<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition period from _________________ to ________________
Commission File Number 33-25984
--------
NET 2 L.P.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 13-3497738
- ---------------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Lexington Corporate Properties Trust
355 Lexington Avenue
New York, NY 10017
---------------------------------------- ----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 692-7200
----------------------
Securities registered pursuant to Section 12(b) of the Act: None
- -----------------------------------------------------------
<TABLE>
<S> <C>
Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interests
- -----------------------------------------------------------
</TABLE>
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 .
--- ---
State the aggregate market value of the voting stock held by non-affiliates of
the Registrant.
Not Applicable.
There is no active public market for the units of limited partnership interests
issued by the Registrant.
<PAGE> 2
PART 1. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NET 2 L.P. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except units and per unit amounts)
March 31, 2000 (unaudited) and December 31, 1999
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 2000 1999
------ ---- ----
<S> <C> <C>
Real estate, at cost $ 94,212 $ 81,925
Less: accumulated depreciation 6,411 5,968
------- -------
87,801 75,957
Cash and cash equivalents 476 566
Restricted cash 7,897 12,508
Deferred expenses (net of accumulated amortization
of $216 and $184 in 2000 and 1999, respectively) 343 305
Rent receivable 1,083 957
Other assets 124 140
-------- --------
$ 97,724 $ 90,433
====== ======
LIABILITIES AND PARTNERS' CAPITAL
---------------------------------
Mortgage notes payable $ 59,096 $ 51,927
Accrued interest payable 212 225
Accounts payable and other liabilities 482 301
-------- --------
59,790 52,453
------ ------
Partners' capital (deficit):
General Partner (255) (254)
Limited Partners ($100 per Unit, 500,000 Units
authorized,477,167 Units issued and outstanding) 38,189 38,234
------ ------
Total partners' capital 37,934 37,980
------ ------
$ 97,724 $ 90,433
====== ======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 3
NET 2 L.P. AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Dollars in thousands, except per unit amounts)
Three Months Ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Revenues:
Rental $ 2,210 $ 2,257
Interest and other 125 161
------ ------
2,335 2,418
----- -----
Expenses:
Interest 1,076 1,075
Depreciation 443 457
Amortization of deferred expenses 32 64
General and administrative 221 181
------ ------
1,772 1,777
----- -----
Income before gain on sale of properties 563 641
Gain on sale of properties - 709
------ ------
Net income $ 563 $ 1,350
=== =====
Net income per Unit of limited
partnership interest $ 1.16 $ 2.77
==== ====
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 4
NET 2 L.P. AND CONSOLIDATED SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Three Months Ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
<S> <C> <C>
Net cash provided by operating activities $ 1,096 $ 1,233
----- -----
Cash flows from investing activities:
Investments in real estate (12,287) (29,237)
Proceeds from sale of properties - 5,333
Decrease in restricted cash 4,611 2,888
------ --------
Net cash used in investing activities (7,676) (21,016)
------ -------
Cash flows from financing activities:
Proceeds of mortgage notes payable 7,500 21,208
Increase in deferred expenses (70) (179)
Principal payments on mortgage notes (331) (305)
Cash distributions to partners (609) (608)
------ -------
Net cash provided by financing activities 6,490 20,116
----- ------
(Decrease) increase in cash and cash equivalents (90) 333
Cash and cash equivalents at beginning of period 566 518
--- ---
Cash and cash equivalents at end of period $ 476 $ 851
=== ===
Supplemental disclosure of cash flow information:
Cash paid during the period for interest $ 1,089 $ 1,090
===== =====
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
<PAGE> 5
NET 2 L.P. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2000
(Unaudited)
1. The Partnership and Basis of Presentation
Net 2 L.P. (the "Partnership") was formed as a limited partnership
on November 9, 1988, under the laws of the State of Delaware to
invest in real estate properties or interests therein. As of March
31, 2000, the Partnership owned interests in fifteen properties.
As of March 31, 2000, the Partnership has a total of 477,167 Units
issued and outstanding held by approximately 2,000 limited partners.
The unaudited financial statements reflect all adjustments that are,
in the opinion of the General Partner, necessary to a fair statement
of condition and the results for the interim period presented. For a
more complete understanding of the Partnership's financial position
and accounting policies, reference is made to the financial
statements previously filed with the Securities and Exchange
Commission with the Partnership's Annual Report on Form 10-K/A for
the year ended December 31, 1999.
2. Summary of Significant Accounting Policies
Net income per Unit amounts were calculated by using the weighted
average number of Units outstanding for each period and allocating
98% of the income attributable for that period to the Limited
Partners. The weighted average number of Units outstanding was
477,167 for all periods presented.
Management of the partnership has made a number of estimates and
assumptions relating to the reporting of assets and liabilities, the
disclosure of contingent assets and liabilities and the reported
amounts of revenues and expenses to prepare these financial
statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
Certain amounts included in the prior year's financial statements
have been reclassified to conform to the current year's
presentation.
3. The Partnership Agreement
For financial statement reporting purposes all items of income are
allocated in the same proportion as distributions of distributable
cash.
Distributable cash attributed to a particular limited partner's Unit
is calculated from the date of admission to the Partnership. The
unpaid cumulative preferred return at March 31, 2000 totaled $27.773
million ($56.96 to $58.90 per Unit, per close). On April 28, 2000,
the cumulative preferred return that was unpaid at March 31, 2000
was reduced by a cash distribution to the Limited Partners for the
three months ended March 31, 2000 totaling $596,459 ($1.25 per
Unit). The General Partner received a cash distribution of $12,173
on April 28, 2000.
<PAGE> 6
NET 2 L.P. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Properties
During the three months ended March 31, 2000, the Partnership
entered into the following real estate transaction:
<TABLE>
<CAPTION>
Lease Net
Capitalized Annualized Expiration Rentable
Date of Costs Base Rent Date Square
Acquisition Tenant Location ($000's) ($000's) (month/year) Feet
----------- ------ -------- -------- -------- ------------ ----
<S> <C> <C> <C> <C> <C> <C>
March 20 Nextel Communications
of the Mid-Atlantic, Inc. Hampton, VA $ 12,287 $ 1,167 12/09 100,632
====== ===== =======
</TABLE>
The following unaudited pro forma operating information for the
three months ended March 31, 2000 and 1999, were prepared as if the
2000 and 1999 acquisitions and dispositions were consummated as of
January 1, 1999. This information does not purport to be indicative
of what the operating results of the Partnership would have been had
the acquisitions and dispositions been consummated on that date. Pro
forma amounts are as follows:
<TABLE>
<CAPTION>
Pro Forma
(In thousands, except per Unit amounts)
Three Months Ended March 31,
2000 1999
---- ----
<S> <C> <C>
Revenues $ 2,612 $ 2,559
Expenses 1,969 1,929
----- -----
Net income $ 643 $ 630
====== ======
Net income per Unit of
limited partnership interest $ 1.32 $ 1.29
==== ====
</TABLE>
The tenant of the Partnership's property in Earth City, Missouri,
has declared bankruptcy. This tenant, which represents approximately
3% of annualized rental revenue, has not affirmed or disaffirmed
the lease.
5. Mortgage Notes Payable
On March 20, 2000, the Partnership obtained $7.5 million in mortgage
note secured by its Hampton, Virginia Property. The mortgage bears
interest at 8.27% per annum and matures on April 1, 2010. The note
requires yearly payments of principal and interest of $677,406 and a
balloon payment of approximately $6.8 million at maturity.
<PAGE> 7
NET 2 L.P. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Related Party Transactions
Leased Properties Management, Inc., an affiliate of the General
Partner, is entitled to receive a fee for managing the Partnership's
properties in the amount of 1% of gross annual rental receipts (or a
greater amount in certain circumstances). For the three months ended
March 31, 2000 and 1999, property management fees, which are
included in general and administrative expenses, totaled $21,000 and
$22,000, respectively.
Lexington Realty Advisors, an affiliate of Lexington Corporate
Properties Trust ("Lexington"), whose chairman and Co-Chief
Executive Officer is an officer and a shareholder of the General
Partner, both received acquisition fees totaling $120,000 and
$283,000, respectively, for the three months ended March 31, 2000
and 1999, respectively.
Lexington is reimbursed by the Partnership for various
administrative services performed. For the three months ended March
31, 2000 and 1999 such reimbursements totaled $45,000 and $66,000,
respectively.
7. Subsequent Events
On May 1, 2000, the Partnership received an extension of up to
thirty days on its $24.5 million line of credit. As of March 31,
2000, the outstanding balance of the line of credit was
approximately $23.5 million with an interest rate of 9.07%. The
Partnership is required to make interest only payments with a rate
of 9.44% during this extension period. The Partnership is seeking
financing with Key Bank of up to $24.25 million with an interest
rate of 250 basis points over the London Interbank Offered Rate
("LIBOR").
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
The Partnership attempts to maintain a working capital reserve equal to 1.5% of
the gross proceeds of its offering which is anticipated to be sufficient to
satisfy liquidity requirements. Liquidity could be adversely affected by
unanticipated costs, particularly costs relating to the vacancy of properties,
tenants experiencing financial difficulties, and greater than anticipated
operating expenses. To the extent that such working capital reserves are
insufficient to satisfy the cost requirements of the Partnership, additional
funds may be obtained through short-term or permanent loans or by reducing
distributions to limited partners.
The unpaid cumulative preferred return at March 31, 2000 totaled $27.773 million
($56.96 to $58.90 per Unit, per close), and was reduced by $596,459 ($1.25 per
Unit) with the first quarter 2000 distribution paid in April 2000.
During the three months ended March 31, 2000, the Partnership entered into the
following real estate transaction:
<TABLE>
<CAPTION>
Lease Net
Capitalized Annualized Expiration Rentable
Date of Costs Base Rent Date Square
Acquisition Tenant Location ($000's) ($000's) (month/year) Feet
- ----------- ------ -------- -------- -------- ------------ ----
<S> <C> <C> <C> <C> <C> <C>
March 20 Nextel Communications
of the Mid-Atlantic, Inc. Hampton, VA $ 12,287 $ 1,167 12/09 100,632
====== ===== =======
</TABLE>
On March 20, 2000, the Partnership obtained $7.5 million in mortgage note
secured by its Hampton, Virginia Property. The mortgage bears interest at 8.27%
per annum and matures on April 1, 2010. The note requires yearly payment of
principal and interest of $677,406 and a balloon payment of approximately $6.8
million at maturity.
The tenant of the Partnership's property in Earth City, Missouri, has declared
bankruptcy. This tenant, which represents approximately 3% of annualized rental
revenue, has not affirmed or disaffirmed the lease.
Except for the debt service requirements under the mortgages, there are no
material restrictions upon the Partnership's present or future ability to make
distributions in accordance with the provisions of its Partnership Agreement.
As of March 31, 2000, the restricted cash represents remaining proceeds from the
sale of properties under the Internal Revenue Code Section 1031, restricted for
investment in future acquisitions.
On May 1, 2000, the Partnership received an extension of up to thirty days on
its $24.5 million line of credit. As of March 31, 2000, the outstanding balance
of the line of credit was approximately $23.5 million with an interest rate of
9.07%. The Partnership is required to make interest only payments with a rate of
9.44% during this extension period. The Partnership is seeking financing with
Key Bank of up to $24.25 million with an interest rate of 250 basis points over
the London Interbank Offered Rate ("LIBOR").
<PAGE> 9
Impact of Year 2000
To date there have been no situations that the General Partner is aware of,
where the year 2000 issue has caused a computer system that effects the
Partnership or any of its properties to function improperly.
Results of Operations (in thousands):
<TABLE>
<CAPTION>
Three Months Ended
March 31,
2000 1999 Increase (Decrease)
---- ---- -------------------
<S> <C> <C> <C>
Total revenues $ 2,335 $ 2,418 $ (83)
----- ----- ---
Total expenses:
Interest 1,076 1,075 1
Depreciation 443 457 (14)
Amortization of deferred expenses 32 64 (32)
General and administrative 221 181 40
------ ------ --
1,772 1,777 (5)
----- ----- --
Income before gain on sale of properties $ 563 $ 641 $ (78)
=== === ===
</TABLE>
The change in results of operations with respect to revenues, interest,
depreciation and amortization for the three months ended March 31, 2000 are
primarily attributed to the sale and acquisition of the properties in 1999.
General and administrative expenses increased in the quarter ended March 31,
2000, due to real property taxes paid on the Missouri property net leased to
Everest & Jennings, Inc. ("Everest & Jennings"). On December 27, 1999, Everest &
Jennings filed a petition for relief under chapter 11 of title 11 of the United
States Code and the petition was granted. The General Partner engaged a
bankruptcy counsel to secure its position in relation to this filing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
The Partnership's exposure to market risk relates to its variable rate credit
facility. As of March 31, 2000, the Partnership's variable rate indebtedness
represented 40% of total long-term indebtedness. During the first quarter of
2000, this variable rate indebtedness had a weighted average interest rate of
9.03%. Had the weighted average interest rate been 100 basis points higher, the
Partnership's net income would have been approximately $53,000 less.
<PAGE> 10
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings - not applicable.
ITEM 2. Changes in Securities - not applicable.
ITEM 3. Defaults under the Senior Securities - not applicable.
ITEM 4. Submission of Matters to a Vote of Security Holders - not
applicable.
ITEM 5. Other Information - not applicable.
ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit No. Exhibit
----------- -------
27 Financial Data Schedule
99 Additional Exhibits:
Loan Agreement with Nations
Financial Capital Corporation
dated May 31, 1994.
First Amendment to Loan
Agreement dated September 28,
1998.
Second Amendment to Loan
Agreement dated October 27,
1998.
Amended and Restated Promissory
Note (Secured) dated October 27,
1998.
(b) Reports on form 8-K filed during the first quarter
ended March 31, 2000.
Form 8-K dated December 22, 1999, filed January 14,
2000. Provided pro forma financial information for the
Partnership regarding the sale of certain properties
located in Pennsylvania, Michigan and Massachusetts.
<PAGE> 11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NET 2 L.P.
By: Lepercq Net 2 L.P.
its general partner
By: Lepercq Net 2 Inc.
its general partner
Date: May 15, 2000 By: /s/ E. ROBERT ROSKIND
----------------------------
E. Robert Roskind
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME AS OF AND FOR
THE THREE MONTHS ENDED MARCH 31, 2000, AS CONTAINED IN THE PARTNERSHIP'S FORM
10-Q FOR SUCH PERIOD AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10-Q. DOLLARS ARE IN THOUSANDS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 8,373
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 94,212
<DEPRECIATION> (6,411)
<TOTAL-ASSETS> 97,724
<CURRENT-LIABILITIES> 0
<BONDS> 59,096
0
0
<COMMON> 0
<OTHER-SE> 37,934
<TOTAL-LIABILITY-AND-EQUITY> 97,724
<SALES> 0
<TOTAL-REVENUES> 2,335
<CGS> 0
<TOTAL-COSTS> 443
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,076
<INCOME-PRETAX> 563
<INCOME-TAX> 0
<INCOME-CONTINUING> 563
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 563
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE> 1
LOAN AGREEMENT
THIS LOAN AGREEMENT (this "Agreement") is entered into as of the 31st
day of May, 1994 between NET 2 L.P., a Delaware limited partnership
("Borrower"), and NATIONS FINANCIAL CAPITAL CORPORATION, a Delaware corporation
("Lender").
