default cannot reasonably be cured within such thirty (30)
day period and Borrower 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 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 one
hundred twenty (120) days, unless, only in the case of cures that require
construction or remedial work, such cure cannot with diligence be completed
within such one hundred twenty (120) day period, in which case such period shall
be extended for an additional one hundred twenty (120) days;
(f) if Borrower or any Guarantor or Indemnitor shall make an
assignment for the benefit of creditors or if Borrower shall generally not be
paying its debts as they become due; or
(g) if the Policies are not kept in full force and effect, or
Borrower has not delivered evidence of the renewal of the Policies ten (10) days
prior to their expiration as provided in Section 3.3(b); or
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(h) if (i) 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 Guarantor or Indemnitor
shall make a general assignment for the benefit of its creditors'; or (ii) there
shall be commenced against 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
ninety (90) days; or (iii) there shall be commenced against the 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 ninety (90) days from the entry thereof; or (iv)
the 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) the 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.
Section 10.2 Late Payment Charge. If any monthly installment of
principal and interest is not paid on 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.
Section 10.3 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) the
Default Rate (as defined in the Note), and (b) the maximum interest rate which
Borrower may by law pay or Lender may charge and collect.
ARTICLE 11. RIGHTS AND REMEDIES
Section 11.1 Remedies.
(a) Upon the occurrence of any Event of Default, and to the
extent permitted by Applicable Laws, Borrower agrees that Lender, and when
requested to do so by Lender, Trustee, may take such action, without notice or
demand, as it deems
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advisable to protect and enforce the rights of Lender and Trustee against
Borrower and in and to the Property, including, but not limited to the following
actions, each of which may be pursued concurrently or otherwise, at such time
and in such order as Lender may determine, in its sole discretion, without
impairing or otherwise affecting the other rights and remedies of Lender or
Trustee:
(i) declare the entire unpaid Debt to be
immediately due and payable;
(ii) 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;
(iii) with or without entry, to the extent permitted
and pursuant to the procedures provided by applicable law, institute
proceedings for the partial foreclosure of this 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;
(iv) 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;
(v) subject to the provisions of Article 15,
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 Security Documents;
(vi) subject to the provisions of Article 15,
recover judgment on the Note either before, during or after any
proceedings for the enforcement of this Security Instrument or the
Other Security Documents;
(vii) 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;
(viii) subject to any applicable law, the license
granted to Borrower under Section 1.2 shall automatically be revoked
and Lender may 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
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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 (A) use, operate, manage,
control, insure, maintain, repair, restore and otherwise deal with all
and every part of the Property and conduct the business thereat; (B)
complete any construction on the Property in such manner and form as
Lender deems advisable; (C) make alterations, additions, renewals,
replacements and improvements to or on the Property; (D) 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, cancel, enforce or modify Leases, obtain and evict
tenants, and demand, sue for, collect and receive all Rents of the
Property and every part thereof; (E) 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 occupied by Borrower; (F) 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 (G) 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 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;
(ix) exercise any and all rights and remedies granted
to a secured party upon default under the Uniform Commercial Code,
including, without limiting the generality of the foregoing: (A) the
right to take possession of the Collateral or any part thereof, and to
take such other measures as Trustee or Lender may deem necessary for
the care, protection and preservation of the Collateral, and (B)
request Borrower at its expense to assemble the Collateral and make it
available to Trustee or Lender at a convenient place acceptable to
Lender. Any notice of sale, disposition or other intended action by
Trustee or Lender with respect to the 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;
(x) apply any sums then deposited in the Escrow Fund
and any other sums held in escrow or otherwise by Lender in accordance
with the terms of this Security Instrument or any Other Security
Document to the payment of the following items in any order in its sole
and absolute discretion:
(A) Taxes and Other Charges;
(B) Insurance Premiums;
(C) Interest on the unpaid principal balance of
the Note;
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(D) amortization of the unpaid principal balance
of the Note; and all other sums payable pursuant to the Note, this
Security Instrument and the Other Security Documents, including,
without limitation, advances made by Lender pursuant to the terms of
this Security Instrument;
(xi) 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 is therefore
irrevocable) for Borrower to collect such Insurance Premiums;
(xii) apply the undisbursed balance of any Net
Proceeds or any Net Proceeds Deficiency deposit, 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 discretion;
(xiii) prohibit Borrower and anyone claiming on
behalf of or through Borrower from making use of or withdrawing any
sums from the Lock Box Account;
(xiv) pursue such other remedies as Lender or
Trustee may have under applicable law.
(b) 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 11.1 to the contrary, if any Event of Default as described in
Subsection 10.1 (h)(i) or (ii) shall occur, the entire unpaid Debt shall be
automatically due and payable, without any further notice, demand or other
action by Lender.
(c) Lender may adjourn from time to time any sale by it to be
made under or by virtue of this Security Instrument by announcement at the time
and place appointed for such sale or for such adjourned sale or sales; and,
except as otherwise provided by any applicable provision of law, Lender, without
further notice or publication, may make such sale at the time and place to which
the same shall be so adjourned.
(d) Upon any sale made under or by virtue of this Section
11.1, whether made under a power of sale or under or by virtue of judicial
proceedings or of a judgment or decree of foreclosure and sale, Lender may bid
for and acquire the Property or any part thereof and in lieu of paying cash
therefor may make settlement for the purchase price by crediting upon the Debt
the net sales price after deducting therefrom the expenses of the sale and costs
of the action and any other sums which Lender is authorized to deduct under this
Security Instrument.
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Section 11.2 Application of Proceeds. The purchase money, proceeds and
avails of any disposition of the Property, or any part thereof, or any other
sums collected by Lender pursuant to the Note, this Security Instrument or the
Other Security 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.
Section 11.3 Right to Cure Defaults. Upon the occurrence of any Event
of Default, 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, cure 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 11.3, 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 in appearing in, defending, or
bringing any such action or proceeding shall bear interest at the Default Rate,
for the period after notice from Lender that such cost or expense was incurred
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.
Section 11.4 Actions and Proceedings. After the occurrence and during
the continuance of an Event of Default, Lender has the right to appear in and
defend any action or proceeding brought with respect to the Property and to
bring any action or proceeding, in the name and on behalf of Borrower, which
Lender, in its discretion, decides should be brought to protect its interest in
the Property.
Section 11.5 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.
Section 11.6 Examination of Books and Records. Lender, its agents,
accountants and attorneys shall have the right upon prior written notice to
examine the records, books, management and other papers of Borrower and its
affiliates or of any Guarantor or Indemnitor which reflect upon their financial
condition, at the Property or at any office regularly maintained by Borrower,
its affiliates or any Guarantor or Indemnitor where the books and records are
located. Lender and its agents shall have the right upon notice to make copies
and extracts from the foregoing records and other papers. In addition, Lender,
its agents, accountants and attorneys shall have the right to examine and audit
the books and records of Borrower and its affiliates or of any Guarantor or
Indemnitor pertaining to the income, expenses and operation of the Property
during
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reasonable business hours at any office of Borrower, its affiliates or any
Guarantor or Indemnitor where the books and records are located.
Section 11.7 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 or Trustee 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 Security Documents, (ii) the release, regardless of
consideration, of the whole or any part of the Property, or of any person liable
for the Debt or any portion thereof, or (iii) any agreement or stipulation by
Lender extending the time of payment or otherwise modifying or supplementing the
terms of the Note, this Security Instrument or the Other Security 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 or Trustee 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 Trustee or Lender thereafter to foreclose this Security Instrument. The
rights of Trustee and 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 Trustee or Lender shall be construed as an election to proceed
under any one provision herein to the exclusion of any other provision. Neither
Trustee nor Lender shall be limited exclusively to the rights and remedies
herein stated but shall be entitled to every right and remedy now or hereafter
afforded at law or in equity.
Section 11.8 Right to Release Any Portion of the Property. Trustee, at
the direction of 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.
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Section 11.9 Violation of Laws. If the Property is not in compliance
with Applicable Laws, Lender may impose additional requirements upon Borrower in
connection herewith including, without limitation, monetary reserves or
financial equivalents.
Section 11.10 Right of Entry. Lender and its agents shall have the
right upon prior written notice to enter and inspect the Property at all
reasonable times upon not less than five (5) Business Days' notice (except in
the case of emergencies when no notice shall be required) to Borrower.