R E C I T A L S
A. The Premises. Borrower is the owner of the following properties
described as follows:
(1) EARTH CITY, MISSOURI. A 9.8 acre parcel of land in Earth
City, Missouri legally described on Exhibit A-1 hereto (the "Earth City
Land") and the office and warehouse facility located thereon (the
"Earth City Building"). The Earth City Building contains 157,000 square
feet of space, and parking for 83 cars.
The Earth City Building and all other ancillary or related
buildings, structures and improvements referred to above are
collectively referred to herein as the "Earth City Improvements". The
Earth City Land and Earth City Improvements, together with all
fixtures, fittings, appliances, apparatus, inventory, supplies,
provisions, machinery, furnishings, equipment, furniture or other
personal property and any replacements or substitutes now or at any
time hereafter located on or used in any way in connection with the
operation of the Earth City Land or Earth City Improvements excluding
personal property owned by tenants and personal property leased by
Borrower in accordance with the provisions of this Agreement (the
"Earth City Personal Property"), are hereinafter sometimes collectively
referred to herein as the "Earth City Premises".
(2) HIGHLAND HEIGHTS, OHIO. A 5.2263 acre parcel of land in
Highland Heights, Ohio legally described on Exhibit A-2 hereto (the
"Highland Land") and the office and warehouse facility located thereon
(the "Highland Building"). The Highland Building contains 106,497
square feet of space, and parking for 154 cars.
The Highland Building and all other ancillary or related
buildings, structures and improvements referred to above are
collectively referred to herein as the "Highland Improvements". The
Highland Land and Highland Improvements, together with all fixtures,
fittings, appliances, apparatus, inventory, supplies, provisions,
machinery, furnishings,
<PAGE> 2
equipment, furniture or other personal property and any replacements or
substitutes now or at any time hereafter located on or used in any way
in connection with the operation of the Highland Land or Highland
Improvements excluding personal property owned by tenants and personal
property leased by Borrower in accordance with the provisions of this
Agreement (the "Highland Personal Property"), are hereinafter sometimes
collectively referred to herein as the "Highland Premises".
(3) TEMPE, ARIZONA. A 2.8105 acre parcel of land in Tempe,
Arizona legally described on Exhibit A-3 hereto (the "Tempe Land") and
the office and warehouse facility located thereon (the "Tempe
Building"). The Tempe Building contains 34,606 square feet of space,
and parking for 88 cars.
The Tempe Building and all other ancillary or related
buildings, structures and improvements referred to above are
collectively referred to herein as the "Tempe Improvements". The Tempe
Land and Tempe Improvements, together with all fixtures, fittings,
appliances, apparatus, inventory, supplies, provisions, machinery,
furnishings, equipment, furniture or other personal property and any
replacements or substitutes now or at any time hereafter located on or
used in any way in connection with the operation of the Tempe Land or
Tempe Improvements excluding personal property owned by tenants and
personal property leased by Borrower in accordance with the provisions
of this Agreement (the "Tempe Personal Property"), are hereinafter
sometimes collectively referred to herein as the "Tempe Premises".
(4) SEATTLE, WASHINGTON. A 40,351 square foot condominium unit
in Seattle, Washington legally described on Exhibit A-4 hereto (the
"Seattle Land") and the improvements located thereon (the "Seattle
Unit"). The Seattle Unit contains 71,627 square feet of space which is
used for office and as a commercial art school. Borrower also is the
owner of the right to lease 81 parking spaces pursuant to a lease
agreement dated December 21, 1989 between The Port of Seattle and Pier
66 Office Associates Limited Partnership, which was assigned to
Borrower pursuant to a Parking Agreement dated December 21, 1989 by and
between the Port of Seattle and Pier 66 Office Associates Limited
Partnership (the "Seattle Parking Agreement").
The Seattle Unit and all other ancillary or related buildings,
structures and improvements referred to above are collectively referred
to herein as the "Seattle Improvements". The Seattle Unit and Seattle
Improvements, together with the Seattle Parking Agreement and all
fixtures, fittings, appliances, apparatus, inventory, supplies,
provisions, machinery, furnishings, equipment, furniture or other
personal property and any replacements or substitutes now or at any
time hereafter located on or used in any way in connection with the
operation of the Seattle
2
<PAGE> 3
Unit or Seattle Improvements excluding personal property owned by
tenants and personal property leased by Borrower in accordance with the
provisions of this Agreement (the "Seattle Personal Property"), are
hereinafter sometimes collectively referred to herein as the "Seattle
Premises".
(5) COLUMBUS, OHIO. A 10.125 acre parcel of land in Columbus,
Ohio legally described on Exhibit A-5 hereto (the "Columbus Land") and
the industrial building located thereon (the "Columbus Building"). The
Columbus Building contains 20,000 square feet of space, and parking for
26 cars.
The Columbus Building and all other ancillary or related
buildings, structures and improvements referred to above are
collectively referred to herein as the "Columbus Improvements". The
Columbus Land and Columbus Improvements, together with all fixtures,
fittings, appliances, apparatus, inventory, supplies, provisions,
machinery, furnishings, equipment, furniture or other personal property
and any replacements or substitutes now or at any time hereafter
located on or used in any way in connection with the operation of the
Columbus Land or Columbus Improvements excluding personal property
owned by tenants and personal property leased by Borrower in accordance
with the provisions of this Agreement (the "Columbus Personal
Property"), are hereinafter sometimes collectively referred to herein
as the "Columbus Premises".
(6) TUCSON, ARIZONA. A 4.8575 acre parcel of land in Tucson,
Arizona legally described on Exhibit A-6 hereto (the "Tucson Land") and
the office building located thereon (the "Tucson Building"). The Tucson
Building contains 30,480 square feet of space, and parking 216 cars.
The Tucson Building and all other ancillary or related
buildings, structures and improvements referred to above are
collectively referred to herein as the "Tucson Improvements". The
Tucson Land and Tucson Improvements, together with all fixtures,
fittings, appliances, apparatus, inventory, supplies, provisions,
machinery, furnishings, equipment, furniture or other personal property
and any replacements or substitutes now or at any time hereafter
located on or used in any way in connection with the operation of the
Tucson Land or Tucson Improvements excluding personal property owned by
tenants and personal property leased by Borrower in accordance with the
provisions of this Agreement (the "Tucson Personal Property"), are
hereinafter sometimes collectively referred to herein as the "Tucson
Premises".
(7) TEXAS CONVENIENCE STORES. Fifteen (15) parcels of land in
Texas legally described on Exhibit A-7 hereto (the "Texas Land") and
the convenience stores and gas stations located thereon (the "Texas
Buildings").
3
<PAGE> 4
The Texas Buildings and all other ancillary or related
buildings, structures and improvements referred to above are
collectively referred to herein as the "Texas Improvements". The Texas
Land and Texas Improvements, together with all fixtures, fittings,
appliances, apparatus, inventory, supplies, provisions, machinery,
furnishings, equipment, furniture or other personal property and any
replacements or substitutes now or at any time hereafter located on or
used in any way in connection with the operation of the Texas Land or
Texas Improvements excluding personal property owned by tenants and
personal property leased by Borrower in accordance with the provisions
of this Agreement (the "Texas Personal Property"), are hereinafter
sometimes individually as a "Texas Premises" or collectively referred
to herein as the "Texas Premises".
(7) MICHIGAN CONVENIENCE STORES. Thirteen (13) parcels of land
in Michigan legally described on Exhibit A-8 hereto (the "Michigan
Land") and the convenience stores and gas stations located thereon (the
"Michigan Buildings").
The Michigan Buildings and all other ancillary or related
buildings, structures and improvements referred to above are
collectively referred to herein as the "Michigan Improvements". The
Michigan Land and Michigan Improvements, together with all fixtures,
fittings, appliances, apparatus, inventory, supplies, provisions,
machinery, furnishings, equipment, furniture or other personal property
and any replacements or substitutes now or at any time hereafter
located on or used in any way in connection with the operation of the
Michigan Land or Michigan Improvements excluding personal property
owned by tenants and personal property leased by Borrower in accordance
with the provisions of this Agreement (the "Michigan Personal
Property"), are hereinafter sometimes individually as a "Michigan
Premises" or collectively referred to herein as the "Michigan
Premises".
The various parcels of Land described above are sometimes collectively
referred to herein as the "Land". The various Buildings and the Seattle Unit are
sometimes collectively referred to as the "Buildings". The various Improvements
described above are sometimes collectively referred to herein as the
"Improvements". The various Personal Property described above is sometimes
collectively referred to herein as the "Personal Property". The various Premises
described above are sometimes collectively referred to herein as the "Premises".
Borrower also owns a 13.67 acres parcel located in Beaverton, Oregon
and the building located thereon (the "Beaverton Premises").
Borrower anticipates acquiring additional parcels and improvements
thereon in accordance with the terms and conditions of this Agreement. Said
parcels and improvements will be
4
<PAGE> 5
included in the terms "Land", "Buildings", "Improvements", "Personal Property"
and "Premises" for all purposes of this Agreement from and after the date of
Borrower's execution of Loan Documents encumbering same.
B. The Loan. Borrower desires to borrow from Lender an amount (the
"Loan") up to $12,000,000.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants, conditions and agreements herein contained, the parties agree as
follows:
ARTICLE I
BORROWERS REPRESENTATIONS AND WARRANTIES
1.1 As a material inducement to Lender's entering into this Agreement,
Borrower hereby represents and warrants to Lender as follows:
A. Accuracy of Recitals. Each of the foregoing recitals is true
and correct.
B. Existence of Borrower. Borrower is a limited partnership, duly
formed, validly existing and in good standing under the laws of the States of
Delaware, Texas, Michigan, Washington, Arizona, Ohio and Missouri. The sole
general partner of Borrower is Lepercq Net 2 L.P., a Delaware limited
partnership ("General Partner"). The sole general partner of General Partner is
Lepercq Net 2 Inc., a Delaware corporation ("Corporate General Partner"). The
General Partner is a limited partnership, duly formed, validly existing and in
good standing under the laws of the State of Delaware. Corporate General Partner
is a corporation, duly formed, validly existing and in good standing under the
laws of the State of Delaware. General Partner owns directly or indirectly 2% of
the equity interests in Borrower, and all of such interests are owned free and
clear of all liens, claims and rights of others. Corporate General Partner owns
directly or indirectly 1% of the equity interests in General Partner, and all of
such interests are owned free and clear of all liens, claims and rights of
others.
C. Authority. Borrower has full right, power and authority to execute,
deliver and carry out the terms and provisions of this Agreement and the "Loan
Documents" (hereinafter defined) and any other documents and instruments to be
executed and delivered by Borrower pursuant to this Agreement. This Agreement
constitutes, and the Loan Documents and any other documents and instruments to
be executed and delivered pursuant to or in connection with this Agreement, when
executed and delivered pursuant hereto will constitute, the duly authorized,
valid and legally binding obligations of the party or parties executing the
same.
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D. No Default; No Notice or Consent. Borrower is not in default under
any contract, agreement or commitment to which it is a party or by which it or
any of its property is bound. The execution and delivery of this Agreement and
the Loan Documents and any other documents or instruments to be executed and
delivered by Borrower pursuant hereto, the consummation of the transactions
herein or therein contemplated and compliance with the terms and provisions
hereof or thereof, will not (i) violate any existing provisions of any zoning,
building, fire, health, environmental protection, land use, life safety,
handicapped persons, disability, liquor or other laws, statutes, codes,
ordinances, rules or regulations, including the Americans with Disabilities Act
and the Occupational Safety and Health Act (collectively, "Applicable Laws") or
any existing applicable order, writ, injunction or decree of any court or
governmental department, commission, board, bureau, agency or instrumentality,
or (ii) conflict or be inconsistent with, or result in any breach of, any of the
terms, covenants, conditions or provisions of, or constitute a default under,
any indenture, mortgage, deed of trust, instrument, document, agreement, or
contract of any kind to which Borrower is a party or by which it or any of its
property may be bound, or (iii) require any notice to or consent of any person
or entity pursuant to any law, regulation or agreement.
E. No Litigation. There are no petitions, actions, moratoria, suits, or
proceedings pending or, to Borrower's knowledge, threatened against or affecting
Borrower, General Partner, Corporate General Partner or, to the best of
Borrower's knowledge based diligent investigation, any of the Premises, before
any court or any governmental, administrative, regulatory, adjudicatory or
arbitrational body or agency of any kind (including any actions or petitions to
alter or declare invalid any laws, ordinances, rules, regulations, permits,
certificates, restrictions or agreements authorizing or relating to the
Premises) which might adversely affect the performance by Borrower of its
obligations pursuant to and as contemplated by the terms and provisions of this
Agreement or the use or operation of the Premises for the uses for which they
are currently operated.
F. Compliance with Laws. The use of the Premises for the uses for which
they are currently operated does not violate (i) to the best of Borrower's
knowledge based on diligent inquiry, any Applicable Law, (ii) to the best of
Borrower's knowledge based on diligent inquiry, any building or operating permit
or license issued with respect to any of the Premises, including liquor
licenses, or (iii) any condition, easement, right-of-way, covenant or
restriction affecting the Premises. Each of the Premises is in compliance with
all of the foregoing.
G. Title. Borrower has good and indefeasible title in fee simple to the
Premises and the Beaverton Premises, free and clear of all liens, claims,
assessments, encumbrances and rights of others except the matters listed on
Exhibit B hereto (the
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"Permitted Exceptions"). The Mortgages (hereinafter defined) and the Security
Agreements (hereinafter defined) will create a first and prior lien on the
Premises, and Lender will have a perfected first and prior lien upon (1) all
Personal Property, (2) all sources of income relating to Borrower and the
Premises, (3) all permits and licenses relating to the Premises, and (4) any
other tangible and intangible property of Borrower.
H. Permits. To the best of Borrower's knowledge based on diligent
inquiry, all necessary and required certificates of occupancy, licenses, permits
and approvals for the use and occupancy of the Premises have been obtained from
the appropriate governmental authorities to permit the operation of the Premises
as herein contemplated from all sanitary, conservation, special benefit
districts, zoning boards and other agencies having jurisdiction. All of such
licenses, permits and approvals in Borrower's possession are listed on Exhibit C
hereto. Borrower has furnished Lender with copies of all of such written
permission, licenses, permits and approvals in its possession.
I. Zoning. The Earth City Premises are duly and validly zoned M-3,
Planned Industrial District" which permits the use thereof for industrial
purposes, which zoning has been enacted without any conditions as to its
effectiveness and is in full force and effect. The Highland Premises are duly
and validly zoned "PMC, Park Commercial Light Manufacturing District" which
permits the use thereof as a for industrial purposes, which zoning has been
enacted without any conditions as to its effectiveness and is in full force and
effect. The Tempe Premises are duly and validly zoned "I-2, Industrial District"
which permits the use thereof as a warehouse with office, which zoning has been
enacted without any conditions as to its effectiveness and is in full force and
effect. The Seattle Unit is duly and validly zoned "DH2-Downtown Harbor Front"
which permits the use thereof as an art school and office, which zoning has been
enacted without any conditions as to its effectiveness and is in full force and
effect. The Columbus Premises are duly and validly zoned "M-2, Manufacturing
District" which permits the use thereof as a warehouse and office, which zoning
has been enacted without any conditions as to its effectiveness and is in full
force and effect. The Tucson Premises are duly and validly zoned "P-I, Park
Industrial District," which permits the use thereof as for industrial uses,
which zoning has been enacted without any conditions as to its effectiveness and
is in full force and effect. The Texas Premises are duly and validly zoned to
permit the use thereof as gas stations with convenience stores, which zoning has
been enacted without any conditions as to its effectiveness and is in full force
and effect. The Michigan Premises are duly and validly zoned to permit the use
thereof as a gas stations, which zoning has been enacted without any conditions
as to its effectiveness and is in full force and effect.