ARTICLE 12. ENVIRONMENTAL HAZARDS
Section 12.1 Environmental Representations and Warranties. Borrower
represents and warrants, based upon an environmental Phase I site assessment of
the Property and information that Borrower knows, that: (a) there are no
Hazardous Substances (defined below) or underground storage tanks in, on, or
under the Property, except those that are both (i) in compliance with
Environmental Laws (defined below) and with permits issued pursuant thereto, if
any, and (ii) fully disclosed to Lender in writing pursuant to the written
reports resulting from the environmental assessments of the Property delivered
to Lender (the "Environmental Report"); (b) there are no past or present
Releases (defined below) of Hazardous Substances in violation of any
Environmental Law or which would require Remediation (defined below) by a
Governmental Authority in, on, under or from the Property except as described in
the Environmental Report; (c) 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; (d) Borrower does
not know of, and has not received, any written or oral notice or other
communication from any person or entity (including, but not limited to a
governmental entity) relating to Hazardous Substances or Remediation thereof, of
possible liability of any person or entity pursuant to any Environmental Law,
other environmental conditions in connection with the Property, or any actual
administrative or judicial proceedings in connection with any of the foregoing;
and (e) Borrower has truthfully and fully provided to Lender, in writing, any
and all information relating to environmental conditions in, on, under or from
the Property that is known to Borrower and that is contained in Borrower's files
and records, including, but not limited to 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 for the
purposes of Sections 12.2. 12.3 and 13.4 only, 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
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Transportation Act; the Resource Conservation and Recovery Act (including, but
not limited to Subtitle I relating to underground storage tanks); the Solid
Waste Disposal Act; the Clean Water Act; the Clean Air Act; the Toxic Substances
Control Act; the Safe Drinking Water Act; the Occupational Safety and Health
Act; the Federal Water Pollution Control Act; the Federal Insecticide, Fungicide
and Rodenticide Act; the Endangered Species Act; the National Environmental
Policy Act; and the River and Harbors Appropriation Act. "Environmental Law"
also includes, but is not limited to, any present, and for the purposes of
Sections 12.2, 12.3 and 13.4 only, 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 or entity, whether or not in connection with transfer of title to
or interest in property. "Hazardous Substances" include but are not limited to
any and all substances (whether solid, liquid or gas) (i) 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 for the purposes of Sections 12.2. 12.3
and 13.4 only, future, Environmental Laws or (ii) that may have a negative
impact on human health or the environment, including, but not limited to
petroleum and petroleum products, asbestos and asbestos-containing materials,
polychlorinated biphenyls, lead, 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
this Article 12.
Section 12.2 Environmental Covenants. Borrower covenants and agrees
that so long as the Borrower owns, manages, is in possession of, or otherwise
controls the operation of the Property: (a) all uses and operations on or of the
Property, whether by Borrower or any other person or entity, 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 in compliance with all Environmental Laws and
with permits issued pursuant thereto, if and to the extent required; (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 or entity (the "Environmental
Liens"); (e) Borrower shall, at its sole cost and expense, fully and
expeditiously cooperate in all activities pursuant to Section 12.3 below,
including, but not limited to providing all relevant information and making
knowledgeable persons available for interviews; (f) Borrower shall, at its sole
cost and
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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 after Lender has reason to believe this
Section 12.2 has been violated (including, but not limited to 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 (defined in
Section 13.1) shall be entitled to rely on such reports and other results
thereof; (g) 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, but not limited to 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; (h) 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 or entity (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 (i) Borrower shall immediately notify Lender in writing promptly
after it has become aware of (A) any presence or Releases or threatened Releases
of Hazardous Substances in, on, under, from or migrating towards the Property
which is required to be reported to a governmental authority under any
Environmental Law, (B) any actual Environmental Lien affecting the Property, (C)
any required Remediation of environmental conditions relating to the Property,
and (D) any written or oral notice or other communication of which Borrower
becomes aware from any source whatsoever (including, but not limited to a
governmental entity) relating in any way to Hazardous Substances or Remediation
thereof, possible liability of any person or entity pursuant to any
Environmental Law, other environmental conditions in connection with the
Property, or any actual or threatened administrative or judicial proceedings in
connection with anything referred to in this Article 12.
Section 12.3 Lender's Rights. Lender, its environmental consultant, and
any other person or entity designated by Lender, including, but not limited to
any receiver and any representative of a governmental entity, shall have the
right, but not the obligation, at intervals of not less than one year, or more
frequently if the Lender reasonably believes that a Hazardous Substance or other
environmental condition violates or threatens to violate any Environmental Law,
after notice to Borrower, 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, but not limited to conducting any environmental assessment
or audit of the Property or portions thereof to confirm Borrower's compliance
with the provisions of this Article 12, and Borrower shall cooperate in all
reasonable ways with Lender in connection with any such audit. Such audit shall
be performed in a manner so as to minimize interference with the conduct of
business at the Property. If such audit discloses that a violation of or a
liability under any Environmental Law exists or if such audit was required or
prescribed by law, regulation or governmental or quasi-governmental authority,
Borrower shall pay all costs and expenses incurred in connection
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with such audit; otherwise, the costs and expenses of such audit shall,
notwithstanding anything to the contrary set forth in this Section, be paid by
Lender.
ARTICLE 13. INDEMNIFICATION
Section 13.1 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, or punitive damages, of whatever kind or nature (including, but not
limited to attorneys' fees and other costs of defense) (the "Losses") imposed
upon or incurred by or asserted against any Indemnified Parties and directly or
indirectly arising out of or in any way relating to any one or more of the
following (but excluding Losses arising out of Lender's gross negligence or
willful misconduct): (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 the Note, this Security Instrument, or any Other
Security Documents; (c) any and all lawful action that may be taken by Lender or
Trustee in connection with the enforcement of the provisions of this Security
Instrument or the Note or any of the Other Security Documents, whether or not
suit is filed in connection with same, or in connection with Borrower, any
Guarantor or Indemnitor and/or any member, partner, joint venturer or
shareholder thereof becoming a party to a voluntary or involuntary federal or
state bankruptcy, insolvency or similar proceeding; (d) any accident, injury to
or death of persons or loss of or damage to property occurring in, on or about
the Property or any part thereof or on the adjoining sidewalks, curbs, adjacent
property or adjacent parking areas, streets or ways; (e) any use, nonuse or
condition in, on or about the Property or any part thereof or on the adjoining
sidewalks, curbs, adjacent property or adjacent parking areas, streets or ways;
(f) any failure on the part of Borrower to perform or be in compliance with any
of the terms of this Security Instrument or the Other Security Documents; (g)
performance of any labor or services or the furnishing of any materials or other
property in respect of the Property or any part thereof; (h) the failure of any
person to file timely with the Internal Revenue Service an accurate Form 1099-B,
Statement for Recipients of Proceeds from Real Estate, Broker and Barter
Exchange Transactions, which may be required in connection with the Security
Instrument, or to supply a copy thereof in a timely fashion to the recipient of
the proceeds of the transaction in connection with which this Security
Instrument is made; (i) any failure of the Property to be in compliance with any
Applicable Laws; (j) the enforcement by any Indemnified Party of the provisions
of this Article 13; (k) 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; (l) the payment of any commission, charge or brokerage
fee to anyone which may be payable in connection with the funding of the loan
evidenced by the Note and secured by this Security Instrument; or (m) any
misrepresentation made by Borrower in this Security Instrument, the Other
Security Documents, or any documents or information provided pursuant to Section
18.1 hereof. Any amounts payable to Lender by reason of the application of this
Section 13.1 shall become immediately due and payable and shall bear interest at
the Default Rate from the
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date loss or damage is sustained by Lender until paid. For purposes of this
Article 13, the term "Indemnified Parties" means Lender and any person or entity
who is or will have been involved in the origination of this loan, any person or
entity who is or will have been involved in the servicing of this loan, any
person or entity, including Trustee and its successors and assigns, in whose
name the encumbrance created by this Security Instrument is or will have been
recorded, persons and entities who may hold or acquire or will have held a full
or partial interest in this loan (including, but not limited to Investors or
prospective Investors in the Securities, as well as custodians, trustees and
other fiduciaries who hold or have held a full or partial interest in this loan
for the benefit of third parties) as well as the respective directors, officers,
shareholders, members, partners, employees, agents, servants, representatives,
contractors, subcontractors, affiliates, subsidiaries, participants, successors
and assigns of any and all of the foregoing (including, but not limited to any
other person or entity who holds or acquires or will have held a participation
or other full or partial interest in this loan or the Property, whether during
the term of this loan or as a part of or following a foreclosure of this loan
and including, but not limited to any successors by merger, consolidation or
acquisition of all or a substantial portion of Lender's assets and business).
Section 13.2 Mortgage and/or Intangible Tax. 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 imposed upon or incurred
by or asserted against any Indemnified Parties and directly or indirectly
arising out of or in any way relating to any tax on the making and/or recording
of this Security Instrument, the Note or any of the Other Security Documents or
in connection with a transfer of all or a portion of the Property pursuant to a
foreclosure, deed in lieu of foreclosure or otherwise.
Section 13.3 ERISA 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 (including, without
limitation, attorneys' fees and costs incurred in the investigation, defense,
and settlement of Losses incurred in correcting any prohibited transaction or in
the sale of a prohibited loan, and in obtaining any individual prohibited
transaction exemption under ERISA that may be required, in Lender's sole
discretion) that Lender may incur, directly or indirectly, as a result of a
default under Sections 4.2 or 5.9.
Section 13.4 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, but not limited to
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 arising out of or in any way
relating to any one or more of the following, unless caused by the gross
negligence or willful misconduct of any Indemnified Party: (a) any presence of
any Hazardous Substances in, on, above or under the Property; (b) any past,
present or threatened Release of Hazardous Substances in, on, above, under or
from the Property; (c) any activity by Borrower, any person or entity affiliated
with Borrower or tenant or
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other users 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; (d) any activity by Borrower, any person or entity
affiliated with Borrower or tenant or other users 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, but not
limited to any removal, remedial or corrective action; (e) any past, present or
threatened violations of any Environmental Laws (or permits issued pursuant to
any Environmental Law) in connection with the Property or operations thereon,
including, but not limited to any failure by Borrower, any person or entity
affiliated with Borrower or tenant or other users of the Property to comply with
any order of any governmental authority in connection with Environmental Laws;
(f) the imposition, recording or filing of any Environmental Lien encumbering
the Property; (g) any administrative processes or proceedings or judicial
proceedings in any way connected with any matter addressed in Article 12 and
this Section 13.4; (h) any past, present or threatened injury to, destruction of
or loss of natural resources in any way connected with the Property, including,
but not limited to costs to investigate and assess such injury, destruction or
loss; (i) 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 owned or possessed by such
Borrower or other users, at any facility or incineration vessel owned or
operated by another person or entity and containing such or similar Hazardous
Substance; (j) 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 selected by Borrower or such other users, from
which there is a Release, or a threatened Release of any Hazardous Substance
which causes the incurrence of costs for Remediation; (k) any personal injury,
wrongful death, or property damage caused by Hazardous Substances arising under
any statutory or common law or tort law theory, including, but not limited to
damages assessed for the maintenance of a private or public nuisance or for the
conducting of an abnormally dangerous activity on or near the Property; and (l)
any intentional misrepresentation in any representation or warranty or material
breach or failure to perform any covenants or other obligations pursuant to
Article 12.
Section 13.5 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, and, at the option of Indemnified
Parties, their attorneys shall control the resolution of 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.
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ARTICLE 14. WAIVERS
Section 14.1 Waiver of Counterclaim. Borrower hereby waives the right
to assert a counterclaim, other than a mandatory or compulsory counterclaim, in
any action or proceeding brought against it by Trustee or Lender arising out of
or in any way connected with this Security Instrument, the Note, any of the
Other Security Documents, or the Obligations.
Section 14.2 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.
Section 14.3 Waiver of Notice. To the extent permitted by Applicable
Law, Borrower shall not be entitled to any notices of any nature whatsoever from
Trustee or Lender except with respect to matters for which this Security
Instrument specifically and expressly provides for the giving of notice by
Trustee or Lender to Borrower and except with respect to matters for which
Trustee or Lender is required by Applicable Law to give notice, and Borrower
hereby expressly waives the right to receive any notice from Trustee or Lender
with respect to any matter for which this Security Instrument does not
specifically and expressly provide for the giving of notice by Trustee or Lender
to Borrower.
Section 14.4 Waiver of Statute of Limitations. Borrower hereby
expressly waives and releases to the fullest extent permitted by law, the
pleading of any statute of limitations as a defense to payment of the Debt or
performance of its Other Obligations.
Section 14.5 Sole Discretion of Lender. \Wherever pursuant to this
Security Instrument (a) Lender exercises any right given to it to approve or
disapprove, (b) any arrangement or term is to be satisfactory to Lender, or (c)
any other decision or determination is to be made by Lender, the decision of
Lender to approve or disapprove all decisions that arrangements or terms are
satisfactory or not satisfactory, and all other decisions and determinations
made by Lender, shall be in the sole and absolute discretion of Lender and shall
be final and conclusive, except as may be otherwise expressly and specifically
provided herein.
Section 14.6 Survival. Except as hereinafter specifically set forth
below, the representations and warranties, covenants, and other obligations
arising under Article 12 shall 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 or Trustee's
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rights and remedies pursuant hereto including, but not limited to foreclosure or
acceptance of a deed in lieu of foreclosure, any exercise of any rights and
remedies pursuant to the Note or any of the Other Security Documents, any
transfer of all or any portion of the Property (whether by Borrower, by Lender,
or by Trustee at the request of 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 Security Documents, and any act or
omission that might otherwise be construed as a release or discharge of Borrower
from the obligations pursuant hereto. All obligations and liabilities of
Borrower under Article 12 shall cease and terminate on the first (1st)
anniversary of the date of payment to Lender in cash of the entire Debt,
provided that contemporaneously with or subsequent to such payment, Borrower, at
its sole cost and expense, delivers to Lender an environmental audit of the
Property in form and substance, and prepared by a qualified environmental
consultant, reasonably satisfactory in all respects to Lender and indicating the
Property is in full compliance with all applicable Environmental Laws.
Section 14.7 Waiver of Trial By Jury. BORROWER HEREBY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING
DIRECTLY OR INDIRECTLY TO THE LOAN EVIDENCED BY THE NOTE, THE APPLICATION FOR
THE LOAN EVIDENCED BY THE NOTE, THE NOTE, THIS SECURITY INSTRUMENT OR THE OTHER
SECURITY DOCUMENTS OR ANY ACTS OR OMISSIONS OF LENDER, ITS OFFICERS, EMPLOYEES,
DIRECTORS OR AGENTS IN CONNECTION THEREWITH.
ARTICLE 15. EXCULPATION
Section 15.1 Exculpation. Notwithstanding anything to the contrary
contained in this Security Instrument or in any Other Security Document (but
subject to the provisions of Sections 15.2, 15.3, 15.4 and 15.5), Lender shall
not enforce the liability and obligation of Borrower to perform and observe the
obligations contained in the Note or this Security Instrument by any action or
proceeding to collect damages or wherein a money judgment or any deficiency
judgment or order or any judgment establishing any personal obligation or
liability shall be sought against Borrower or any principal director, officer,
employee, beneficiary, shareholder, partner, member, trustee, agent or affiliate
of Borrower or any person owning, directly or indirectly, any legal or
beneficial interest in Borrower, or any successors or assigns of any of the
foregoing (collectively, the "Exculpated Parties"). Lender or Trustee, at the
request of Lender, may bring a foreclosure action, action for specific
performance or other appropriate action or proceeding to enable Lender to
enforce and realize upon this Security Instrument, the Other Security Documents,
and the interest in the Property, the Rents and any other collateral given to
Lender created by this Security Instrument and the Other Security Documents;
provided, however, subject to the provisions of Sections 15.2, 15.3, 15.4 and
15.5, that any judgment in any action or proceeding shall be enforceable against
Borrower only to the extent of Borrower's interest in the Property, in the Rents
and in any other collateral given to Lender in connection with the Note. Lender,
by accepting
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the Note and this Security Instrument, agrees that it shall not, except as
otherwise provided below, sue for or demand any deficiency judgment against
Borrower or any of the Exculpated Parties in any action or proceeding, under or
by reason of or under or in connection with the Note, the Other Security
Documents or this Security Instrument.
Section 15.2 Reservation of Certain Rights. The provisions of Section
15.1 shall not (a) constitute a waiver, release or impairment of the
Obligations; (b) impair the right of Lender or Trustee to name Borrower as a
party defendant in any action or suit for judicial foreclosure and sale under
this Security Instrument; (c) affect the validity or enforceability of any
indemnity, guaranty, master lease or similar instrument made in connection with
the Note, this Security Instrument, or the Other Security Documents; (d) impair
the right of Lender to obtain the appointment of a receiver; or (e) impair the
enforcement of the Assignment of Leases and Rents executed in connection
herewith.
Section 15.3 Exceptions to Exculpation. Notwithstanding the provisions
of Article 15.1 to the contrary, Borrower and Indemnitor shall be personally
liable to Lender on a joint and several basis for the Losses Lender incurs due
to: (a) fraud or intentional misrepresentation by Borrower or any other person
or entity in connection with the execution and the delivery of the Note, this
Security Instrument or the Other Security Documents; (b) Borrower's
misapplication or misappropriation of Rents received by Borrower after the
occurrence and during the continuance of an Event of Default; (c) Borrower's
misapplication or misappropriation of tenant security deposits or Rents
collected in advance; (d) the misapplication or misappropriation of insurance
proceeds or condemnation awards after the occurrence and during the continuance
of an Event of Default; (e) any fees or commissions paid by Borrower after the
occurrence and during the continuance of an Event of Default to any principal,
affiliate or general partner of Borrower, Indemnitor or Guarantor in violation
of the terms of the Note, this Security Instrument or the Other Security
Documents; (f) criminal acts perpetrated by it in respect of the Property; (g)
any failure by Borrower or Indemnitor to comply with the terms and provisions of
Section 13.4 hereof or of the Environmental Indemnity; or (h) any failure by
Borrower or any general partner or the SPE Member of Borrower to comply with the
terms and provisions of Section 4.3 hereof; or (i) all fees and expenses of
Lender or Trustee pursuant to Section 19.2 hereof.
Section 15.4 Recourse. Notwithstanding the foregoing, the agreement of
Lender not to pursue recourse liability as set forth in Section 15.1 above SHALL
BECOME NULL AND VOID and shall be of no further force and effect in the event
(i) the Property or any part thereof shall become an asset in (A) a voluntary
bankruptcy or insolvency proceeding, or (B) an involuntary bankruptcy or
insolvency proceeding commenced by an affiliate of Borrower which is not
dismissed within ninety (90) days of filing, or (ii) Borrower or any Guarantor
or Indemnitor fails to comply with the terms and provisions of Section 3.11
hereof within thirty (30) days after written notice from Lender to Borrower
(which notice shall be a second notice given after the expiration of any notice
given pursuant to Section 10.1(e)).
Section 15.5 Bankruptcy Claims. 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
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any other provisions of the U.S. Bankruptcy Code to file a claim for the full
amount of the Debt secured by this Security Instrument or to require that all
collateral shall continue to secure all of the Debt owing to Lender in
accordance with the Note, this Security Instrument and the Other Security
Documents.