In the event that all or any part of the Improvements are destroyed or
damaged, the Improvements can under present
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Applicable Law, be legally reconstructed to their condition prior to such damage
or destruction, and thereafter exist without violating any zoning or other
ordinances applicable thereto and without the necessity of obtaining any
variances or other relief from local laws. Neither the zoning (including parking
requirements) nor any other right to construct, use or operate any of the
Premises is in any way dependent upon or related to any real estate other than
the applicable Premises or Unit.
J. Complete Disclosure. Neither this Agreement nor any document,
financial statement, credit information, certificate or statement required
herein or in any Loan Document to be furnished to Lender by or on behalf
Borrower contains any untrue statement of a fact in any material respect or
omits to state a fact necessary to make any statements made herein not
misleading in any material respect.
K. Usury. Neither the performance by Borrower of its obligations
hereunder or under the Loan Documents or any other documents and instruments
delivered pursuant hereto or in connection herewith nor the interest rate under
the Note nor any other aspect of the transaction contemplated hereby shall cause
the Loan to be usurious or illegal under applicable law.
L. Agreements Affecting the Premises. There are no contracts or
agreements (either oral or written) affecting the Premises entered into by
Borrower or of which Borrower has knowledge, including leases, tenancies or
other contracts or agreements relating to the maintenance, development or
management thereof, except as otherwise specifically described in this Article I
or Article II or as listed in Exhibit D hereto and except for contracts and
agreements which may be cancelled on thirty (30) days notice or which do not
have a term of more than a year. Borrower has heretofore furnished Lender with
true and complete copies of all of such contracts or agreements.
M. Brokerage Commissions. No brokerage fees or commissions are payable
in connection with the Loan other than to John Vander Zwaag of The Binswanger
Companies.
N. Condemnation. Borrower has not received any notice from any
governmental or quasi-governmental body or agency or from any person or entity
with respect to (and Borrower does not know of) any actual or threatened taking
of any of the Premises, or any portion thereof, for any public or quasi-public
purpose by the exercise of the right of condemnation or eminent domain or of any
moratorium which may affect operation of any of the Premises.
O. Exempt Transaction. The Loan is an exempt transaction under the
Truth-in-Lending Act.
P. Access. Each parcel of the Land has access to and full utilization
of completed public roads or valid and enforceable easements over private roads
necessary for access to and full utilization of each of the Premises for its
intended purposes.
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Q. Tax Division. A tax division has been effected with respect to each
of the Premises so that it is taxed for ad valorem taxation without regard to or
inclusion of any other property. A subdivision has been effected with respect to
each of the Premises so that for all purposes each of the Premises may be
mortgaged, conveyed and otherwise dealt with as a separate lot or parcel.
R. Non-foreign Status of Borrower. Borrower is not a nonresident alien
for purposes of U.S. income taxation and is not a foreign corporation,
partnership, foreign trust or foreign estate (as said terms are defined in the
Internal Revenue Code of 1986, as amended (the "Code") and Income Tax
Regulations).
S. ERISA. Borrower is not a party to any plan defined and regulated
under the Employee Retirement Income Security Act of 1974, as amended ("ERISA")
or Section 4975 of the Code. None of the assets of Borrower are "plan assets" as
defined in 29 C.F.R. Section 2509.75-2 or Section 2510.3-101.
T. Special Assessment Districts. None of the Premises is located in any
special assessment district, special tax district or other special service
district and is not subject to any special assessments, tax incremental
financing or similar taxation.
U. Leases. Borrower has furnished Lender with true and complete copies
of the following:
(1) Lease dated March 19, 1992 between Everest & Jennings, Inc. and
Borrower relating to the Earth City Premises.
(2) Lease dated February 27, 1989 between The Tranzonic Companies and
Borrower relating to the Highland Premises.
(3) Lease dated February 27, 1989 between The Tranzonic Companies and
Borrower relating to the Tempe Premises.
(4) Lease dated March 30, 1990 between Art Institute of Seattle, Inc.
and Borrower relating to the Seattle Premises.
(5) Lease dated February 29, 1990 between Ameritech Systems, Inc. and
Ameritech Services, Inc. which was assigned to Borrower relating to the Columbus
Premises.
(6) Lease dated September 28, 1990 between Robin Cable Systems of
Tucson and Borrower relating to the Tucson Premises.
(7) Leases described on Exhibit G-1 relating to the Texas Premises.
(8) Leases described on Exhibit G-2 relating to the Michigan Premises.
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(9) The Agreement to Lease dated June 1, 1991 between Total Petroleum,
Inc. and Borrower (the "Agreement to Lease").
(10) The Guaranty of Lease dated March 30, 1990 from EMC Holdings, Inc.
to Borrower relating to the Lease described in clause (4) above (the "Lease
Guaranty").
The leases described in clauses (1) through (6) above are sometimes
referred to herein as the "Major Leases", the leases described in clauses (7)
and (8) above are sometimes referred to as the "Secondary Leases", and the Major
Leases and the Secondary Leases, together with any leases that may be entered
into by Borrower after the date hereof and under the provisions of section 3.1 P
are included in the term "Leases" are sometimes collectively referred to as the
"Leases".
The Leases, the Agreement to Lease and the Lease Guaranty are all in
full force and effect, free from default. Each of the Leases, (and, with respect
to the Michigan Premises, the Agreement to Lease, and, with respect to the
Seattle Premises, the Lease Guaranty) embodies the entire transaction between
Borrower and the tenant under such Lease with respect to the applicable
Premises. Borrower has performed all of its obligations and undertakings under
the Leases and the Agreement to Lease as and when due under the terms thereof
and, to the best of Borrower's knowledge, no tenant has any right of offset or
counterclaim with respect thereto.
V. Management Agreement. Borrower has furnished Lender with a true and
complete copy of the Management Agreement dated January 10, 1989 between
Borrower and Leased Properties Management, Inc. (the "Management Agreement") for
general management of the assets and affairs of Borrower. The Management
Agreement is in full force and effect, free from default.
W. Financial Statements. The financial statements furnished by Borrower
to Lender in connection with this Agreement are (a) true and correct in all
material respects, (b) have been prepared in accordance with generally accepted
accounting principles consistently applied, and (c) present fairly the financial
condition of Borrower as of the respective dates thereof. No material adverse
change has occurred in the financial condition of Borrower since the date of the
most recent financial statement. Without limitation of the foregoing, all
indebtedness of Borrower to any affiliate of Borrower is disclosed on said
financial statements.
1.2 Representations Remade. Borrower warrants and covenants that the
foregoing representations and warranties are true on the date hereof and will be
true on the date of the Initial Disbursement (hereinafter defined) of the Loan
and all subsequent disbursements of the Loan or Future Acquisition Funds
(hereinafter defined). All representations, warranties, covenants and agreements
made herein or in any Loan Document or in any certificate or other document
delivered to Lender by or on
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behalf of Borrower pursuant to or in connection with this Agreement shall be
deemed to have been relied upon by Lender, notwithstanding any investigation
heretofore or hereafter made by Lender or on its behalf (and Borrower hereby
acknowledges such reliance by Lender in making the Loan). All such
representations, warranties, covenants and agreements shall survive the making
of each disbursement of the Loan and all Future Acquisition Funds and shall
continue in full force and effect until such time as the Loan has been paid in
full, Borrower has performed all of its obligations and agreements hereunder,
and neither Lender nor any successor, assign or designee of Lender has any
further interest, direct or indirect, in the Premises.
ARTICLE II
GENERAL CONDITIONS OF LOAN
2.1 Loan Documents. On or prior to the Initial Disbursement unless
otherwise specified, Borrower shall execute and deliver or cause to be duly
executed and delivered to Lender the following documents, all of which shall be
in form and substance satisfactory to Lender (such documents, together with
those documents described in Section 2.2 hereof, being herein sometimes
collectively called the "Loan Documents"):
A. Note. A promissory note (the "Note") in the amount of Twelve Million
Dollars ($12,000,000.00), payable to the order of Lender on or before May 30,
1999 (the "Initial Maturity Date"), subject to four one-year extension options
which may be exercised on the terms and conditions set forth below (any date to
which the maturity date of the Note has been extended is referred to below as an
"Extended Maturity Date"). The Note shall bear interest (based on the actual
number of days elapsed in a 360 day year) at a rate per annum (the "Interest
Rate") equal to the Base Rate (as defined in the Note) in effect on the first
business day of each month, plus four hundred fifty (450) basis points.
The interest rate will be adjusted on the first calendar day of each
month and will be payable monthly in arrears on the first day of each calendar
month, commencing with the first calendar month next succeeding the date of the
Disbursement. Interest from and after maturity whether by acceleration or
otherwise shall accrue at a rate (the "Default Rate") equal to the lesser of the
"Maximum Rate" (as defined in the Note) and the rate of 5% per annum plus the
Interest Rate from time to time in effect.
In addition to interest, Borrower will make monthly principal payments
calculated with reference to a 20-year amortization schedule, calculated based
on a 9.5% interest rate commencing on the first day of the first month after the
Initial Disbursement. In addition to the foregoing, during the period of any
extension of the Loan, all Net Cash Flow (hereinafter defined) in any month will
be paid to Lender as a mandatory
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prepayment of the Note. Such payments will be applied to the last maturing
installments of the Note.
Borrower shall have the right to extend the maturity date of the Note
for four additional one (1) year terms upon satisfaction of all of the following
conditions:
1. On or before a date not more than 90 and not less than 30
days prior the Initial Maturity Date or the applicable Extended
Maturity Date, as the case may be, Borrower shall have notified Lender,
in writing, of Borrower's desire to extend the Loan.
2. On the date of the request for the extension and on the
Initial Maturity Date or applicable Extended Maturity Date, no Event of
Default which is a Monetary Default (as defined below) shall have
occurred during the two year period preceding the date of the request,
no Event of Default which is not a Monetary Default shall have occurred
which remains uncured, and no Default (as defined below) shall have
occurred and be continuing. An Event of Default which is based on the
failure to pay an amount due under this Agreement or any of the Loan
Documents is referred to as a "Monetary Default".
3. On or before the Initial Maturity Date or applicable
Extended Maturity Date Borrower shall have paid an extension fee in the
amount 1% of the outstanding principal amount of the Loan for the first
extension, 1.33% of the outstanding principal amount of the Loan for
the second extension, 1.67% of the outstanding principal amount of the
Loan for the third extension, and 2% of the outstanding principal
amount of the Loan for the fourth extension. Such fees will be
calculated as of the date Borrower notifies Lender of its intent to
extend the Loan, will fully earned as of said date and will be
nonrefundable.
Borrower will not have the right to prepay the Note except at the times
and on the terms set forth in the Note.
B. Mortgages. A mortgage on each of the Premises (collectively, the
"Mortgages"), securing the Note and all of the Borrower's obligations hereunder
and under the Loan Documents (collectively, "Borrower's Obligations"), which
Mortgages shall be a first lien on each of the Premises, subject only to the
applicable Permitted Exceptions. Borrower shall provide Lender with evidence
that all recording fees, taxes and charges due in connection with recording of
the Mortgages have been paid. Notwithstanding the foregoing, Borrower will not
be required to encumber the Nacogdoches Road, San Antonio, Texas Premises. All
Mortgages delivered to Lender in connection with Future Acquisitions
(hereinafter defined) will be included in the term "Mortgages".
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C. Security Interest. Security agreements (collectively with all
security agreements in connection with Future Acquisitions, the "Security
Agreements") and such other instruments and documents executed by Borrower as
may be necessary to create in favor of Lender a perfected first and prior lien
securing Borrower's Obligations upon (1) all Personal Property, (2) all sources
of income relating to Borrower and each of the Premises, including rental
income, (3) all permits and licenses relating to the Premises, and (4) any other
tangible and intangible property of Borrower.
D. Certificate of Non-foreign Status. A certification as to non-foreign
status executed by Borrower.
E. Assignments of Rents. Assignments of Rents (collectively with all
assignments of rents in connection with Future Acquisitions, "Assignments")
executed by Borrower.
F. Subordination, Non-disturbance and Attornment Agreements.
Subordination, non-disturbance and attornment agreements executed by each tenant
of a Premises.
G. Subordination of Management Agreement. An agreement executed by
Borrower an consented to by Manager whereby the Management Agreement is
subordinated to the Loan and Manager agrees that the Management Agreement may be
terminated by Lender upon occurrence of an Event of Default. Such other
agreements from the Manager as Lender may request.
H. Certification. A Certificate executed by Borrower pursuant to which
Borrower represents and warrants that all representations and warranties set
forth herein are true and correct on the date of the Initial Disbursement.
I. General Partner's Agreement. An agreement (the "General Partner's
Agreement") executed by General Partner whereby it guaranties payment of the
amounts under Sections 3.11, 6.5, 8.1, 8.9, 8.10, 8.20 and 8.24 of this
Agreement.
J. Assignment of Environmental Indemnities. Assignments of all
environmental indemnities executed by tenants so that such indemnities run in
favor of Lender.
K. Assignment of Letter of Credit. An assignment of the letter of
credit in the approximate amount of $450,000 provided by the tenant of the Tempe
Premises to Lender, together with evidence that the issuing bank has amended the
letter of credit to provide for such transfer.
L. Guaranty of Seattle Premises. An assignment of the guaranty of the
lease on the Seattle Premises.
M. Other Documents. Such other documents or instruments as Lender may
reasonably require.
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2.2 Additional Requirements. In addition to the documents described in
2.1 above, prior to the Initial Disbursement/ Borrower shall deliver or cause to
be delivered to Lender each of the following, all of which shall be in form and
substance satisfactory to Lender:
A. Title Policy. Upon recording of the Mortgages, mortgagee's policies
of ALTA 1970 title insurance (the "Title Policy") issued by Lawyers Title
Insurance Company (the "Title Company") each in a face amount satisfactory to
Lender, guaranteeing, as of the date of the Initial Disbursement, each of the
Mortgages to be a valid and perfected first and prior lien on the Premises
(including any easements appurtenant thereto) subject only to the Permitted
Exceptions. The Title Policy shall contain such endorsements as Lender may
require, including, without limitation, comprehensive zoning, comprehensive
endorsement 100, access, survey, a tie-in endorsement and elimination of the
creditors rights exception.
B. Survey. A current survey of each of the Earth City, Highland
Heights, Tempe, Seattle, Columbus and Tucson Premises (the "Major Premises")
certified to Lender and the Title Company by a surveyor registered in the States
where the Premises are located and containing the minimum detail for land
surveys as most recently adopted by the American Land Title Association and
American Congress on surveying and Mapping in 1988 (Class A) and showing no
state of facts or conditions objectionable to Lender. Said survey shall indicate
that (1) adequate ingress and egress to the Premises is available over public
streets, rights of way or perpetual easements, and (2) the Land is not in a
flood plain or flood hazard area designated by the Secretary of Housing and
Urban Development or any other governmental or quasi-governmental authority
having jurisdiction over the Land except as noted thereon. Evidence that the
Land is not in any "wet land" as designated by the Army Corps of Engineers or
any other governmental or quasi-governmental authority having jurisdiction over
the Land. Borrower will furnish Lender a survey for the Tempe Premises meeting
the foregoing requirements prior to July 15, 1994, together with an endorsement
to the title policy for the Tempe Premises reflecting said survey.
C. Opinion. A favorable opinion or opinions of counsel of Borrower and
General Partner dated the date of the Initial Disbursement, and relating to such
matters with respect to this Agreement and the Loan Documents and the
transaction contemplated hereby (including usury) as Lender may reasonably
request.
D. Insurance. A policy or policies of insurance as set forth on Exhibit
E. Prior to August 1, 1994, a policy of rent loss insurance meeting the
requirements set forth in Exhibit E for a period of not less than one year which
will replace the interim policy of rent loss insurance furnished to Lender at
closing. Prior to July 1, 1994, Borrower will furnish revised insurance
certificates deleting the "endeavor to" language in the insurance certificates
furnished at closing. Until Borrower has
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complied with the foregoing sentence, no Future Acquisition Funds will be
disbursed, and failure to comply with the foregoing sentence by July 1, 1994
will constitute an Event of Default.
E. UCC Searches. Uniform Commercial Code, judgment and tax lien
searches made in the States where the Premises are located after the date
hereof, on Borrower and General Partner showing no filings other than those made
hereunder or those acceptable to Lender and no other matters objectionable to
Lender.
F. Authorization Documents. (i) For Borrower and General Partner, a
certified copy of the agreement of limited partnership of Borrower and General
Partner, a certificate of good standing for the state of Delaware and each state
where a Premises is located and a certified copy of the certificate of limited
partnership, and (ii) for Corporate General Partner, certified resolutions, a
certificate of incumbency with specimen signatures, a certified copy of the
Articles of Incorporation, a certified copy of the by-laws, a current
certificate of good standing for the State of Delaware.
G. Environmental Assessment. An environmental assessment prepared by an
environmental consultant satisfactory to Lender showing no matters
unsatisfactory to Lender, and a letter from the consultant who prepared the
environmental assessment stating that Lender is authorized to rely on the
assessment. Evidence of insurance maintained by the Environmental Consultant.
H. Flood Plain Notice. If any portion of the Premises is in a flood
plain, Borrower's executed receipt of the Flood Plain Notice delivered by Lender
to Borrower.
I. Certificates of Occupancy. A copy of the certificate of occupancy
issued with respect to each of the Premises.
J. Zoning. Evidence satisfactory to Lender as to the zoning of each the
Premises and that each of the Premises are in compliance therewith.
K. Lender's Inspection. A satisfactory inspection report of the
Premises prepared by an engineer or other consultant satisfactory to Lender
("Lender's Inspector").
L. Estoppel Certificates. Estoppel certificates executed by Tenants
showing no matters unsatisfactory to Lender.
M. Equifax Report. A favorable Equifax report on Borrower and General
Partner.
N. Financial Statements. Current audited financial statements of
Borrower and income tax returns for General Partner and Corporate Partner.
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O. Permits and Licenses. Copies of all permits and licenses that are
necessary in connection with the operation of each of the Major Premises in
Borrower's possession.
P. Compliance with Laws. Evidence satisfactory to Lender that the
Premises has obtained and is in compliance with all Applicable Laws.
Q. Recording and Documentary Taxes. Evidence that Borrower has paid all
mortgage and recording fees and charges.
R. Appraisals. An appraisal of each of the Premises (other than the
Texas and Michigan Premises) ordered by Lender and satisfactory to Lender in all
respects.
S. Adverse Change. There shall be no material adverse change in the
financial condition or prospects of Borrower or General Partner from such
condition as it existed on the date of the latest financial statements provided
to Lender.
T. Certified Copies of Leases. Certified copies of the Leases.
U. Other Items. Such other documents and instruments as Lender may
reasonably require.
2.3 Disbursements from Future Acquisition Fund. As a condition to
Lender's obligation to make disbursement of a portion of the Future Acquisition
Fund, Borrower must furnish the following to Lender, all of which must be in
form and substance satisfactory to Lender.
A. Underwriting materials. A copy of Borrower's purchase contract, a
copy of all leases (and any proposed leases), copies of any market studies,
financial information, engineering structural studies furnished to, performed by
or obtained by Borrower in connection with its due diligence review of the
proposed Future Acquisition.
B. Environmental Report. A current environmental report of the Proposed
Acquisition, certified to Lender and showing no matters unsatisfactory to
Lender.
C. Title and Survey. A copy of a current title report and survey for
the Proposed Acquisition.
D. Representations and Warranties. Borrower shall have delivered to
Lender a representation and warranty certificate in the form of Exhibit H
completed by Borrower with respect to such Future Acquisition.
E. Appraisal. If Lender, in its sole and absolute discretion elects, an
appraisal of the Future Acquisition.
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If Lender, in its sole and absolute discretion, decides to encumber a
Future Acquisition, Borrower will furnish to Lender, as a condition of the
making of a disbursement of Future Acquisition Funds, all of the documents and
instruments listed in Sections 2.1B, C, E, F, H and L with respect to such
Future Acquisition, and all of the submissions and showings listed in Sections
2.2 A, B, C, D, E, F, G, H, I, J, L, 0, P, Q, T and U with respect to such
Future Acquisition, all of which shall be in form and substance satisfactory to
Lender.
ARTICLE III
COVENANTS, CONDITIONS AND AGREEMENTS
3.1 Borrower hereby covenants and agrees with Lender as follows:
A. Inspections. Borrower will permit, and will cooperate with Lender in
arranging for, inspections from time to time of the Premises and Borrower's
books and records by Lender's Inspector and by any other representatives of
Lender. In the event that Lender's Inspector or other representatives furnish
Lender with reports covering such inspections Lender may, but is not under any
obligation whatsoever to, furnish Borrower with copies of any of said reports.
Borrower acknowledges and agrees that (i) all of such inspections and reports
shall be made for the sole benefit of Lender, and not for the benefit of
Borrower or any third party, and neither Lender nor Lender's Inspector or any of
its representatives, agents or contractors assume any responsibility or
liability (except to Lender) by reason of such inspections, reports or the
furnishing of any of such reports to Borrower, (ii) Borrower will not rely upon
any of such inspections or reports for any purpose whatsoever, and (iii) such
inspections and the furnishing of any of such reports to Borrower will not
constitute a waiver of any of the provisions of this Agreement or any of the
obligations of Borrower hereunder. Borrower further acknowledges and agrees that
neither Lender nor Lender's Inspector, representatives, agents or contractors
shall be deemed to be in any way responsible for any matters related to design
or construction of the Improvements.
B. Taxes. Borrower will pay, or cause to be paid, all taxes,
assessments, and other similar charges which are assessed, levied, confirmed,
imposed, or which become a lien upon or against the Premises or any portion
thereof or which become payable with respect thereto or with respect to the
occupancy, use or possession of the Premises before the same become delinquent,
and will promptly deliver to Lender a receipt evidencing payment or such
evidence of payment that the tenant under the applicable Lease is required to
deliver under the applicable Lease.
C. No Liens. The Premises shall be kept free and clear of all liens and
encumbrances (unless the same are bonded or insured
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<PAGE> 18
over by the Title Company in a manner satisfactory to Lender) of every nature or
description (whether for taxes or assessments, or charges for labor, materials,
supplies or services or any other thing) other than the Permitted Exceptions.
Without limitation of the foregoing, Borrower will not cause or permit any
instrument or document affecting the Premises to be recorded without Lender's
prior written consent thereto and no tract map, parcel map, condominium plan,
condominium declaration, or plat of subdivision will be recorded with respect to
the Land without Lender's prior written approval thereof, such approval not to
be unreasonably withheld.
D. Condition of Premises. Borrower will keep and maintain the Premises
in good order, condition and repair, ordinary wear and tear and damage by fire
or other casualty excepted, and will make, as and when the same shall become
necessary, all structural and non-structural, exterior and interior, ordinary
and extraordinary, foreseen and unforeseen, repairs and maintenance necessary or
appropriate. Borrower will suffer or commit no waste to the Premises or any
portion thereof. Borrower will, at its expense, promptly repair, restore,
replace or rebuild any part of the Premises which may be damaged or destroyed by
any casualty or as the result of any taking under the power of eminent domain to
the extent permitted given the size, scope and extent of the taking. Borrower
shall cause all repairs, maintenance, rebuilding, replacement or restoration to
be (in the opinion of Lender) of equivalent quality. Except as provided in this
Agreement, subject to the provisions of the Leases, Borrower will not cause,
suffer or permit the construction of any buildings, structures, or improvements
on the Premises without the prior written consent of Lender to the proposed
construction as well as to the plans and specifications relating thereto. None
of the buildings, structures, or improvements erected or located on the Premises
shall be removed, demolished or substantially or structurally altered in any
material respect without the prior written consent of Lender.
E. Personal Property. All of the Personal Property will be owned by
Borrower in Borrower's name, and will be kept free and clear of all chattel
mortgages, conditional vendor's liens, purchase money financing liens, and all
liens, encumbrances and security interests whatsoever except those arising
pursuant to the provisions of this Agreement.
F. Compliance. Borrower will comply or cause compliance with all (i)
Applicable Laws, (ii) building or operating, permit or license issued with
respect to the Premises, or (iii) condition, easement, right-of-way, covenant or
restriction affecting the Premises.
G. Performance of Agreements. Borrower will duly and punctually
perform, observe and comply with all of the terms, provisions, conditions,
covenants and agreements on its part to be performed, observed and complied with
hereunder and under (i) the Loan Documents, (ii) the Permitted Exceptions, (iii)
the
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<PAGE> 19
Leases, (iv) the Management Agreement, and (v) any other documents, instruments
and agreements delivered by Borrower in connection herewith or pursuant hereto,
and will not suffer or permit any default or event of default to exist under any
of the foregoing. Borrower will not amend, modify or terminate any document or
instrument included in clauses (ii) through (v) above without Lender's prior
written consent.
H. Access. Borrower will allow Lender, its representatives or agents,
at any time during normal business hours, access to the records and books of
account, including any supporting or related vouchers or papers, kept by or on
behalf of Borrower, its representatives or agents, in connection with the
Premises, such access to include the right to make extracts or copies thereof
and to audit such books and records.
I. Lender's Expenses. Borrower agrees to pay, on demand by Lender, all
actual expenses, charges, costs and fees incurred in connection with the
documentation, disbursement and administration of the Loan including the
evaluation and funding of Future Acquisitions pursuant to Section 4.3B of this
Agreement (collectively, "Lender's Expenses"), Lender's Expenses shall include
all registration and recording fees, insurance consultant fees, environmental
consultant fees, costs of market studies, costs of audits, credit reports,
appraisals, engineering reports, fees and disbursements of all counsel (both
local and special) for Lender, travel costs, escrow fees, cost of surveys, fees
and costs of Lender's Inspector.
J. Commitment Fee. Borrower has paid Lender a commitment fee in the
amount of $180,000 (the "Commitment Fee") which Commitment Fee is deemed fully
earned upon execution of this Agreement and non-refundable. If the Loan fails to
close by April 29, 1994 due to Borrower's failure to satisfy all conditions to
funding hereunder, Lender will retain the Commitment Fee in addition to Borrower
paying all of Lender's Expenses relating to the Loan.
K. Financial Statements. Borrower will furnish to Lender (1) annual
audited financial statements of Borrower, all such financial statements to be
prepared in accordance with generally accepted accounting principles on a basis
consistent with previous years and compiled by a firm of nationally recognized
independent certified public accountants reasonably acceptable to Lender, (2)
quarterly financial statements of Borrower, including balance sheets, profits
and loss statements and cash flow statements, including a breakdown of cash flow
and operating results from each Premises, which will be certified by Borrower's
chief financial officer as accurately reflecting Borrower's financial condition
and the matters shown thereon, (3) monthly statements showing the payment of
rent from each of the Premises, (4) copies of all projections and financial
reports furnished to limited partners of Borrower, (5) copies of all budgets,
projections and other information furnished by Manager to Borrower for each of
the Premises, (6) copies of all operating
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<PAGE> 20
budgets prepared under the Management Agreement, (7) annual tax returns of
General Partner, (8) copies of all financial statements and repo3~ts furnished
by a Tenant to Borrower, and (9) such other financial information as Lender may
from time to time reasonably request. All such financial statements shall be
delivered to Lender as soon as possible but in the case of (i) monthly cash flow
and operating statements, not later than 10 days after the close of each month,
(ii) quarterly financial statements, not later than 45 days after the close of
each quarter, (iii) in the case of audited annual financial statements not later
than 90 days after the close of each fiscal year, (iv) in the case of compiled
annual financial statements, not later than 120 days after the close of each
fiscal year, and (v) in the case of tax returns, promptly after filing. All
unaudited financial statements and reports will be certified to Lender by
Borrower and, with respect to the financial statements of General Partner, by
General Partner as being accurate and complete.
L. Management. Borrower will provide competent and responsible
management for the Premises by Manager or another manager acceptable to Lender
and will not enter into any management agreement or arrangement with respect to
the Premises without Lender's prior written consent. Any management agreement
must contain subordination and termination provisions acceptable to Lender.
Borrower will not make, suffer, or permit, without the prior written consent of
Lender, any use of the Premises for any purpose other than that specified
herein.
M. Due on Sale or Encumbrance. Borrower will not, without the prior
written consent of Lender, sell, assign, transfer, further mortgage, grant a
deed of trust, pledge or otherwise dispose of or further encumber, whether by
operation of law, or otherwise, any or all of its interest in the Premises
except for sales of such Premises in accordance with the provisions of Section
4.6. Borrower will not incur any indebtedness or borrow any funds, secured or
unsecured, without Lender's prior written consent, except for financing of
properties:
A. for which Borrower has no liability, under any circumstances, for
the payment of principal or interest or for a deficiency judgment; and
B. which were acquired solely with
(1) proceeds of the sale of the Beaverton Property,
(2) Net Cash Flow which is not restricted under Section
3.1Q, and
(3) cash on hand as of the date of the Initial
Disbursement, and
(C) which were acquired without any Future Acquisition Funds.
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<PAGE> 21
At all times during the term of the Loan, General Partner will be the
sole general partner of Borrower, will not engage in any other business or
enterprise without the prior written consent of Lender, and will keep its
interest in Borrower free and clear of all liens, claims, encumbrances or rights
of others. At all times during the term of the Loan, Corporate General Partner
will be the sole general partner of General Partner, will not engage in any
other business or enterprise without the prior written consent of Lender, and
will keep its interest in General Partner free and clear of all liens, claims,
encumbrances or rights of others.
N. Condemnation. Borrower will not enter into any agreement for the
taking of any of the Premises, or any part thereof with anyone authorized to
acquire the same in or by condemnation proceedings, or by the exercise of any
power of eminent domain, unless and until Lender shall have consented thereto in
writing.
O. Litigation. Borrower will promptly furnish Lender a written notice
of any litigation in which Borrower, General Partner or any of the Premises is
named as defendant which affects or relates to any of the Premises, Borrower or
General Partner and is not fully covered by insurance for which the insurer has
assumed the defense and acknowledged coverage. Borrower shall furnish Lender
with copies of all pleadings or orders filed or entered therein or with respect
thereto.