ARTICLE 16. NOTICES
Section 16.1 Notices. All notices or other written communications
hereunder shall be deemed to have been properly given (a) upon delivery, if
delivered in person or by facsimile transmission with receipt acknowledged by
the recipient thereof, (b) one (1) Business Day (defined below) after having
been deposited for overnight delivery with any reputable overnight courier
service, or (c) three (3) Business Days after having been deposited in any post
office or mail depository regularly maintained by the U.S. Postal Service and
sent by registered or certified mail, postage prepaid, return receipt requested,
addressed as follows:
If to Borrower:
A.T.C, L.L.C.
1010 Wisconsin Avenue, N.W.
Suite 250
Washington, D.C. 20007
Fax Number: 202-298-7277
Attn: Thomas G. Kappler
with a copy to:
JACKSON & CAMPBELL, P.C.
1120 20th Street, N.W.
Suite 300
Washington, D.C. 20036
Fax Number: 202-457-1678
Attention: David H. Cox
If to Trustee:
LAWYERS TITLE INSURANCE COMPANY
804 Charles Street
Fredericksburg, VA 22404
Attention: John McManus
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If to Lender:
GMAC Commercial Mortgage Corporation
650 Dresher Road
Horsham, Pennsylvania 19055-8015
Attention: Barry Moore, Executive Vice President
Facsimile No. (215) 328-3478
With a copy to:
Commercial Capital Initiatives, Inc.
Wall Street Plaza
88 Pine Street
New York, New York 10005
Attention: Manager - Loan Administration
Facsimile No. (212) 269-5286
and
Weil, Gotshal & Manges LLP
767 Fifth Avenue
New York, New York 10153
Attention: Elliot L. Hurwitz, Esq. (KLT)
Facsimile No. (212) 310-8007
or addressed as such party may from time to time designate by written
notice to the other parties.
Either party by notice to the other may designate additional or
different addresses for subsequent notices or communications.
For purposes of this Subsection, "Business Day" shall mean a day on
which commercial banks are not authorized or required by law to close in the
State of New York.
ARTICLE 17. APPLICABLE LAW
Section 17.1 Choice of Law. THIS SECURITY INSTRUMENT SHALL BE GOVERNED,
CONSTRUED, APPLIED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE WHERE
THE PROPERTY IS LOCATED AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.
Section 17.2 Usury Laws. This Security Instrument and the Note are
subject to the express condition that at no time shall Borrower be obligated or
required to pay interest on the Debt at a rate which could subject the holder of
the Note to either civil or criminal liability as a result of being in excess of
the maximum interest rate which Borrower is permitted by applicable law to
contract or agree to pay. If by the terms of
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this Security Instrument or the Note, Borrower is at any time required or
obligated to pay interest on the Debt at a rate in excess of such maximum rate,
the rate of interest under the Security Instrument and the Note shall be deemed
to be immediately reduced to such maximum rate and the interest payable shall be
computed at such maximum rate and all prior interest payments in excess of such
maximum rate shall be applied and shall be deemed to have been payments in
reduction of the principal balance of the Note. All sums paid or agreed to be
paid to Lender for the use, forbearance, or detention of the Debt shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Note until payment in full so that
the rate or amount of interest on account of the Debt does not exceed the
maximum lawful rate of interest from time to time in effect and applicable to
the Debt for so long as the Debt is outstanding.
Section 17.3 Provisions Subject to Applicable Law. All rights, powers
and remedies provided in this Security Instrument may be exercised only to the
extent that the exercise thereof does not violate any applicable provisions of
law and are intended to be limited to the extent necessary so that they will not
render this Security Instrument invalid, unenforceable or not entitled to be
recorded, registered or filed under the provisions of any Applicable Law.
Section 17.4 Inapplicable Provision. If any term of this Security
Instrument or any application thereof shall be invalid or unenforceable, the
remainder of this Security Instrument and any other application of the term
shall not be affected thereby.
ARTICLE 18. SECONDARY MARKET
Section 18.1 Dissemination of Information. If Lender determines at any
time to sell, transfer or assign the Note, this Security Instrument and the
Other Security Documents, and any or all servicing rights with respect thereto,
or to grant participations therein (the "Participations") or issue mortgage
pass-through certificates or other securities (such sale and/or issuance, the
"Securitization") 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, investor, or their
respective successors in such Participations and/or Securities (collectively,
the "Investor") or any Rating Agency rating such Securities and each 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 (including, without limitation, all financial statements), which
shall have been furnished by Borrower, any Guarantor or any Indemnitors, 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
Subsection 7.4(c) hereof and such other documents as may be reasonably requested
by Lender and, upon Lender's reasonable request, meeting with any Rating Agency
for due diligence purposes. Borrower shall also furnish and Borrower, any
Guarantor and any Indemnitor consent to Lender furnishing to such Investors or
such prospective Investors or any Rating Agency any and all information
concerning the
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Property, the Leases, the financial condition of Borrower, any Guarantor and any
Indemnitor as may be requested by Lender, any Investor or any prospective
Investor or Rating Agency in connection with any sale, transfer or
Participation. Borrower shall deliver on the date hereof, at Borrower's sole
cost and expense, a nonconsolidation opinion, and within ten (10) days after
demand of Lender, an update of same (which update Borrower will not be required
to provide more than once), each in form and substance and delivered by counsel
acceptable to Lender and the Rating Agency rating or proposed to rate the
Securities, as may be required by Lender and/or such Rating Agency. Borrower's
failure to deliver the opinions required hereby shall constitute an Event of
Default hereunder.
Section 18.2 Conversion to Registered Form. At the request of Lender,
Borrower shall appoint, as its agent, a registrar and transfer agent (the
"Registrar") which shall maintain, subject to such reasonable regulations as it
shall provide, such books and records as are necessary for the registration and
transfer of the Note in a manner that shall cause the Note to be considered to
be in registered form for purposes of Section 163(f) of the Internal Revenue
Code of 1986. The option to convert the Note into registered form once exercised
may not be revoked. Borrower's choice of Registrar and any agreement setting out
the rights and obligation of the Registrar shall be subject to the reasonable
approval of Lender. Borrower may revoke the appointment of any particular person
as Registrar, effective upon the effectiveness of the appointment of a
replacement Registrar. The costs and fees of the Registrar shall be borne by
Borrower and the Registrar shall not be entitled to any fee from Lender or any
other lender in respect of transfers of the Note and Security Instrument (other
than Taxes and governmental charges and fees).
ARTICLE 19. COSTS
Section 19.1 Performance at Borrower's Expense. Borrower acknowledges
and confirms that Lender shall impose certain administrative processing and/or
commitment fees in connection with (a) the extension, renewal, modification,
amendment and termination of its loans, (b) the release or substitution of
collateral therefor, (c) obtaining certain consents, waivers and approvals with
respect to the Property, or (d) the review of any Lease or proposed Lease or the
preparation or review of any subordination, non-disturbance agreement (the
occurrence of any of the above shall be called an "Event"). 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, with or without
demand, all such fees (as the same may be increased or decreased from time to
time), and any additional fees of a similar type or nature which may be imposed
by Lender from time to time, upon the occurrence of any Event or otherwise.
Wherever it is provided for herein that Borrower pay any costs and expenses,
such costs and expenses shall include, but not be limited to, all legal fees and
disbursements of Lender (whether of retained firms, the reimbursement for the
expenses of in-house staff or otherwise) and all costs and expenses of Trustee,
if any.
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Section 19.2 Attorney's Fees for Enforcement.
(a) Borrower shall pay all legal fees incurred by Lender in
connection with (i) the preparation of the Note, this Security Instrument and
the Other Security Documents; and (ii) the items set forth in Section 19.1
above, and (b) Borrower shall pay to Lender on demand any and all expenses,
including legal expenses and attorneys' fees, incurred or paid by Lender or
Trustee in protecting its interest in the Property or the Collateral or in
collecting any amount payable hereunder or in enforcing its rights hereunder
with respect to the Property or the Collateral, whether or not any legal
proceeding is commenced hereunder or thereunder and whether or not any default
or Event of Default shall have occurred and is continuing, together with
interest thereon at the Default Rate from the date paid or incurred by Lender or
Trustee until such expenses are paid by Borrower.
ARTICLE 20. DEFINITIONS
Section 20.1 General Definitions. Unless the context clearly indicates
a contrary intent or unless otherwise specifically provided herein, words used
in this Security Instrument may be used interchangeably in singular or plural
form and the word "Borrower" shall mean "each Borrower and any subsequent owner
or owners of the Property or any part thereof or any interest therein," the word
"Lender" shall mean "Lender and any subsequent holder of the Note," the word
"Note" shall mean "the Note and any other evidence of indebtedness secured by
this Security Instrument," the word "person" shall include an individual,
corporation, limited liability company, partnership, trust, unincorporated
association, government, governmental authority, and any other entity, the word
"Property" shall include any portion of the Property and any interest therein,
the word "Trustee" shall mean "Trustee and its successors and assigns", and the
phrases "attorneys' fees" and "counsel fees" shall include any and all
attorneys', paralegal and law clerk fees and disbursements, including, but not
limited to fees and disbursements at the pre-trial, trial and appellate levels
incurred or paid by Lender in protecting its interest in the Property, the
Leases and the Rents and enforcing its rights under this Security Instrument.
Section 20.2 Headings, Etc. The headings and captions of various
Sections of this Security Instrument are for convenience of reference only and
are not to be construed as defining or limiting, in any way, the scope or intent
of the provisions hereof.
ARTICLE 21. MISCELLANEOUS PROVISIONS
Section 21.1 No Oral Change. This Security Instrument, and any
provisions hereof, may not be modified, amended, waived, extended, changed,
discharged or terminated orally or by any act or failure to act on the part of
Borrower, Lender or Trustee, but only by an agreement in writing signed by the
party against whom enforcement of any modification, amendment, waiver,
extension, change, discharge or termination is sought.
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Section 21.2 Liability. If Borrower consists of more than one person,
the obligations and liabilities of each such person hereunder shall be joint and
several. This Security Instrument shall be binding upon and inure to the benefit
of Borrower and Lender and their respective successors and assigns forever.
Section 21.3 Duplicate Originals; Counterparts. This Security
Instrument may be executed in any number of duplicate originals and each
duplicate original shall be deemed to be an original. This Security Instrument
may be executed in several counterparts, each of which counterparts shall be
deemed an original instrument and all of which together shall constitute a
single Security Instrument. The failure of any party hereto to execute this
Security Instrument, or any counterpart hereof, shall not relieve the other
signatories from their obligations hereunder.
Section 21.4 Number and Gender. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa.
Section 21.5 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
Security Documents and the performance and discharge of the Other Obligations.
Section 21.6 Entire Agreement. The Note, this Security Instrument and
the Other Security Documents constitute the entire understanding and agreement
between Borrower, Lender and Trustee with respect to the transactions arising in
connection with the Debt and supersede all prior written or oral understandings
and agreements between Borrower and Lender with respect thereto. Borrower hereby
acknowledges that, except as incorporated in writing in the Note, this Security
Instrument and the Other Security Documents, there are not, and were not, and no
persons are or were authorized by Lender to make, any representations,
understandings, stipulations, agreements or promises, oral or written, with
respect to the transaction which is the subject of the Note, this Security
Instrument and the Other Security Documents.
ARTICLE 22. TRUSTEE PROVISIONS
Section 22.1 The Trustee.
(a) It shall be no part of the duty of Trustee to see to any
recording, filing or registration of this Security Instrument or any other
instrument in addition or supplemental hereto, or to give any notice thereof, or
to see to the payment of or be under
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any duty in respect of any tax or assessment or other governmental charge which
may be levied or assessed on the Property, or any part thereof, or against
Borrower, or to see to the performance or observance by Borrower of any of the
covenants and agreements contained herein. Trustee shall not be responsible for
the execution, acknowledgement or validity of this Security Instrument or of any
instrument in addition or supplemental hereto or for the sufficiency of the
security purported to be created hereby, and makes no representation in respect
thereof or in respect of the rights of Lender. Trustee shall have the right to
advice of counsel upon any matters arising hereunder and shall be fully
protected in relying as to legal matters on the advice of counsel. Trustee shall
not incur any personal liability hereunder except for his own gross negligence
or willful misconduct and Trustee shall have the right to rely on any
instrument, document or signature authorizing or supporting any action taken or
proposed to be taken by Trustee hereunder and believed by Trustee in good faith
to be genuine.
(b) Trustee may resign by an instrument in writing addressed
to Lender, or Trustee may be removed at any time with or without cause by an
instrument in writing executed by Lender. In case of the death, resignation,
removal or disqualification of Trustee, or if for any reason Lender shall deem
it desirable to appoint a substitute or successor trustee to act instead of the
herein named trustee or any substitute or successor trustee, then Lender shall
have the right and is hereby authorized and empowered to appoint a successor
trustee, or a substitute trustee, without other formality than appointment and
designation in writing executed by Lender, which substituted trustee may be
Lender or an affiliate of Lender, and the authority hereby conferred shall
extend to the appointment of other successor and substitute trustees
successively until the Debt secured hereby has been paid in full, or until the
Property is fully and finally sold hereunder. Such appointment and designation
by Lender shall be full evidence of the right and authority to make the same and
of all facts therein recited. If Lender is a corporation or association and such
appointment is executed in its behalf by an officer of such corporation or
association, such appointment shall be conclusively presumed to be executed with
authority and shall be valid and sufficient without proof of any action by the
board of directors or any superior officer of the corporation or association.
Upon the making of any such appointment and designation, all of the estate and
title of Trustee in the Property shall vest in the named successor or substitute
Trustee, and he shall thereupon succeed to and shall hold, possess and execute
all of the rights, powers, privileges, immunities and duties herein conferred
upon Trustee; but, nevertheless, upon the written request of Lender or of the
successor or substitute Trustee, the trustee ceasing to act shall execute and
deliver an instrument transferring to such successor or substitute Trustee all
of the estate and title in the Property of the trustee so ceasing to act,
together with all the rights, powers, privileges, immunities and duties herein
conferred upon the Trustee, and shall duly assign, transfer and deliver any of
the properties and moneys held by said trustee hereunder to said successor or
substitute Trustee. All references herein to "Trustee" shall be deemed to refer
to Trustee (including any successor or substitute appointed and designated as
herein provided) from time to time acting hereunder.
(c) Trustee shall not be liable for any error of judgement or
act done by Trustee in good faith, or be otherwise responsible or accountable
under any circumstances whatsoever (including Trustee's negligence), except for
Trustee's gross
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negligence or willful misconduct. Trustee shall have the right to rely on any
instrument, document or signature authorizing or supporting any action taken or
proposed to be taken by him hereunder, believed by him in good faith to be
genuine. All moneys received by Trustee shall, until used or applied as herein
provided, be held in trust for the purposes for which they were received, but
need not be segregated in any manner from any other moneys (except to the extent
required by law), and Trustee shall be under no liability for interest on any
moneys received by him hereunder. Borrower hereby ratifies and confirms any and
all acts which the herein-named Trustee or his successor or successors,
substitute or substitutes, in this trust, shall do lawfully by virtue hereof.
Borrower will reimburse Trustee for, and save him harmless against, any and all
liability and expenses which may be incurred by him in the performance of his
duties. The foregoing indemnity shall not terminate upon discharge of the
secured Debt or foreclosure, or release or other termination, of this Security
Instrument.
ARTICLE 23. LOCAL LAW PROVISIONS
The provisions set forth on Exhibit B annexed hereto are incorporated
herein by reference as if fully set forth herein.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
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IN WITNESS WHEREOF, THIS SECURITY INSTRUMENT has been executed by
Borrower the day and year first above written.
BORROWER:
A.T.C, L.L.C., a Virginia limited liability company
By: /s/ Thomas Kappler
--------------------------------
A.T. Center, Inc., a Virginia corporation
By: Thomas Kappler, President
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EXHIBIT A
(Description of Land)
ALL of that certain lot, piece or parcel of land, with the buildings and
improvements thereon, situate, lying and being
<PAGE> 69
EXHIBIT B
Local Law Provisions
None
<PAGE> 1
EXHIBIT 10.3
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") is
made this 8th day of October, 1998, by and among A.T.C., L.L.C., a Virginia
limited liability company, having its principal place of business at 1010
Wisconsin Avenue, N.W., Suite 250, Washington, D.C. 20007 (Attn: Jeffrey Berman
or Thomas Kappler) ("Assignor"), Ramco Virginia Properties, L.L.C., a Michigan
limited liability company, having its principal place of business at 27600
Northwestern Highway, Suite 200, Southfield, Michigan 48034 (Attn: Dennis
Gershenson) ("Assignee"), A.T. Center, Inc., a Virginia corporation, having an
address at 1010 Wisconsin Avenue, N.W., Suite 250, Washington, D.C. 20007 (Attn:
Jeffrey Berman or Thomas Kappler) ("Original Principal"), Ramco-Gershenson
Properties Trust, a Maryland real estate investment trust, ("New Principal"),
having an address at 27600 Northwestern Highway, Suite 200, Southfield, Michigan
48034 (Attn: Dennis Gershenson), and LaSalle National Bank, as trustee for the
registered holders of GMAC Commercial Mortgage Securities, Inc. Mortgage
Pass-Through Certificates, Series 1998-C1, having its principal place of
business at c/o GMAC Commercial Mortgage Corporation, as Master Servicer, 650
Dresher Road, Horsham, Pennsylvania 19044 (Attn: Servicing Manager)
("Beneficiary").