P. Leasing. Borrower will not, without the prior written consent of
Lender, enter any lease or other rental or occupancy arrangement or concession
agreement with respect to the Premises or any portion thereof unless such lease
has been approved by Lender in writing. In the event Borrower desires to enter
into any other lease or other rental or occupancy arrangement or concession
agreement with respect to the Premises, or any portion thereof, prior to
Borrower's entering into any lease or other rental, occupancy or concession
agreement, Borrower shall submit to Lender, for its approval, which approval
will not be unreasonably withheld, the proposed form therefor which shall in any
event include provisions relating to subordination and attornment reasonably
satisfactory to Lender. Lender's approval, disapproval or conditional approval,
if given orally, shall be followed by written confirmation. Borrower shall not
(1) modify, amend or terminate (except for a termination upon a material
monetary default by a tenant under any Lease), (2) or accept, after the
commencement of a term of a Lease, any rental payment thereunder more than one
(1) month in advance of its due date, without the prior written consent of
Lender, or (3) take any action or fail to take any action which would entitle a
tenant to terminate a Lease on account of a default by Borrower or to offset
against any amounts due under the Lease. For purposes of the preceding
paragraph, security deposits shall not be considered advance rental.
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<PAGE> 22
Q. Excess Funds. Commencing on the first day of the first month
following the Initial Disbursement and continuing until the Initial Maturity
Date, Net Operating Income (hereinafter defined) from the Premises shall be
tested, on an aggregate basis from all Premises, each quarter as of the end of
each calendar quarter commencing with the quarter beginning July 1, 1994 and,
with respect to the month of June, 1994 for such month. Each such calendar
quarter is referred to herein as a "Period." If the Debt Service Coverage ratio
falls below 2.5 for a Period then Borrower shall deposit in an account (the
"Excess Funds Account") with Lender all Net Cash Flow (hereinafter defined) for
all Net Cash Flow for the following Periods, such deposit to be made on or
before the fifteenth (15th) day of the Period or month after the month for which
the calculation is made. In the event the Premises achieves a Debt Service
Coverage ratio of 2.5 or greater for any two consecutive subsequent Periods,
then the funds on deposit with Lender in the Excess Funds Account and interest
thereon will be paid to Borrower upon such achievement, provided no Default or
Event of Default has occurred and is continuing. Notwithstanding such
achievement, Borrower thereafter shall continue to comply with the calculation
provisions of this section and, if the Debt Service Coverage Ratio is less than
2.5 for any Period, the provisions for the deposit of this Section with respect
to Excess Funds will continue to apply. If there are Excess Funds required to be
held by Lender for four consecutive Periods, all funds on deposit with Lender in
the Excess Funds Account together with interest thereon and all Net Cash Flow
subsequently deposited with Lender will be applied as a mandatory prepayment of
the Note in inverse order of maturity, except that the provisions of the fourth
and subsequent sentences of this paragraph will continue to apply. Mandatory
prepayments made under this section are not subject to the prepayment fee under
the Note.
As used herein, "Debt Service Coverage" ratio will mean the ratio of
Net Operating Income to the amount of principal and interest payable on the
average outstanding amount of the Loan during such Period less any prepayments
of principal, at a rate equal to 9.5% per annum.
As used herein, "Net Cash Flow" will mean Net Operating Income
(hereinafter defined) less scheduled principal and installments paid on the Note
during the period.
As used herein, "Net Operating Income" will mean Gross Income less
Expenses.
As used herein, "Gross Income" shall mean (without duplication) all
revenues and receipts of every kind derived from operation of the Premises,
including income (from both cash and credit transactions), before commissions
and discounts for prompt or cash payment, from rent, stores, offices, exhibit or
sales space of every kind, license, lease, sublease and concession fees and
rentals, income from vending machines, health club membership fees, food and
beverage sales, wholesale and retail sales of
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<PAGE> 23
merchandise and proceeds of business interruption or similar insurance, but
excluding proceeds of sales of furnishings, fixtures and equipment, proceeds of
the sale of a Premises, proceeds of the Loan and non-cash income. In the event
Borrower receives at any one time and from time to time cash payments
constituting income for more than a period such payment shall be prorated over
the periods to which such payment relates.
As used herein, "Expenses" shall mean the greater of actual or budgeted
(pursuant to a budget prepared by Borrower and approved by Lender) normal and
customary annualized operating expenses incurred or paid, including (i) the
aggregate of all cash expended and expenses paid or incurred by Borrower for
costs of owning, operating, managing (such management fees not to exceed 5% of
Gross Income), repairing (not including capital repairs) or otherwise
maintaining the Premises, excluding (i) principal and interest payments on the
Note, (ii) depreciation, amortization and other non-cash expenses, and (iii)
capital expenditures. In calculating expenses paid during a Period, insurance
premiums, real estate taxes, reserves and other costs not generally paid on a
monthly basis will be allocated over the entire time period for which they were
paid or are payable, without regard to the actual date of payment.
Calculation of the Net Operating Income for a Period shall be made by
Borrower and submitted to Lender for its approval, no later than the fifteenth
(15th) day of the following Period. Borrower will furnish Lender with any
back-up for such calculations that Lender may request. Lender shall have the
right to audit Borrower's calculation of Net Operating Income at any time at
Borrower's expense.
If with respect to any Period Borrower is not required to deposit Net
Cash Flow with Lender under this Section or under the provisions of Section 2.b.
of the Note, no Default or Event of Default has occurred and is continuing, and
Borrower has determined that it has sufficient operating reserves, Borrower may
distribute Net Cash Flow from such Period to its Partners.
In order to secure the payment and performance of Borrower's
Obligations, Borrower hereby grants to Lender a security interest in, and
pledges to Lender, all funds (and any interest thereon) held from time to time
in the Excess Funds Account and the Future Acquisitions Account (hereinafter
defined).
R. Condominium Documents. With respect to each Unit at the Seattle
Premises owned by Borrower and the interest in the common elements appurtenant
thereto, Borrower shall fully and timely comply with all obligations under the
Condominium Act for the State of Washington and with all obligations under the
condominium documents, including, without limitation, payment of all assessments
and other charges, whether regular or special, on Units owned by it, and on
request of Lender from time to time shall submit to Lender evidence reasonably
satisfactory to Lender evidencing such compliance.
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<PAGE> 24
S. Tax and Insurance Escrow Payments. To secure the performance of
Borrower's Obligations and to promptly pay on the Premises and all insurance
premiums relating to the Premises and satisfy all taxes, assessments and
governmental and other charges, Borrower, at Lender's request, shall pay to
Lender, on or before the first day of each calendar month, or at such other
intervals as may be designated by Lender, one-twelfth (or such other fractional
amounts as Lender may require) of the amount or amounts estimated by Lender, in
its sole discretion, to be sufficient to pay insurance premiums, taxes,
assessments, and governmental and other charges on the Premises (or any of the
Premises designated by Lender) on an annual basis as the same may become due and
payable. Borrower further agrees to pay Lender, from time to time, upon demand
therefor, sufficient additional amounts, as estimated by Lender in its sole
discretion, to make up any deficiencies in the amount of insurance premiums,
taxes, assessments, and governmental and other charges next coming due. All such
funds shall be held by Lender, without interest, as part of the Lender's
collateral security under this Loan, with Borrower hereby granting Lender a
continuing security interest in such funds to secure the Borrower's Obligations.
Such escrow amounts shall not be, nor be deemed to be trust funds, and may be
commingled with the general funds of Lender; Lender shall have the right, but
not the obligation, to apply all or any part of such escrow amounts to satisfy
Borrower's insurance premiums, taxes, assessments, and governmental and other
charges as they become due and payable. Borrower shall furnish Lender with bills
in sufficient time to pay such insurance premiums, taxes and other charges
before any penalty attaches. Notwithstanding the foregoing, Lender shall not be
responsible to Borrower or to any other person for the payment of such insurance
premiums, taxes, assessments, and governmental and other charges, and Lender
shall not be liable for any failure to do so. Borrower agrees that Lender shall
have the right, at its sole option, to apply all tax and insurance escrow
payments then in the possession of Lender to the payment and satisfaction,
whether in whole or in part, of the Borrower's obligations, together with
interest thereon, upon the occurrence of any Event of Default under this Loan.
Lender agrees not to exercise the foregoing rights with respect to a Premises so
long as the tenant of the Premises is paying such amounts directly and on a
timely basis.
T. Appraisals. Borrower acknowledges Lender's right to obtain a new
appraisal (or update of an existing appraisal) at any time while the Loan or any
portion thereof remains outstanding, (a) when in Lender's reasonable judgment,
such an appraisal is warranted as a result of Lender's internal evaluation of
the Loan (at a minimum, a re-appraisal will be required three years from the
date of value cited in the original appraisal report), or (b) to comply with
statutes, rules, regulations or directives of governmental agencies having
jurisdiction over Lender. Lender's intent is not to order an appraisal more
frequently than once per year. Borrower agrees to pay, within thirty (30) days
after written demand by Lender, all reasonable expenses, charges, costs and fees
of any reappraisal
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<PAGE> 25
of the Premises required by Lender, including, without limitation, a reappraisal
of the Premises to be performed three years after the Initial Disbursement, or
another appraisal performed pursuant to Lender's appraisal policies.
U. Repair Work. Borrower agrees to cause the tenant of the Seattle Unit
and the tenant of the Tempe Improvements to promptly complete all repair work
required with respect to said Unit and Premises as described in Lender's letter
to Borrower dated May 3, 1994. Borrower agrees to cause the tenants of the SW
Military, San Antonio, Pat Booker, San Antonio and O'Connor, San Antonio, Texas
Premises to secure the pressurized cylinders located thereon in accordance with
the Occupational Safety and Health Act.
ARTICLE IV
4.1 Agreement to Lend. On the basis of the covenants, agreements and
representations of Borrower contained in this Agreement and the Loan Documents
and subject to the terms and conditions set forth in this Agreement and the Loan
Documents, Lender agrees to lend to Borrower the Loan. Borrower agrees to use
Loan proceeds for the purpose for which they were advanced and for no other
purpose. The Initial Disbursement will be disbursed for the following purposes
and subject to the following conditions:
A. Up to $8,535,000 for the purpose of repaying or purchasing (and
immediately canceling) existing debt of Borrower. Borrower will provide Lender
with such pay-off letters and loan purchase documents for its approval. Borrower
will immediately cancel any indebtedness so purchased and provide Lender with
evidence of such cancellation.
B. $180,000 to reimburse Borrower for the Commitment Fee.
C. Up to $325,000 to pay closing costs in connection with the Loan
which are approved by Lender.
D. Up to $2,960,000 (said amount, together with all funds deposited
pursuant to Section 4.3 below are referred to as "Future Acquisition Funds") to
be deposited by Lender in an account with Lender (the "Future Acquisition
Account") to be used in connection with Future Acquisitions as provided in
Section 4.3 below.
4.2 Initial Disbursement. Subject to the satisfaction of the terms and
conditions herein contained, the proceeds of the Loan shall be disbursed at the
"Initial Disbursement" upon satisfaction of all conditions set forth in Sections
2.1 and 2.2 hereof. Loan proceeds will be disbursed in connection with
Borrower's repayment or purchase of the Borrower's existing line
25
<PAGE> 26
of credit debt and shall, if such debt is secured, be disbursed pursuant to a
written escrow agreement with the Title Company in form and substance
satisfactory to Lender.
4.3 Disbursements for Future Acquisitions.
A. Borrower and Lender anticipate that Borrower may make acquisitions
of property from time to time (such acquisitions are called "Future
Acquisitions"). Borrower may acquire Future Acquisitions without Lender's
approval if either (1) the only sources of funds for such Future Acquisition are
the proceeds of the Beaverton Premises, Net Cash Flow which is not restricted
under Section 3.1Q and cash on hand as of the date of the Initial Disbursement
are used for such Future Acquisition and no Future Acquisition Funds are used in
connection with such acquisition or (2) the only Future Acquisition Funds used
in connection with such acquisition are those deposited in the Future
Acquisition Account at the time of the Initial Disbursement and Borrower is not
obtaining a loan or financing of any type in connection with such Future
Acquisition.
B. With respect to all other Future Acquisitions, if Borrower satisfies
all of the conditions of Section 2.3, including Lender's approval of the
proposed Future Acquisition and Lender's determination of the portion of the
Future Acquisition Funds that Lender is willing to disburse with respect to such
Future Acquisition, each in Lender's sole discretion, Lender will disburse the
portion of the Future Acquisition Funds that Lender determines will be disbursed
with respect to such Future Acquisition. Lender's discretion will be based on
factors such as type of collateral, cash flow from collateral, value of
collateral.
C. From and after such Future Acquisition, the Future Acquisition will
be deemed to be part of the "Premises" and all other defined terms, such as
"Building", "Improvements" and "Personal Property" shall be applicable to such
Premises as if it were included in such terms on the date hereof. In such event,
all of the representations and warranties and covenants with respect to the
"Premises" and each component thereof shall be applicable to such Premises.
D. Subject to the foregoing requirements, Lender agrees to disburse
Future Acquisition Funds from time to time provided all of the following
conditions are satisfied:
1. Not less than 15 days prior to the requested date of disbursement,
Borrower shall deliver or cause to be delivered to Lender the documents and
instruments required under Section 2.3.
2. No Default or Event of Default has occurred and is continuing at the
time of the disbursement.
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<PAGE> 27
3. All of the representations and warranties set forth in this
Agreement are true and correct with respect to such Future Acquisition, with
such modifications, such as to accurately describe the size of the Future
Acquisition and its zoning, as are necessary to make such representations
accurate and complete.
E. Borrower will not acquire any property or interest in property
without the prior written consent of Lender (whether or not Lender has agreed to
finance such property through the disbursement of Future Acquisition Funds)
without Lender's prior written consent unless such property or interest in
property is in compliance with the provisions of this Section 4.3.
4.4 Disbursed Amounts. All amounts disbursed by Lender under this
Agreement shall be evidenced by the Note and secured by all security for the
Note. Without limitation of any other provision hereof, funds in the Future
Acquisition Fund Account will bear interest from the date disbursed into the
Future Acquisition Account, whether or not they are ever disbursed from such
Account.
4.5 Additional Conditions. The continued performance, observance and
compliance by Borrower of and with all of the warranties, covenants and
agreements of Borrower contained herein and the Loan Documents (whether or not
non-performance constitutes an Event of Default) shall be a condition precedent
to disbursement of the Future Acquisition Fund. In addition, Lender shall not be
required to disburse Future Acquisition Funds at any time that (i) an Event of
Default or a Default has occurred, (ii) any proceedings have been commenced or
threatened in writing by any public or quasi-public body to acquire a Premises
or any interest therein or any part thereof and such Premises is not released as
security for Borrower's Obligations in accordance with the provisions of this
Agreement, by eminent domain or by condemnation proceedings, (iii) any
legislation has been passed or any suit or other proceedings have been
instituted the effect of which is to prohibit, enjoin (or to declare unlawful or
improper) or otherwise materially, adversely affect, in Lender's reasonable
judgment, the performance by Borrower or Lender of its obligations hereunder or
as contemplated hereby, or (iv) Lender has reasonable cause to believe that the
Premises might be subject to forfeiture under any federal or state law,
including the Racketeer Influenced and Corrupt Organizations Act of 1970, for
which forfeiture of assets is a potential penalty (a "RICO Related Law").
Lender's refusal to advance Loan proceeds under or on account of the provisions
of this Section shall not alter or diminish any of Borrower's other obligations
hereunder or prevent any failure of Borrower to perform any of its obligations
from becoming an Event of Default.