W I T N E S S E T H:
WHEREAS, Assignor is the borrower under the loan documents
(the "Loan Documents") pertaining to a loan (the "Loan"), in the principal
amount of $15,225,000, made by GMAC Commercial Mortgage Corporation to Assignor,
such loan documents including, without limitation, (i) that certain Promissory
Note (the "Note"), dated February 27, 1998, (ii) that certain Deed of Trust and
Security Agreement (the "Mortgage"), dated February 27, 1998, granted by
Assignor to Beneficiary, recorded in Stafford County, Virginia, filed for record
on _______________, in Deed Book ___________, page ______ (iii) that certain
Assignment of Leases and Rents, dated February 27, 1998, recorded in Stafford
County, Virginia, filed for record on _______________, in Deed Book ___________,
page ______, (iv) that certain Environmental Indemnity Agreement (the
"Environmental Indemnity"), dated February 27, 1998, executed by Assignor,
Original Principal, Jeffrey Berman and Thomas Kappler, (v) that certain Guaranty
of Recourse Obligations of Borrower (the "Recourse Guaranty"), dated February
27, 1998, executed by Original Principal, and (vi) the Other Security Documents
(as defined in the Mortgage);
WHEREAS, Assignor desires to transfer to Assignee, and
Assignee desires to accept, the Property (as defined in the Mortgage);
WHEREAS, in connection with such transfer of the Property,
Assignor desires to assign to Assignee, and Assignee desires to assume, all of
Assignor's rights and obligations under the Loan Documents;
<PAGE> 2
WHEREAS, in connection with such assignment and assumption of
the Loan Documents, Original Principal desires to assign to New Principal, and
New Principal desires to assume, all of Original Principal's rights and
obligations under the Recourse Guaranty; and
WHEREAS, Assignor has requested Beneficiary's consent to the
transfer of the Property and assignment and assumption of the Loan Documents, as
aforesaid, and Beneficiary has consented thereto on the terms and conditions of
this Agreement.
NOW, THEREFORE, in consideration of the foregoing, one Dollar
($1.00), the terms set forth below, and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, and with intent to
be legally bound, the parties hereby agree as follows:
1. Assignor does hereby assign to Assignee and Assignee does
hereby expressly assume and agree to be liable for and to pay and perform all of
the terms, conditions, liabilities and obligations of Assignor under the Loan
Documents, whether heretofore, now or hereafter arising or accruing, with the
same force and effect as if the Assignee were the original obligor under the
Loan Documents, effective as of the date of this Agreement. Assignee does hereby
agree to be bound by each and every one of the representations, warranties,
covenants, obligations and agreements made by Assignor set forth in the Loan
Documents. From and after the date hereof, Assignor (together with Original
Principal, Jeffrey Berman and Thomas Kappler) shall be released of any and all
liability under the Loan Documents, except for liability in respect of this
Agreement.
2. Assignee hereby (a) reaffirms all of Assignor's covenants,
agreements, representations and warranties under the Loan Documents, and (b)
without limiting the generality of paragraph 1 above, acknowledges that wherever
the terms "Maker", "Borrower", "Grantor", or "Assignor" appear in the Loan
Documents, such terms shall be deemed to include Assignee and shall no longer
mean, refer to or include Assignor.
3. Assignee acknowledges and agrees that the Beneficiary's
liens and security interests (collectively the "Liens") in the Property and
other collateral described in the Loan Documents shall survive the assignment by
Assignor and the assumption by Assignee of the Loan Documents, intact and
unimpaired, and shall remain a valid and enforceable first priority perfected
security interest.
4. Original Principal does hereby assign to New Principal and
New Principal does hereby expressly assume and agree to be liable for all of the
terms, conditions, liabilities and obligations of Original Principal under the
Recourse Guaranty, whether heretofore, now or hereafter arising or occurring,
with the same force and effect as if New Principal were the original guarantor
thereunder, effective as of the date of this Agreement. New Principal does
hereby agree to be bound by each and every one of the representations,
warranties, covenants, obligations and agreements made by Original Principal set
forth in the Recourse Guaranty. From and after the date hereof, Original
2
<PAGE> 3
Principal shall be released of any and all liability under the Recourse
Guaranty, except for liability in respect of this Agreement.
5. New Principal does hereby agree to assume and be liable for
and to pay and perform all of the terms, conditions, liabilities and obligations
of the indemnitor under the Environmental Indemnity, whether heretofore, now or
hereafter arising, with the same force and effect as if New Principal were the
original indemnitor thereunder. New Principal does hereby agree to be bound by
each and every one of the representations, warranties, covenants, obligations
and agreements made by Original Principal set forth in Environmental Indemnity.
Original Principal shall remain liable under the Environmental Indemnity with
respect only to losses and claims relating to conditions at the Mortgaged
Property at or prior to the date of this Agreement. In respect of any such
claims or losses, New Principal and Original Principal shall be jointly and
severally liable under the Environmental Indemnity.
6. New Principal hereby (a) reaffirms all of Original
Principal's covenants, agreements, representations and warranties under the
Recourse Guaranty and the Environmental Indemnity, and (b) without limiting the
generality of paragraphs 4 and 5 above, acknowledges that wherever the terms
"Guarantor" or "Indemnitor" appear in such documents, such terms shall be deemed
to include New Principal and shall no longer mean, refer to or include Original
Principal.
7. Assignor, Assignee, Original Principal and New Principal
hereby certify, represent and warrant the following facts to Beneficiary knowing
that Beneficiary requires, and is relying upon, the certifications,
representations and warranties contained in this paragraph as a condition to
entering into this Agreement and that these certifications, representations and
warranties shall be continuing throughout the term of the Loan:
(a) As of the date hereof, Assignor, Assignee,
Original Principal and New Principal have no rights of setoff, counterclaims or
defenses, of any kind or description against Beneficiary as holder of the Note,
beneficiary under the Mortgage or otherwise.
(b) The Loan Documents are the valid and binding
obligations of Assignee, enforceable against Assignee in accordance with their
terms.
(c) The Recourse Guaranty and the Environmental
Indemnity are the valid and binding obligations of New Principal enforceable
against New Principal in accordance with their terms.
(d) The Environmental Indemnity, as modified by this
Agreement, is the valid and binding obligation of New Principal, enforceable
against New Principal in accordance with its terms as modified hereby.
(e) Neither Assignor, Assignee, Original Principal nor
New Principal is in default under any of the Loan Documents.
3
<PAGE> 4
(f) Assignee and New Principal are solvent and the
execution of this Agreement and the consummation of the transactions
contemplated by this Agreement will not render Assignee or New Principal
insolvent; the value of each of Assignee's and New Principal's assets exceeds
the amount of their respective liabilities (both direct and contingent), and
each of Assignee and New Principal has the ability to pay their respective debts
as they become due or mature.
(g) Assignor, Assignee, Original Principal and New
Principal have the full power and authority to enter into this Agreement, and
the other documents and instruments required under or contemplated by this
Agreement, and the execution, delivery and performance of this Agreement, and
such other documents and instruments are within their organizational powers,
have been duly authorized, and are not in contravention of their organizational
documents or the terms of any indenture, mortgage contract or other agreement to
which any of them is a party or by which any of them or their property are
bound.
(h) Neither Assignor, Assignee, Original Principal nor
New Principal has any present intent to (i) file a voluntary petition under any
Chapter of the United States Bankruptcy Code, or in any manner to seek relief,
protection, reorganization, liquidation, dissolution or similar relief for
debtors under any local, state, federal or other insolvency laws or laws
providing for relief of debtors, or in equity, or directly or indirectly, to
file any such petition or to seek any such relief, either at the present time or
at any time hereafter, or (ii) directly or indirectly to cause any involuntary
petition under any Chapter of the United States Bankruptcy Code to be filed
against any of such parties or directly or indirectly to cause any of such
parties to become the subject of any proceedings pursuant to any local, state,
federal or other insolvency laws or laws providing for the relief of debtors, or
in equity, either at the present time, or at any time hereafter, or (iii)
directly or indirectly to cause any collateral securing the Loan, or any portion
thereof or any interest of Assignee or New Principal therein, to become the
property of any bankruptcy estate or the subject of any local, state, federal or
other bankruptcy, dissolution, liquidation or insolvency proceedings, or in
equity, either at the present time or at any time hereafter. All parties agree
that the filing of any such petition or the seeking of any such relief or the
participation in such filing or seeking of such relief, whether directly or
indirectly, for the purpose in whole or in part of adversely affecting
Beneficiary's rights hereunder, would be deemed a bad faith filing which would
entitle Beneficiary to obtain an immediate dismissal under Section 1112 of the
Bankruptcy Code.
(i) In the event that Assignor, Assignee, Original
Principal or New Principal becomes a debtor in any proceeding, under Chapter 11
or Chapter 7 of the Bankruptcy Code, as from time to time amended, in which
Beneficiary is or becomes a creditor of any such party in respect of the Loan
Documents, such party, as debtor or debtor-in-possession, will consent (and, to
the fullest extent permitted by law, does hereby presently consent) to the
immediate entry of an order in such proceeding granting Beneficiary relief from
the automatic stay under Section 362 of the Bankruptcy Code, as amended from
time to time, to enable Beneficiary to exercise its rights and remedies under
the Loan Documents (i) to foreclose the Mortgage, (ii) to foreclose any and all
4
<PAGE> 5
other security interests granted by the Loan Documents; and (iii) to exercise
any of its other rights and remedies in respect of the collateral under the Loan
Documents.
(j) Assignor, Assignee, Original Principal and New
Principal shall, to the fullest extent permitted by law, take no steps in any
such bankruptcy proceeding for the purpose of, in whole or in part, objecting,
hindering or delaying the exercise of Beneficiary's rights and remedies under
the Loan Documents, including, without limitation, any action or proceeding by
Beneficiary against any such party. Without limiting the foregoing, it is the
express intent of the parties hereto that no injunctive relief against
Beneficiary be sought under Section 105 or any other provision of the Bankruptcy
Code by Assignor, Assignee, Original Principal or New Principal, nor shall any
expansion be sought of the stay provided by Section 362 of the Bankruptcy Code
as against Beneficiary.
8. Beneficiary reserves all rights, remedies, claims, actions,
causes of action, and defenses under the Loan Documents, and no defaults or
Events of Default (whether declared, undeclared, known or unknown) under the
Loan Documents are waived by Beneficiary, nor shall Beneficiary's execution
hereof be deemed a waiver of any such default, Event of Default, right or remedy
to which Beneficiary is entitled to exercise. A breach of any representation,
warranty or agreement set forth in this Agreement shall constitute an Event of
Default under the Loan Documents if such breach continues for more than 10 days
after notice from Beneficiary to Assignee.
9. Upon the written request of Beneficiary, Assignor,
Assignee, Original Principal and New Principal shall promptly do, execute,
acknowledge and deliver all further acts, deeds, conveyances, transfers and
assurances necessary or proper for the better assuring, conveying, assigning,
establishing, reestablishing and confirming unto the Beneficiary its Liens in
the Property, and the other collateral for the Loan, and the products and
proceeds thereof, including, without limitation, the execution, acknowledgment
and delivery of such mortgages, deeds of trust, assignments, financing
statements, or other security documents for the purposes of confirming,
perfecting, or continuing perfection of the Beneficiary's first priority Liens
in such property.
10. This Agreement, and the representations, warranties,
covenants and agreements contained herein, shall (a) continue until satisfaction
in full of the Loan, notwithstanding any action or inaction of the Beneficiary
with respect to the Loan, (b) not be affected or in any way impaired by the
insolvency or bankruptcy of the Assignor, Assignee, Original Principal or New
Principal, or any party liable for payment of the amounts payable under the Loan
Documents, and (c) be binding upon the Assignor, Assignee, Original Principal
and New Principal and their respective successors and assigns, and shall inure
to the benefit of the Beneficiary and its successor and assigns.
11. All recitals set forth hereinabove are hereby reiterated
in their entirety and incorporated herein by reference.
12. Beneficiary hereby acknowledges and consents to the
transfer of the Property and the assignment and assumption of the Loan Documents
as set forth in
5
<PAGE> 6
this Agreement. In no event shall Beneficiary's consent hereunder be deemed to
constitute Beneficiary's consent to any future transfer of the Property or
assignment and assumption of the Loan Documents.
13. The parties hereto hereby agree that this Agreement shall
be interpreted, construed and enforced according to the laws of the State of
Virginia.
14. Assignee's and New Principal's Addresses for notices under
the Loan Documents are as set forth above in the introductory paragraph hereof.
15. This Agreement may be executed in multiple counterparts,
each of which shall be fully effective as an original and all of which,
together, shall constitute one and the same instrument.
6
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have set their
signatures hereon as of the day and year first above written.
ASSIGNOR:
A.T.C., L.L.C.,
a Virginia limited liability company
By: A.T. Center, Inc.,
a Virginia corporation, its managing member
By:/s/ Authorized Signature
------------------------
Name:
---------------------
Title:
--------------------
ASSIGNEE:
RAMCO VIRGINIA PROPERTIES, L.L.C.,
a Michigan limited liability company
By: Ramco Virginia Management, L.L.C.,
a Michigan limited liability company, its managing member
By: Ramco SPC II, Inc.,
a Michigan corporation, its managing member
By:/s/ Authorized Signature
------------------------
Name:
----------------------
Title:
---------------------
ORIGINAL PRINCIPAL:
A.T. CENTER, INC.,
a Virginia corporation
By:/s/ Authorized Signature
------------------------
Name:
----------------------
Title:
---------------------
7
<PAGE> 8
NEW PRINCIPAL:
RAMCO-GERSHENSON PROPERTIES TRUST,
a Maryland real estate investment trust
By:/s/ Authorized Signature
------------------------
Name:
----------------------
Title:
---------------------
BENEFICIARY:
LaSalle National Bank, as trustee for the registered holders
of GMAC
COMMERCIAL MORTGAGE SECURITIES, INC. MORTGAGE
PASS-THROUGH CERTIFICATES, Series 1998-C1, without recourse
By: GMAC Commercial Mortgage Corporation as Master
Servicer on Behalf of LaSalle National Bank
By:/s/ Authorized Signature
------------------------
Name:
----------------------
Title:
---------------------
8
<PAGE> 1
EXHIBIT 10.4
EXCHANGE RIGHTS AGREEMENT
THIS EXCHANGE RIGHTS AGREEMENT (this "AGREEMENT"), dated as of
September 4, 1998, is entered into by and among RAMCO-GERSHENSON PROPERTIES
TRUST, a Maryland real estate investment trust (the "COMPANY"), and A.T.C.,
L.L.C., a Virginia limited liability company (the "NEW LIMITED PARTNER").
R E C I T A L S:
A. Ramco-Gershenson Properties, L.P., a Delaware limited partnership
(the "OPERATING PARTNERSHIP"), was formed pursuant to the Amended and Restated
Agreement of Limited Partnership of the Operating Partnership dated May 10,
1996, as thereafter amended as of June 25, 1996, September 29, 1996, October 3,
1997, October 8, 1997, October 14, 1997, December 18, 1997, December 31, 1997,
January 8, 1998 and September 4, 1998 (the "PARTNERSHIP AGREEMENT").
B. Pursuant to the Partnership Agreement, the New Limited Partner and
the Original Limited Partners (collectively, the "LIMITED PARTNERS") hold units
of limited partnership interest ("OP UNITS") in the Operating Partnership.
C. The Company has agreed to provide the New Limited Partner with
certain rights to exchange its OP Units for the Company's shares of beneficial
interest, par value $.10 per share ("REIT SHARES").
Accordingly, the parties hereto do hereby agree as follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"ASSIGNEE" means a Person to whom one or more OP Units have been
transferred in a manner determined under the Partnership Agreement, but who has
not become a substituted limited partner in accordance therewith.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"CASH AMOUNT" means an amount of cash per OP Unit equal to the Value on
the Valuation Date of the REIT Shares Amount.
"DECLARATION OF TRUST" means the RGPT Trust Declaration of Trust, dated
as of October 2, 1997, as amended.
"EXCHANGE FACTOR" means 1.0, provided, that in the event that the
Company (i) declares or pays a dividend on its outstanding REIT Shares in REIT
Shares or makes a distribution to all holders of its outstanding REIT Shares in
REIT Shares; (ii) subdivides its outstanding REIT shares; or (iii) combines its
outstanding REIT Shares into a smaller number of REIT Shares, the Exchange
Factor shall be adjusted by multiplying the Exchange Factor by a fraction, the
numerator of which shall be the number of REIT Shares issued and outstanding on
the record date for such dividend, distribution, subdivision or combination
assuming for such purpose that such dividend, distribution, subdivision or
combination has occurred as of such time, and the denominator of which shall be
the actual number of REIT Shares (determined without the above assumption)
issued and outstanding on the record date for such dividend, distribution,
subdivision or combination. Any adjustment to the Exchange Factor shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
<PAGE> 2
"EXCHANGING PARTNER" has the meaning set forth in Section 2.1 hereof.
"EXCHANGE RIGHT" has the meaning set forth in Section 2.1 hereof.
"LIEN" means any lien, security interest, mortgage, deed of trust,
charge, claim, encumbrance, pledge, option, right of first offer or first
refusal and any other right or interest of others of any kind or nature, actual
or contingent, or other similar encumbrance of any nature whatsoever.
"NOTICE OF EXCHANGE" means the Notice of Exchange substantially in the
form of Exhibit B to this Agreement.
"REIT SHARES AMOUNT" means that number of REIT Shares equal to the
product of the number of OP Units offered for exchange by the Exchanging
Partner, multiplied by the Exchange Factor as of the Valuation Date, provided,
that in the event the Company issues to all holders of REIT Shares rights,
options, warrants or convertible or exchangeable securities entitling the
shareholders to subscribe for or purchase REIT Shares, or any other securities
or property (collectively, the "rights"), then the REIT Shares Amount shall also
include such rights that a holder of that number of REIT Shares would be
entitled to receive.
"SEC" means the Securities and Exchange Commission.
"SPECIFIED EXCHANGE DATE" means the tenth (10th) Business Day after
receipt by the Company and by the Operating Partnership of a Notice of Exchange.
"VALUATION DATE" means the date of receipt by the Company of a Notice
of Exchange or, if such date is not a Business Day, the first Business Day
thereafter.
"VALUE" means, with respect to a REIT Share, the average of the daily
market price for the five (5) consecutive trading days immediately preceding the
Valuation Date. The market price for each such trading day shall be: (i) if the
REIT Shares are listed or admitted to trading on any national securities
exchange or the NASDAQ National Market System, the closing price on such day, or
if no such sale takes place on such day, the average of the closing bid and
asked prices on such day; (ii) if the REIT Shares are not listed or admitted to
trading on any national securities exchange or the NASDAQ National Marker
System, the last reported sale price on such day or, if no sale takes place on
such day, the average of the closing bid and asked prices on such day, as
reported by a reliable quotation source designated by the Company; or (iii) if
the REIT Shares are not listed or admitted to trading on any national securities
exchange or the NASDAQ National Market System and no such last reported sale
price or closing bid and asked prices are available, the average of the reported
high bid and low asked prices on such day, as reported by a reliable quotation
source designated by the Company, or if there shall be no bid and asked prices
on such day, the average of the high bid and low asked prices, as so reported,
on the most recent day (not more than five (5) days prior to the date in
question) for which prices have been so reported; provided, that if there are no
bid and asked prices reported during the five (5) days prior to the date in
question, the Value of the REIT Shares shall be determined by the independent
trustees of the Company acting in good faith on the basis of such quotations and
other information as it considers, in its reasonable judgment, appropriate. In
the event the REIT Shares Amount includes rights that a holder of REIT Shares
would be entitled to receive, then the Value of such rights shall be determined
by the Company acting in good faith on the basis of such quotations and other
information as it considers, in its reasonable judgment, appropriate.