4.6 Release Payments. A Premises may be sold by Borrower (and, subject
to the provisions hereinafter set forth, Lender agrees to release such Premises
from the applicable Mortgage) upon payment to Lender of a release payment (the
"Release
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<PAGE> 28
Payment") in an amount equal to the greater of (1) 100% of the net sale proceeds
resulting from the sale of such Premises or (2) 125% of the Loan basis for such
Premises, as determined by Lender. As of the date hereof, the Loan allocation
set forth in Exhibit I is applicable, but such allocation is subject to
adjustment by Lender from time to time based on factors such as but not limited
to a decline in the value of one or more of the Premises or in the financial
condition of Borrower or one of the tenants. In addition, Borrower may request
that Lender accept a Release Payment with respect to Premises if a condemnation
or eminent domain proceeding is commenced with respect to such Premises or if
Borrower is unable to satisfy the provisions of Section 5.3 for use of Proceeds
with respect to such Premises, or if a Premises is rezoned without the agreement
or acquiescence of Borrower.
Such Release Payment will be deposited in the Future Acquisition Fund
Account if the Release Payment is received prior to June 1, 1997 and will be
subject to the provisions of Section 4.3 with respect to the disbursement
thereof in connection with Future Acquisition Properties. If such Release
Payment is received on or after June 1, 1997, Lender may require, at its option,
such Release Payment to be (1) applied toward repayment of the Loan, subject to
the prepayment fees set forth in the Note, (2) deposited in the Future
Acquisition Funds Account, or (3) released to Borrower for distribution to
Borrower.
Upon receipt of a Release Payment with respect to a Premises and the
release of such Premises from the lien of the applicable Mortgage, such Premises
will no longer be considered a Premises for purposes of this Agreement.
4.7 Interest. All funds deposited with Lender under Sections 3.1Q,
4.1D, and 4.6 shall be deposited one-half into an interest bearing money market
account ("Money Market Investments") in Lender's name and one-half into 30-day
investment grade commercial paper (11CP Investments") in Lender's name and held
by Lender. Borrower must give Lender two business days notice of withdrawal of
funds from Money Market Investments and four business days notice of withdrawal
of funds from CP Investments. Borrower shall bear all risk of loss, diminution
of value and breakage costs in connection with any investment of funds. All
interest shall be added to the amount deposited in said accounts. Borrower
hereby grants Lender a first and prior security interest in all Money Market
Investments and CP Investments and all interest and earnings thereon.
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ARTICLE V
INSURANCE AND CASUALTY
5.1 A. Coverage. Borrower shall insure and keep insured the Premises
against such perils and hazards, and in such amounts and with such limits, as
Lender may from time to time reasonably require, and, in any event, including
those set forth in Exhibit E hereto.
B. Evidence of Coverage. The insurance shall be evidenced by the
original Policy or a true and certified copy of the original policy, or in the
case of liability insurance, by certificates of insurance. Borrower shall
deliver originals of all policies and renewals (or certificates evidencing the
same), marked "paid", to Lender at least thirty (30) days before the expiration
of existing policies and in any event, Borrower shall deliver originals of such
policies or certificates to Lender at least thirty (30) days before the
expiration of existing policies. If Lender has not received satisfactory
evidence of such renewal or substitute insurance in the time frame herein
specified, Lender shall have the right, but not the obligation, to purchase such
insurance for Lender's interest only. Any amounts so disbursed by Lender
pursuant to this Article shall be a part of the Loan and shall bear interest at
the Default Rate. Nothing contained in this Article shall require Lender to
incur any expense or take any action hereunder, and inaction by Lender shall
never be considered a waiver of any rights accruing to Lender on account of this
Article.
C. Separate Insurance. Borrower shall not carry any separate insurance
on the Premises concurrent in kind or form with any insurance required hereunder
or contributing in the event of loss without Lender's prior consent, and any
such policy shall have attached a standard non-contribution mortgagee clause,
with loss payable to Lender, and shall meet all other requirements set forth
herein.
D. Loss. Borrower shall give immediate notice of any loss to Lender. In
case of loss covered by any of such policies, Lender is authorized to adjust,
collect and compromise in its discretion, all claims thereunder and in such
case, Borrower covenants to sign upon demand, or Lender may sign or endorse on
Borrower's behalf, all necessary proofs of loss, receipts, releases, and other
papers required by the insurance companies to be signed by Borrower if Borrower
neglects or refuses to do so. Borrower hereby irrevocably appoints Lender as its
attorney-in-fact for the purposes set forth in the preceding sentence. Lender
may deduct from such insurance proceeds any expenses incurred by Lender in the
collection and settlement thereof, including, but not limited to, attorneys, and
adjusters, fees and charges.
E. Proceeds. If all of a Premises or any part of a Premises shall be
damaged or destroyed by fire or other casualty
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or shall be damaged or taken through the exercise of the power of eminent domain
or other cause described in Exhibit E, Borrower shall promptly and with all due
diligence restore and repair the Premises to the extent of the net insurance
proceeds, award or other compensation (collectively, the "Proceeds") available
for the cost of such restoration or repair. However, if the Proceeds are not
sufficient to repair and restore the Premises, Borrower must pay Lender a
Release Payment for such Premises. Lender may require, subject to the provisions
of the applicable Lease, that all plans and specifications for such restoration
or repair be submitted to and approved by Lender (which approval shall not be
unreasonably withheld) in writing prior to commencement of the work. Subject to
Section 5.3, at Lender's election, to be exercised by written notice to Borrower
within thirty (30) days following Lender's unrestricted receipt in cash or the
equivalent thereof of the Proceeds, the entire amount of the Proceeds, shall
either: (i) be applied to the Loan in such order and manner as Lender may elect,
in which event no prepayment premium will be payable on the Proceeds, or (ii)
held in an interest bearing account and made available to Borrower on the terms
and conditions set forth in this Article to finance the cost of restoration or
repair with any excess to be applied to the Loan in the inverse order of
maturity. If the amount of the Proceeds to be made available to Borrower
pursuant to this Article is less than the cost of the restoration or repair as
estimated by Lender at any time prior to completion thereof, Borrower shall
cause to be deposited with Lender the amount of such deficiency within thirty
(30) days of Lender's written request therefor (but in no event later than the
commencement of the work) and Borrower's deposited funds shall be disbursed
prior to the Proceeds. If Borrower is required to deposit funds under this
Article, the deposit of such funds shall be a condition precedent to Lender's
obligation to disburse the Proceeds held by Lender hereunder. If Borrower makes
such a deposit and excess insurance proceeds remain after completion of the
restoration or repair, such excess proceeds shall be remitted to Borrower up to
the amount of the deposit made by Borrower.
The amount of the Proceeds which is to be made available to Borrower,
together with any deposits made by Borrower hereunder, shall be held by Lender
in an interest bearing account to be disbursed from time to time to pay the cost
of repair or restoration either, at Lender's option, to Borrower or directly to
contractors, subcontractors, material suppliers and other persons entitled to
payment in accordance with and subject to such conditions to disbursement as
Lender may impose to assure that the work is fully completed in a good and
workmanlike manner and paid for and that no liens or claims arise by reason
thereof. Lender may require (i) evidence of the estimated cost of completion of
such restoration or repair satisfactory to Lender, (ii) such architect's
certificates, waivers of lien, contractor's sworn statements, title insurance
endorsements, plats of survey, and other evidence of cost, payment and
performance acceptable to Lender, and (iii) inspections by Lender's Inspector,
the fees and expenses of which shall be paid by Borrower. No payment made
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prior to final completion of the repair or restoration shall exceed ninety
percent (90%) of the value of the work performed from time to time. No trust or
fiduciary relationship shall be deemed to be created in connection with the
holding of the Proceeds of Lender. Lender agrees that if Borrower requests,
Lender will invest the funds on behalf of Borrower in investments satisfactory
to Lender, with all earnings and interests, less Lender's administration fee, to
be applied to restoration costs. Borrower shall not be entitled to a credit
against the Loan except and to the extent the funds are applied thereto pursuant
to this Article. Without limitation of the foregoing, Lender shall have the
right at all times to apply such funds to the cure of any Event of Default or
the performance of any obligations of Borrower under this Agreement or the Loan
Documents.
5.2 Application of Proceeds. In case of loss or damage by fire or
otherwise to the Premises or any part thereof, Borrower will forthwith notify
Lender of same and Lender may make proof of such loss if the same is not
promptly made by Borrower or if Lender deems it desirable to do so. Lender is
authorized to adjust, collect and compromise, in its sole discretion, all claims
under insurance policies covering the loss in question. All insurance proceeds
shall be paid directly and solely to Lender, and all insurance policies required
hereunder shall so stipulate. Each insurance company providing coverage for the
Premises is authorized and directed to make such payment directly and solely to
Lender. All insurance proceeds may, subject to Section 5.3 below, be applied
either to the reduction of the indebtedness from Borrower to Lender under the
Note or this Agreement or to the restoration, repair, replacement or rebuilding
of the portion of the Premises so damaged in such manner as Lender may
determine, and any application thereof to the Note shall not release or relieve
Borrower from making the payments or performing the other agreements and
obligations herein required until the Note is paid in full.
5.3 Restoration. Lender shall make the Proceeds available to Borrower
in accordance with Lender's customary construction lending procedures, if
Borrower has satisfied all of the following conditions: (a) no Default or Event
of Default has occurred which has not been cured, (b) the Proceeds when combined
with Borrower's own funds deposited with Lender for the purpose of rebuilding
are sufficient, in Lender's reasonable judgment, to complete the repair,
rebuilding and restoration of the Premises, (c) the insurance company providing
coverage for such loss shall not claim that it does not have liability to pay
any or some portion of the Proceeds to Borrower, (d) Lender has determined, in
its reasonable judgment, that the Premises can be repaired and restored not
later than six (6) months prior to the then scheduled maturity date of the Note,
and (e) the Improvements can be repaired and rebuilt to the same extent as exist
on the date hereof, all in accordance with Applicable Laws, or Lender is
satisfied, in its sole discretion, that the Improvements as they can be restored
will meet of all of Lender's requirements as to value, utility, income
production and other underwriting
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criteria, and (f) Lender is satisfied that rent loss and business interruption
insurance proceeds and Borrower's own funds are available, in sufficient amounts
and for a sufficient duration, to produce income at a level which will provide
Lender with a 1.75 Debt Service Coverage ratio for all of the Premises based on
the then current interest rate and the amortization schedule attached to the
Note.
ARTICLE VI
ENVIRONMENTAL REPRESENTATIONS COVENANTS AND INDEMNITIES
6.1 Definitions. For purposes of this Article:
A. "Property" means: The Premises, including improvements now or
hereafter situated thereon or thereunder, construction material used in such
improvements, surface and subsurface soil and water, areas leased to tenants,
and all business, uses, and operations thereon.
B. "Environmental Laws" means:
(1) any federal statute, law, code, rule regulation, ordinance, order,
standard, permit, license or requirement (including consent decrees, judicial
decisions and administrative orders) together with all related amendments,
implementing regulations and reauthorizations, pertaining to the protection,
preservation, conservation or regulation of the environment, including: the
Comprehensive Environmental Response, Compensation, and Liability Act, 42 U.S.C
Section 9601 et seq. ("CERCLA"); the Resource Conservation and Recovery Act, 42
U.S.C. Section 6901 et seq. ("RCRA"); the Toxic Substances Control Act, 15
U.S.C. Section 2601 et seq. ("TOSCA"); the Clean Air Act, 42 U.S.C. Section 7401
et seq.; and the Clean Water Act, 33 U.S.C. Section 1251 et seq.;
(2) any state or local statute, law, code, rule, regulation, ordinance,
order, standard, permit, license or requirement (including consent decrees,
judicial decisions and administrative orders) together with all
reauthorizations, pertaining to the protection, preservation, conservation or
regulation of the environment;
(3) any federal, state or local legislation enacted in the future
pertaining to the protection, preservation, conservation or regulation of the
environment, and all related amendments, implementing regulations and
reauthorizations.
C. "Hazardous Material" means:
(1) "hazardous substances" as defined by CERCLA;
(2) "hazardous wastes", as defined by RCRA;
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(3) any pollutant or contaminant, or hazardous, dangerous or toxic
chemical, material, waste or substance ("pollutant") within the meaning of
Environmental Laws, which Environmental Laws prohibit, limit or otherwise
regulate the use, exposure, release, generation, manufacture, sale, transport,
handling, storage, treatment, reuse, presence, disposal or recycling of such
pollutant;
(4) more than 50 gallons of petroleum, crude oil or any fraction of
petroleum or crude oil;
(5) any radioactive material, including any source, special nuclear or
by-product material as defined at 42 U.S.C. Section 2011 et sea., and amendments
thereto and reauthorizations thereof;
(6) asbestos-containing materials ("ACM") in any form or condition; and
(7) polychlorinated biphenyls.
D. "Environmental Actions" means:
(1) any notice of violation, complaint, claim, citation,
demand, inquiry or inquiries, report, action, assertion of potential
responsibility, lien, encumbrance, or proceeding regarding the
Property, whether formal or informal, absolute or contingent, matured
or unmatured, brought or issued by any governmental unit, agency, or
body, or any person or entity respecting:
(i) Environmental Laws;
(ii) public health risks;
(iii) the environmental condition of the Property, or any
portion thereof, or any property near the Property,
including actual or alleged damage or injury to
wildlife, biota, air, surface or subsurface soil or
water, or other natural resources; or
(iv) the use, exposure, release, generation, manufacture,
transportation to or from, handling, storage,
treatment, recycling, reclamation, reuse, disposal or
presence of Hazardous Material either on the Property
or transported off-site for sale, treatment, storage,
recycling, reclamation, reuse or disposal;
(2) any violation or claim of violation by Borrower of
any Environmental Laws;
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(3) any lien on a Premises for damages caused by, or the
recovery of any costs incurred for the investigation, remediation or
cleanup of any release or threatened release of Hazardous Material; or
(4) the destruction or loss of use of property, or the injury,
illness or death of any officer, director, employee, agent,
representative, tenant or invitee of Borrower or any other person
arising from or caused by the environmental condition of the Property.
6.2 Representations and Warranties. Borrower hereby represents and
warrants to Lender that:
A. Compliance. The Property and Borrower are currently and, to the best
of Borrower's knowledge, have been in compliance with all Environmental Laws,
except as stated on Exhibit F. To the best of Borrower's knowledge based on
diligent inquiry, all required governmental permits and licenses are in effect,
and Borrower and the Property is in compliance therewith. Borrower has not
received any notice of any Environmental Action respecting either the Property
or any off-site facility to which has been sent any Hazardous Material for
off-site treatment, recycling, reclamation, reuse, handling, storage or
disposal.
B. Absence of Hazardous Material. No use, exposure, release,
generation, manufacture, storage, treatment, transportation or disposal of
Hazardous Material is occurring, or, to Borrower's knowledge has occurred, on or
from the Property except as disclosed in Exhibit F. All Hazardous Material used,
treated, stored, transported to or from, generated or handled on the Property,
has been, to the best of Borrower's knowledge, disposed of on or off the
Property in a lawful manner. No environmental, public health or safety hazards
currently exist with respect to the Property. No underground storage tanks
(including petroleum storage tanks) are present on or under the Property except
as disclosed in Exhibit F ("Permitted Tanks")
C. Proceeding and Actions. There are no pending or, to the best of
Borrower's knowledge, threatened, and, to the best of Borrower's knowledge,
there have been no past, Environmental Actions to which Borrower is a party or
which relate to the Property.