ARTICLE 2
EXCHANGE RIGHT
SECTION 2.1 EXCHANGE RIGHT.
A. Subject to Sections 2.1.B, 2.1.C, 2.1.D and 2.1.E hereof, the
Company hereby grants to the New Limited Partner and the New Limited Partner
does hereby
2
<PAGE> 3
accept the right (the "EXCHANGE RIGHT"), exercisable on or after the date one
(1) year after September 4, 1998, to exchange on a Specified Exchange Date all
or a portion of the OP Units held by the New Limited Partner at an exchange
price equal to and in the form of the REIT Shares Amount to be paid by the
Company. The Exchange Right shall be exercised pursuant to a Notice of Exchange
delivered to the Company and to the Operating Partnership by the New Limited
Partner (the "EXCHANGING PARTNER"); provided, however, that the Operating
Partnership may exchange the OP Units subject to the Notice of Exchange in
accordance with Section 2.1.B. The New Limited Partner may not exercise the
Exchange Right for less than one thousand (1,000) OP Units or, if the New
Limited Partner holds less than one thousand (1,000) OP Units, all of the OP
Units held by the New Limited Partner. Any Assignee of the New Limited Partner
may exercise the rights of the New Limited Partner pursuant to this Section 2.1,
and the New Limited Partner shall be deemed to have assigned such rights to such
Assignee and shall be bound by the exercise of such rights by such Assignee. In
connection with any exercise of such rights by an Assignee on behalf of the New
Limited Partner, the REIT Shares Amount shall be paid by the Operating
Partnership directly to such Assignee and not to the New Limited Partner.
B. Notwithstanding the provisions of Section 2.1.A, after receiving a
Notice of Exchange the Operating Partnership may, in its sole and absolute
discretion, elect to satisfy the Exchanging Partner's Exchange Right by paying
to the Exchanging Partner the Cash Amount on the Specified Exchange Date. If the
Operating Partnership shall elect to exercise its right to purchase OP Units for
the Cash Amount under this Section 2.1.B with respect to a Notice of Exchange,
it shall so notify the Exchanging Partner within five Business Days after the
receipt by it of such Notice of Exchange. In the event the Operating Partnership
shall elect to satisfy the Exchanging Partner's Exchange Right by exchanging
REIT Shares for the OP Units offered for exchange, the Exchanging Partner agrees
to execute such documents as the Operating Partnership may reasonably require in
connection with the issuance of REIT Shares upon exercise of the Exchange Right.
C. Notwithstanding the provisions of Section 2.1.A and Section 2.1.B,
the New Limited Partner shall not be entitled to exercise the Exchange Right
pursuant to Section 2.1.A if the delivery of REIT Shares to the New Limited
Partner on the Specified Exchange Date by the Company pursuant to Section 2.1.A
(regardless of whether or not the Operating Partnership would in fact exercise
its rights under Section 2.1.B) would be prohibited under the Declaration of
Trust of the Company.
D. Notwithstanding the provisions of Section 2.1.A and Section 2.1.B,
the Exchange Right may be exercised prior to the date which is one (l) year
after September 4, 1998 (i) with the prior written consent of at least a
majority of the Company's independent trustees or (ii) in the event of the death
of the New Limited Partner prior to such date, to the minimum extent necessary
to permit the estate of the New Limited Partner to acquire REIT Shares pursuant
to Section 2.1.A or cash pursuant to Section 2.1.B that could be utilized to
fund the payment of any estate taxes that may be payable at such time.
E. The Exchange Right shall expire with respect to any OP Units for
which an Exchange Notice has not been delivered to the Company and to the
Operating Partnership on or before December 31, 2094.
F. Any exchange of OP Units pursuant to this Article 2 shall be deemed
to have occurred as of the Specified Exchange Date for all purposes, including
without limitation the payment of distributions or dividends in respect of OP
Units or REIT shares, as applicable. Any OP Units acquired by the Operating
Partnership pursuant to an exercise by the New Limited Partner of an Exchange
Right shall be deemed to be acquired by and reallocated or reissued to the
Operating Partnership. The Company, as general partner of the Operating
Partnership, shall amend the Partnership Agreement to reflect each such exchange
and reallocation or reissuance of OP Units and each corresponding recalculation
of the OP Units of the New Limited Partner. The number of OP Units to be
reallocated or reissued to the Operating Partnership shall
3
<PAGE> 4
equal the number of REIT Shares issued to the New Limited Partner upon exercise
of an Exchange Right.
G. Except in connection with a merger, business combination or other
reorganization transaction, the Company shall not exchange any of its OP Units
as long as there are any other holders of OP Units.
ARTICLE 3
OTHER PROVISIONS
SECTION 3.1 COVENANTS OF THE COMPANY.
A. At all times during the pendency of the Exchange Right, the Company
shall reserve for issuance such number of REIT Shares as may be necessary to
enable the Company to issue such shares in full payment of the REIT Shares
Amount in regard to all OP Units held by Limited Partners which are from time to
time outstanding.
B. During the pendency of the Exchange Right, the Company shall deliver
to the New Limited Partner in a timely manner all reports filed by the Company
with the SEC to the extent the Company also transmits such reports to its
shareholders and all other communications transmitted from time to time by the
Company to its shareholders generally.
C. The Company shall notify the New Limited Partner, upon request, of
the then current Exchange Factor.
SECTION 3.2 FRACTIONAL SHARES.
No fractional REIT Shares shall be issued upon exchange of OP Units.
The number of full shares of REIT Shares which shall be issuable upon exchange
of OP Units (or the cash equivalent amount thereof if the Cash Amount is paid)
shall be computed on the basis of the aggregate amount of OP Units so
surrendered. Instead of any fractional REIT Shares which would otherwise be
issuable upon exchange of any OP Units, the Company shall pay a cash adjustment
in respect of such fraction in an amount equal to the Cash Amount of an OP Unit
multiplied by such fraction.
ARTICLE 4
GENERAL PROVISIONS
SECTION 4.1 ADDRESSES AND NOTICE.
Any notice, demand, request or report required or permitted to be given
or made to the New Limited Partner or Assignee under this Agreement shall be in
writing and shall be deemed given or made when delivered in person or when sent
by first class United States mail or by other means of written communication to
the New Limited Partner or Assignee at the address listed on the records of the
Partnership. Notice to the Company shall be made to the following address: 27600
Northwestern Highway, Suite 200, Southfield, Michigan 48036, Attn: Chairman.
SECTION 4.2 TITLES AND CAPTIONS.
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
SECTION 4.3 PRONOUNS AND PLURALS.
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa.
4
<PAGE> 5
SECTION 4.4 FURTHER ACTION.
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
SECTION 4.5 BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
SECTION 4.6 WAIVER.
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
SECTION 4.7 COUNTERPARTS.
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all of the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
SECTION 4.8 APPLICABLE LAW.
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of laws thereof.
SECTION 4.9 INVALIDITY OF PROVISIONS.
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
caused this Agreement to be executed as of the day and year first above written.
RAMCO-GERSHENSON PROPERTIES
TRUST, a Maryland real estate investment
Trust
By:/s/ Bruce Gershenson
--------------------------------------------------
Its:Executive Vice President
------------------------------------------
A.T.C., L.L.C.,
a Virginia limited liability company
By: A.T. CENTER, INC., a Virginia corporation,
Its Managing Member
By:/s/ Thomas Kappler
------------------
Thomas Kappler
Its: President
5
<PAGE> 6
EXHIBIT "A"
NOTICE OF EXCHANGE
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
CONSOLIDATED BALANCE SHEETS STATEMENT OF OPERATIONS STATEMENT OF SHAREHOLDERS
EQUITY STATEMENT OF CASH FLOW AND NOTES TO CONSOLIDATED FINANCIAL STATEMENT AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-Q FOR THE
QUARTERLY PERIOD ENDED SEPTEMBER 30, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 4,743
<SECURITIES> 0
<RECEIVABLES> 7,057
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 518,494
<DEPRECIATION> 23,154
<TOTAL-ASSETS> 525,607
<CURRENT-LIABILITIES> 20,041
<BONDS> 325,696
0
0
<COMMON> 0
<OTHER-SE> 133,546
<TOTAL-LIABILITY-AND-EQUITY> 525,607
<SALES> 0
<TOTAL-REVENUES> 55,668
<CGS> 0
<TOTAL-COSTS> 14,421
<OTHER-EXPENSES> 13,882
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,688
<INCOME-PRETAX> 8,677
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,077
<EPS-PRIMARY> .73
<EPS-DILUTED> .72
</TABLE>