D. Waters of the United States. No part of the Land on which
Improvements are located contains "waters of the United States", as defined in
33 CFR 328, and Borrower will not discharge dredged or fill material into waters
of the United States as such activity is described and regulated by Section 404
of the Clean Water Act, 33 U.S.C. 1344.
6.3 Borrower Covenants. Borrower hereby covenants and agrees with
Lender as follows:
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A. Compliance. The Property and Borrower shall comply with all
Environmental Laws. All governmental permits and licenses required under any
Environmental Laws shall remain in effect or shall be renewed in a timely
manner, and Borrower shall comply therewith. All Hazardous Material now or
hereafter present, handled or generated on the Property will be disposed of in a
lawful manner and handled in compliance with all applicable Environmental Laws.
Borrower will satisfy all requirements of applicable Environmental Laws for the
registration, operation, maintenance and removal of all underground storage
tanks on the Property, if any.
B. Absence of Hazardous Material. Other than Permitted Material (as
defined on Exhibit F), no Hazardous Material shall be introduced to or used,
generated, presented, or handled on the Property without thirty (30) days' prior
written notice to Lender.
C. Environmental Actions. Borrower shall immediately notify Lender of
all Environmental Actions and provide copies within five business days of
receipt of all written notices, complaints, correspondence and other documents
relating thereto. Borrower shall promptly and diligently pursue the cure and, if
applicable, dismissal with prejudice of all Environmental Actions to the
reasonable satisfaction of Lender, and Borrower shall keep the Property free of
any encumbrance arising from any judgment, liability or lien imposed pursuant to
any Environmental Actions.
D. Remediation. Exhibit F discloses conditions relating to the presence
of Hazardous Materials on certain of the Premises. Pursuant to the Agreement to
Lease, Borrower has undertaken remedial action in order to remove all Hazardous
Materials (other than Permitted Materials) from the Michigan Premises in
accordance with all Applicable Laws (the "Remediation Plan"). Borrower agrees to
diligently proceed with the Remediation Plan so that all Hazardous Materials
(other than Permitted Materials) on the Michigan Premises are removed in
accordance with all Environmental Laws and the Michigan Premises are remediated
in accordance with all applicable Environmental Laws as soon as possible.
Without limitation of the foregoing, and as part of the Remediation Plan,
Borrower shall comply with all directives and requirements of the Michigan
Underground Storage Tank Agency. Borrower will keep Lender advised, on a monthly
basis, of all actions taken pursuant to the Remediation Plan.
E. ACM. Borrower agrees to establish and follow an operating and
maintenance program for all of the Premises containing ACM, including, without
limitation, Pleasanton, Texas; Brairglen Drive, San Antonio, Texas; Pat Book,
San Antonio, Texas; Colebra, San Antonio, Texas; Huckberry, San Antonio, Texas;
Vance Johnson, San Antonio, Texas; and O'Connor, San Antonio, Texas.
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F. Future Environmental Audits. Borrower shall provide such information
and certifications which Lender may reasonably request from time to time to
insure Borrower's compliance with this Article. To investigate Borrower's
compliance with Environmental Laws and with this Article, Lender shall have the
right, but no obligation, at any time to enter upon the Property, take samples,
review Borrower's books and records, interview Borrower's employees and
officers, and conduct such other activities as Lender, at its sole discretion,
deems appropriate to ensure Borrower's compliance. Borrower shall cooperate
fully in the conduct of such an audit. If Lender decides to conduct such an
audit because of (i) an Environmental Action; (ii) Lender's considering taking
possession of or title to the Property after default by Borrower; (iii) a
material change in the use of the Property, which in Lender's opinion, increases
the risk of non-compliance with Environmental Laws; or (iv) the introduction of
Hazardous Material other than Permitted Material to the Property; then Borrower
shall pay upon demand all costs and expenses connected with such audit, which,
until paid, shall become additional indebtedness secured by the Loan Documents
and shall bear interest at the Default Rate. Nothing in this Article shall give
or be construed as giving Lender the right to direct or control Borrower's
actions in complying with Environmental Laws.
6.4 Lender's Rights to Rely. Lender is entitled to rely upon Borrower's
representations, warranties and covenants contained in this Article despite any
independent investigations by Lender or its consultants. Borrower shall take all
necessary actions to determine for itself, and to remain aware of, the
environmental condition of the Property. Borrower shall have no right to rely
upon any independent environmental investigations or findings made by Lender or
its consultants.
6.5 Indemnification. The term "Lender's Environmental Liability" shall
mean any and all losses, liabilities, obligations, penalties, claims, fines,
lost profits (due to the failure to receive interest payments when due),
clean-up costs, litigation, demands, defenses, costs, -judgments, suits,
proceedings, damages (including consequential damages such as a decline in the
value of the Premises), disbursements or expenses of any kind or nature
whatsoever (including attorneys' fees prior to and at trial and appellate levels
and experts' fees and disbursements and expenses incurred in investigating,
defending against, settling or prosecuting any litigation, claim or proceeding)
which may at any time be imposed upon, incurred by or asserted or awarded
against Lender or any of Lender's parent and subsidiary corporations, and their
affiliates, shareholders, directors, officers, employees,, and agents
(collectively, "Affiliates") in connection with or arising from:
A. any Hazardous Material on, in, under or affecting all or any portion
of the Property, or any surrounding areas other than those which are owned by
Lender or in which Lender has a
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security interest to the extent that such Hazardous Material physically affects
the Property;
B. any misrepresentation, inaccuracy or breach of any warranty,
covenant or agreement contained or referred to in this Article;
C. any violation or claim of violation by Borrower of any Environmental
Laws;
D. the imposition of any lien on any of the Premises for damages caused
by, or the recovery of any costs incurred for the cleanup of, any release or
threatened release of Hazardous Material; or
E. any Environmental Actions.
Borrower shall indemnify, defend (at trial and appellate levels and
with counsel, experts and consultants reasonably acceptable to Lender and at
Borrower's sole cost) and hold Lender and its Affiliates free and harmless from
and against Lender's Environmental Liability other than Lender's Environmental
Liability which arises solely out of Lender's willful misconduct or gross
negligence (collectively, "Borrower's Indemnification obligations"). Borrower's
Indemnification Obligations are secured by the Mortgages.
Borrower, its successors and assigns, hereby waive, release and agree
not to make any claim or bring any cost recovery action against Lender relating
to this Loan or the Property under or with respect to any Environmental Laws. To
the extent that Lender is strictly liable under any Environmental Laws or
Environmental Actions, Borrower's obligation to Lender under the foregoing
indemnity shall likewise be without regard to fault on the part of Borrower or
Lender with respect to the violation or condition which results in liability to
Lender.
Borrower's Indemnification Obligations shall survive without limitation
the repayment of the Note or any transfer of the Property by Borrower, Lender or
its Affiliates, including by foreclosure or by a deed in lieu of foreclosure.
ARTICLE VII
BORROWER'S DEFAULT
7.1 Events of Default. Each of the following shall constitute an "Event
of Default" under this Agreement, and the occurrence of any of the following
events or the existence of any of the following conditions which, with the
giving of notice of the passage of time, or both, could give rise to an Event of
Default hereunder shall constitute a "Default" under this Agreement:
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A. Borrower fails to pay, when due, any installment of interest or
principal on the Note or any other amounts due to Lender hereunder or under any
of the Loan Documents for a period of five (5) days, or Borrower fails to pay
the Note in full upon maturity thereof; or
B. Any representation, warranty, or certification made in or pursuant
to this Agreement or any Loan Document by Borrower, or otherwise made in writing
in connection with or as contemplated by this Agreement or any Loan Documents by
Borrower shall be incorrect or false in any material respect when made; or
C. An Event of Default occurs under a Mortgage; or
D. Borrower fails to furnish Lender with the financial statements
described in Section 3.1 K hereof and such failure continues for a period of ten
(10) days after written notice thereof from Lender to Borrower; or
E. A Premises or any material part thereof is damaged or destroyed by
fire or other casualty and Borrower fails to satisfy all of the conditions of
Section 5.3 within sixty (60) days from the date of such casualty; or
F. Any lien, or notice of lien for the performance of work or the
supplying of materials is filed or served against the Premises and remains
unsatisfied, unbonded or insured over (in a manner reasonably satisfactory to
Lender and Title Company) for a period of sixty (60) days after the Borrower has
notice of such lien; or
G. Borrower enters into any secondary or additional financing
agreements or arrangements of any kind whatsoever with respect to the Premises
(including any financing secured, in whole or in part, by all or any part of or
interest in the Premises) other than lease financing expressly allowed herein or
in the Security Agreement; or
H. A default occurs under the General Partner's Agreement; or
I. A breach, default or violation of Section 3.1M or Section 5.1A shall
occur; or
J. A Premises is rezoned (except for such rezoning as does not
adversely affect the use of such Premises) either voluntarily or involuntarily,
and such zoning is final and non-appealable or any agreement for any of the
foregoing is entered into, without the prior written consent of Lender, and a
Partial Release has not been paid to Lender with respect to such Premises; or
K. Any order or decree is entered by any court of competent
jurisdiction directly or indirectly enjoining or prohibiting Lender or Borrower
from performing any of their obligations under this Agreement, and such order or
decree is not
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vacated, and the proceedings out of which such order or decree arose are not
dismissed, within sixty (60) days after the granting of such decree or order; or
L. Judicial proceedings are commenced by any public or quasi-public
body having jurisdiction to acquire one of the Premises or any interest therein
or any part thereof by eminent domain which Lender, in its sole reasonable
judgment, determines may materially impair the value or utility of the Premises,
and such proceedings are not dismissed within thirty (30) days; or
M. Borrower, General Partner or Corporate General Partner: makes an
assignment for the benefit of creditors; or petitions or applies to any court
for the appointment of a trustee or receiver for itself or for any substantial
part of its assets or for the Premises or any portion thereof, or commences any
proceedings under any bankruptcy, arrangement, insolvency, readjustment of debt
or reorganization statute or law of any jurisdiction, whether now or hereafter
in effect; or if any such petition or application is filed or any such
proceedings are commenced, and Borrower, General Partner or Corporate General
Partner by any act indicates any approval thereof, consent thereto, or
acquiescence therein; or an order is entered appointing any such trustee or
receiver, or adjudicating Borrower, General Partner or Corporate General Partner
bankrupt or insolvent, or approving the petition in any such proceeding; or if
any petition or application for any such proceeding or for the appointment of a
trustee or receiver is filed by any third party against Borrower, General
Partner or Corporate General Partner or their respective assets or the Premises,
or any portion thereof, and any of the aforesaid proceedings is not dismissed
within ninety (90) days of its filing; or
N. Borrower fails to comply with (or to bond or indemnify Lender to its
reasonable satisfaction with regard to) any requirement, material in Lender's
reasonable judgment (including compliance with all Applicable Laws) of any
governmental authority having jurisdiction within thirty (30) days after
Borrower has notice of such requirement; or
O. The filing of formal charges, by any governmental or
quasi-governmental entity, including the issuance of an indictment, under a RICO
Related Law against Borrower which is not dismissed with sixty (60) days from
the date of filing; or
P. There occurs, in the reasonable opinion of Lender, a material
adverse change in the financial condition of Borrower which may impair
Borrower's ability to pay the Loan and all interest therein or to perform its
obligations hereunder or under the Loan Documents, which continues for thirty
(30) days after written notice from Lender to Borrower; or
Q. The failure of Borrower to pay any money judgment of $5000 or more
against it before the expiration of thirty (30)
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days after such judgment becomes final and no longer appealable; or
R. The written admission by Borrower of its inability to pay its debts
as they become due; or
S. Borrower fails to perform any of its agreements under Section 3.1 P,
Q or S and such failure continues for a period of five (5) days after written
notice from Lender; or
T. Either (1) Borrower fails to perform any of its obligations or
agreements under a Major Lease, (2) a tenant exercises a right of set off or
offset under a Lease, or (3) a major Lease is terminated for any reason and
Borrower does not pay Lender a Release Payment for such Premises within thirty
(30) days after the date of the occurrence; or
U. Borrower fails to complete the environmental remediation of any of
the Premises as set forth in the Remediation Plan for such Premises by the date
set forth in the Remediation Plan or with respect to any of the Premises, an
Environmental Action is commenced against Borrower or such Premises and is not
dismissed or cured in accordance with the provisions of Section 6.3C within 90
days after commencement thereof; or
V. Borrower fails to comply with, keep or perform any of its other
obligations, agreements, undertakings, covenants, conditions or warranties under
(i) any of the Loan Documents (other than the Note or Mortgage) or (ii) any
other document or instrument executed and delivered by Borrower pursuant to this
Agreement, or (iii) this Agreement, and such failure continues for a period of
thirty (30) days after notice thereof by Lender to Borrower, or if such failure
can not, with due diligence, be cured within thirty (30) days and Borrower has
commenced the curing thereof, for a period of sixty (60) days after notice
thereof by Lender to Borrower.
7.2 Remedies. Upon the happening of an Event of Default, Lender shall
have the right, if such Event of Default shall then be continuing, in addition
to all the remedies conferred upon Lender by law or equity or the terms of any
Loan Document, to do any or all of the following, concurrently or successively,
without notice to Borrower:
A. Declare the Note to be, and the Note shall thereupon become,
immediately due and payable without presentment, demand, protest, notice of
intention to accelerate, notice of acceleration or notice of any kind, all of
which are hereby expressly waived, anything contained herein or in the Note to
the contrary notwithstanding and exercise any of its rights and remedies under
the Loan Documents.
B. Terminate Lender's obligations under this Agreement to extend credit
of any kind or to make any disbursement, whereupon
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the commitments and obligations of Lender to extend credit or to make
disbursements hereunder shall terminate.
C. Enter upon and take possession of the Premises and all material,
equipment and supplies thereon and do anything necessary or desirable to fulfill
the obligations of Borrower hereunder and to manage, maintain, repair and
protect the Premises. Without restriction of the generality of the foregoing and
for the purposes aforesaid, Borrower hereby appoints and constitutes Lender its
lawful attorney-in-fact with full power of substitution (i) to pay, settle or
compromise all existing bills and claims which may be liens or security
interests, or to avoid such bills and claims becoming liens or security
interests, against the Premises or any fixtures or equipment thereon, or as may
be necessary or desirable for the clearance of title or otherwise, (ii) to do
any and every act which Borrower might do on its own behalf, including to enter
into leases of any portion of the Premises, and (iii) to prosecute or defend any
and all actions or proceedings involving the Premises or any fixtures, equipment
or other installations thereon, it being understood and agreed that this power
of attorney shall be a power coupled with an interest and cannot be revoked.
Lender and its designees! representatives, agents, licensees and contractors
shall be entitled to the entry, possession and use contemplated herein without
the consent of any party and without any legal process or other condition
precedent whatsoever. Borrower acknowledges that any denial of such entry,
possession and use by Lender will cause irreparable injury and damage to Lender
and agrees that Lender may forthwith sue for any remedy to enforce the immediate
enjoyment of such right. Borrower hereby waives the posting of any bond as a
condition for granting such remedy.
D. Anything in this Agreement to the contrary notwithstanding, it is
specifically understood and agreed that all funds furnished by Lender pursuant
to the provisions of this Article VII shall be deemed advanced by Lender under
an obligation to do so regardless of the identity of the person or persons to
whom such funds are furnished and shall bear interest at the Default Rate. Funds
advanced by Lender in the exercise of its judgment that the same are needed to
protect its security or to otherwise perform any obligations of Borrower
hereunder are to be deemed obligatory advances hereunder and are to be added to
the total indebtedness evidenced by the Note and secured by the Mortgage and
other Loan Documents and, without limitation of Section 8.2 hereof, said
indebtedness shall, if necessary, be increased accordingly.
E. In case of any Default or Event of Default hereunder or under any of
the Loan Documents, Borrower will pay Lender's attorneys' fees and disbursements
and court costs (including those relating to appeals) and all related expenses
in connection with the enforcement of this Agreement or any of the Loan
Documents.
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<PAGE> 42
F. Borrower hereby acknowledges that Lender is extending credit based
upon both the financial statements of Borrower and the aggregate values of the
Premises and other security (the "Collateral") and that the Collateral is
located in different jurisdictions. Accordingly, Borrower agrees that, from and
after any Event of Default, Lender shall be allowed, to the greatest extent
permitted by applicable law, including the laws of whichever jurisdictions
Lender may choose as most facilitating for the exercise of its rights (and which
may be applicable), to pursue and realize upon all of the remedies available to
it under any of the Loan Documents, at law, in equity, or otherwise, and
simultaneously or consecutively, in its discretion, including, without
limitation, commencement of one or more actions in one or more jurisdictions for
repayment of all or portions of the Borrower's Obligations; for the separate or
simultaneous sale or foreclosure of the Collateral or portions thereof; for the
obtaining of judgments or deficiency judgments; for the seeking of injunctive
relief and receiverships; and for maximum access to and realization from the
Borrower's Obligations and Collateral or portions thereof in such manner as
Lender may deem in its interest, and hereby waives any requirement that any
deficiency judgment proceeding be initiated or completed with respect to any
other property constituting Collateral as a condition to commencing any
enforcement proceeding against any party or any particular item of Collateral.
Borrower hereby expressly acknowledges and agrees that various consents, waivers
and agreements set forth in any of the Loan Documents, including the Mortgages,
were granted in recognition of the foregoing, and that all such waivers,
consents and agreements shall apply to each other Loan Document as though set
forth therein. In addition to any other consents, waivers and agreements set
forth in any of the Loan Documents, and without limiting the foregoing, Borrower
agrees that, to the maximum extent permitted by applicable law, Lender may
foreclose on or sell (or both sell and foreclose) all properties located in the
same state in any one or more counties where any of the properties in that state
are located; any personal property located on real property encumbered by a
Mortgage may be foreclosed upon in the manner provided for, simultaneously with,
and as a part of the proceeding for, foreclosure of the real property; and
Borrower hereby waives the benefits of any "one-action rule" of any state which
may be applicable to it or to any of the Collateral and waives marshalling of
assets for itself and all other parties claiming by, through or under it.
ARTICLE VIII
MISCELLANEOUS
8.1 Indemnification. Borrower agrees to protect, defend, indemnify and
hold Lender, and its affiliates and its and their officers, directors, employees
and agents (an "Indemnified Party") harmless from and against any and all loss,
liability, damage, suit, claim, expense, fees and costs (including court
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<PAGE> 43
costs and attorneys' fees) suffered or incurred by an Indemnified Party in
connection with any claim, demand, suit or proceeding brought or asserted by any
person other than Borrower arising out of or relating to Lender's entering into
or carrying out the terms of this Agreement or being the holder of the Note or
any of the Loan Documents or resulting from Borrower's default hereunder, or the
transactions contemplated hereby or thereby, including any injury or damage to
person or property occurring on or about the Premises, other than any claim,
demand, suit or proceeding arising solely as a result of Lender's gross
negligence or willful misconduct.
8.2 Performance by Lender. In the event that Borrower shall at any time
fail to duly and punctually pay, perform, observe or comply with any of its
warranties, covenants and agreements hereunder or under the Loan Documents or
under any other document or instrument given as security for the indebtedness
evidenced by the Note, or in the event that Borrower shall otherwise default or
permit to exist a Default or Event of Default hereunder or under the Note or any
other Loan Document, then and in any such event, Lender may (but shall in no
event be required to) make any such payment or perform any such term, provision,
condition, covenant or agreement or cure any such Default or Event of Default.
Any amounts expended by Lender in so doing shall constitute additional advances
hereunder, the payment of which is additional indebtedness, secured by the Loan
Documents and shall become due and owing at Lender's demand, with interest at
the Default Rate from the date of disbursement thereof until fully paid. The
execution of this Agreement by Borrower shall and hereby does constitute an
irrevocable direction and authorization to Lender to so disburse such funds.
8.3 Transfer by Lender. Lender may assign, negotiate, pledge or
otherwise hypothecate all or any portion of this Agreement or grant
participation herein, or in any of its rights and security hereunder or under
any Loan Documents, including the Mortgage and Note and, in case of such
assignment, Borrower will accord full recognition thereto and agree that all
rights and remedies of Lender in connection with the interest so assigned shall
be enforceable against Borrower by such assignee with the same force and effect
and to the same extent as the same would have been enforceable by Lender but for
such assignment. In connection with any such assignment, participation or other
transfer, Borrower agrees that Lender may deliver copies to any potential
participant or other transferee of all documents, instruments, financial
statements and other information from time to time furnished to Lender pursuant
to or in connection with this Agreement.
Borrower shall not assign, attempt to assign or suffer the assignment
of its rights under this Agreement either voluntarily or by operation of law.
8.4 Lender's Actions. The authority herein conferred upon Lender and
any action taken by Lender hereunder will be taken by
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Lender for its own protection only, and Lender does not and shall not be deemed
to have assumed any responsibility to Borrower or to any other person or persons
with respect to any such action herein authorized or taken by Lender. No person
shall be entitled to rely upon, or claim to have relied upon, any action taken
or failed to have been taken by Lender or any of its representatives.
8.5 Time is of the Essence. Time is of the essence of this Agreement.
8.6 Waivers. No waiver of any term, provision, condition, covenant or
agreement herein contained shall be effective unless set forth in a writing
signed by Lender, and any such waiver shall be effective only to the extent set
forth in such writing. No failure by Lender to exercise, or delay by Lender in
exercising, any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder preclude any other or further exercise thereof, or the
exercise of any other right or remedy provided by law. No notice or demand on
Borrower in any case shall, in itself, entitle Borrower to any other or further
notice or demand in similar or other circumstances or constitute a waiver of the
rights of Lender to any other or further action in any circumstances without
notice or demand.
8.7 Notices. Any notice which any party hereto may be required or may
desire to give hereunder shall be deemed to have been given if delivered
personally or if mailed, postage prepaid, by United States registered or
certified mail, return receipt requested, or by overnight express courier
addressed in the case of Borrower to:
Net 2 L.P.
c/o The LCP Group L.P.
355 Lexington Avenue
New York, New York 10017
Attn: T. Wilson Eglin
with a copy to:
Battle Fowler
280 Park Avenue
New York, New York 10017
Attn: Robert W. Gelfman, Esq.
in the case of Lender to:
Nations Financial Capital Corporation
One Canterbury Green
P.O. Box 120013
Stamford, Connecticut 06912-4099
Attn: Vice President Commercial Real Estate
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<PAGE> 45
with a copy to:
Nations Financial Capital Corporation
One Canterbury Green
P.O. Box 120013
Stamford, Connecticut 06912-4099
Attn: General Counsel
or to such other address or addresses as the party to be given notice may have
furnished in writing to the party seeking or desiring to give notice, as a place
for the giving of notice, provided that no change in address shall be effective
until ten (10) days after served or given to the other party in the manner
provided above. Any notice given in accordance with the foregoing shall be
deemed given when received or when delivery is refused.
8.8 Successors and Assigns. This Agreement shall inure to the benefit
of the parties and their respective successors and assigns, except that unless
Lender consents in writing, no assignment made by Borrower in violation of this
Agreement shall confer any rights on any assignee of Borrower.
8.9 No Partnership. Nothing herein, in the Mortgage, Note or in any
other Loan Document contained, and no action or inaction whatsoever on the part
of Lender, shall be deemed to make Lender a partner or joint venturer with
Borrower, and Borrower shall protect, defend, indemnify and hold Lender harmless
from and against all claims, loss, cost, expense (including attorneys' fees) and
damages arising from the relationship between Lender and Borrower being
construed as or alleged to be anything other than that of Lender and Borrower.
8.10 Brokerage Claims. Borrower shall protect, defend, indemnify and
hold Lender harmless from and against all loss, cost, liability and expense
incurred as a result of any claim or a broker's or finder's fee against Lender
or any person or entity in connection with the transaction herein contemplated.
8.11 Publicity. Lender may publicize the Loan if it so elects but will
endeavor to notify Borrower before doing so. Borrower shall not publicize the
Loan without the prior written consent of Lender.
8.12 Documents Satisfactory to Lender. All documents and other matters
required by any of the provisions of this Agreement to be submitted or furnished
to Lender shall be in form and substance satisfactory to Lender.
8.13 Additional Assurances. Borrower agrees that, at any time or from
time to time, upon the written request of Lender, it will execute, and, if
required, record, file (and pay all fees, taxes or other expenses relating
thereto) all such further documents and do all such other acts and things as
Lender may
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reasonably request to effectuate the transaction contemplated herein in
accordance with the terms hereof.
8.14 Entire Agreement. This Agreement, the Exhibits hereto and the
documents referred to herein constitute the entire agreement between the parties
hereto with respect to the subject matter hereof and may not be modified or
amended in any manner other than by supplemental written agreement executed by
the , parties hereto. The commitment letter dated March 29, 1994 from Lender to
Borrower is hereby terminated.
8.15 Severability. If any provisions of this Agreement or the
application thereof to any person or situation shall, to any extent, be held
invalid or unenforceable, the remainder of this Agreement, and the application
of such provision to persons or situations other than those to which it shall
have been held invalid or unenforceable, shall not be affected thereby, but
shall continue valid and enforceable to the fullest extent permitted by law.
8.16 No Third Party Beneficiary. This Agreement is made for the sole
benefit of Borrower and Lender, and no other person shall be deemed to have any
privity of contract hereunder nor any right to rely hereon to any extent or for
any purpose whatsoever, nor shall any other person have any right of action of
any kind hereon or be deemed to be a third party beneficiary hereunder.
8.17 Choice of Laws; Consent to Jurisdiction. THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
CONNECTICUT. Borrower irrevocably (a) agrees that any suit, action or other
legal proceeding relating to this Agreement or the Loan Documents (other than
the Mortgage) may be brought in any federal or state court in Connecticut, at
Lender's option; (b) consents to the jurisdiction of each such court in any such
suit, action or proceeding; (c) waives any objection which such Borrower may
have to the laying of venue in any such suit, action or proceeding in either
such court; and (d) agrees to join Lender in any petition for removal to either
such court. If Borrower is not qualified to do business in Connecticut as a
foreign corporation, Borrower hereby irrevocably appoints T. Wilson Eglin, 29
Ralsey Rd., Stamford, Conn. 06902, as its authorized agent ("Agent") in the
State of Connecticut to accept on its behalf service of process for purposes of
any such suit, action or proceeding. Borrower may appoint a replacement agent in
the State of Connecticut provided that said agent shall be reasonably
satisfactory to Lender and that Borrower shall deliver to Lender evidence in
writing of its irrevocable appointment of said replacement agent and the agent's
acceptance thereof. Lender may obtain personal jurisdiction and perfect service
of process through the Agent or by any other means now or hereafter permitted by
applicable law. In addition, to the extent permitted by law, Lender may obtain
personal jurisdiction and perfect service process by delivery of notice in
accordance with the provisions of Section 8.7 of this Agreement.
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8.18 Definitions. The following terms are defined in the Sections set
forth below:
<TABLE>
<CAPTION>
Section in
Term Which Defined
<S> <C>
Agent 8.17
Applicable Laws 1.1D
Beaverton Premises A
Borrower's Obligations 2.1B
Capital Reserve Account 3.1R
CERCLA 6.1B(1)
Code 1.1s
Columbus Improvements A
Columbus Land A
Columbus Personal Property A
Columbus Premises A
Commitment Fee 3.1J
Completion Cost 4.3D
Debt Service Coverage 3.1T
Default 7.1
Default Rate 2.2A
Earth City Improvements A
Earth City Land A
Earth City Personal Property A
Earth City Premises A
Environmental Actions 6.1D
Environmental Laws 6.1B
ERISA 1.1T
Event of Default 7.1
Expenses 3.1Q
Excess Funds Account 3.1T
Future Acquisitions 4.3
Future Acquisition Account 4.1
Future Acquisition Funds 4.1
Gross Income 3.1Q
Hazardous Material 6.1C
Highland Improvements A
Highland Land A
Highland Personal Property A
Highland Premises A
Improvements A
Indemnified Party 8.1
Initial Disbursement 4.2
Land A
Lender's Expenses 3.11
Lender's Inspector 2.2M
Loan Documents 1.1C
Loan B
Management Agreement 1.1W
Mortgages 2.1G
Net Cash Flow 3.1Q
Net Operating Income 3.1Q
Note 2.1A
Period 3.1T
</TABLE>
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<PAGE> 48
<TABLE>
<CAPTION>
<S> <C>
Permitted Exceptions 1.1G
Personal Property A
Premises A
Proceeds 5.1E
Property 6.1A
RCRA 6.1B(1)
Release Payment 4.6
RICO Related Law 4.5
Seattle Improvements A
Seattle Land A
Seattle Property A
Seattle Premises A
Tempe Improvements A
Tempe Land A
Tempe Personal Property A
Tempe Premises A
Tucson Improvements A
Tucson Land A
Tucson Personal Property A
Tucson Premises A
Title Company 2.2A
Title Policy 2.2A
</TABLE>
8.19 Limitation on Interest. All agreements between Borrower and
Lender, whether now existing or hereafter arising and whether written or oral,
are hereby expressly limited so that in no contingency or event, whether by
reason of acceleration of the maturity of the Note or otherwise, shall the
amount paid, or agreed to be paid to Lender for the use, forbearance, or
detention of the money to be loaned under the Note or otherwise or for the
payment or performance of any covenant or obligation contained herein or in any
other document evidencing, securing or pertaining to the Loan exceed the Maximum
Rate (as defined in the Note). If from any circumstances whatsoever fulfillment
of any provision hereof or any of such other agreements shall cause the amount
paid to exceed the Maximum Rate, then ipso facto, the amount paid to Lender
shall be reduced to the Maximum Rate, and if from any such circumstances the
Lender shall ever receive interest or anything which might be deemed interest
under applicable law which exceeds the Maximum Rate, such amount which would be
excessive interest shall be applied to the reduction of the principal of the
Note and not to the payment of interest, or if such excessive interest exceeds
the unpaid balance of principal of the Note such excess shall be refunded to
Borrower. All sums paid or agreed to be paid to Lender for the use forbearance
or detention of the indebtedness of Borrower to Lender shall, to the extent
permitted by applicable law, (i) be amortized, prorated, allocated and spread
throughout the full term of such indebtedness until payment in full so that the
actual rate of interest on account of such indebtedness does not exceed the
Maximum Rate now or as hereafter amended, throughout the term thereof, (ii) be
characterized as a fee, expense or other charge other than interest, and/or
(iii) exclude any voluntary prepayments and the effects thereof. The terms and
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<PAGE> 49
provisions of this paragraph shall control and supersede every other provision
of all agreements between Lender and Borrower.
8.20 Limitation on Liability. (a) Lender agrees that General Partner,'
subject to the imitations and exceptions contained in subsections (b), (c), and
(d) below, shall have no personal liability under this Agreement or any of the
Loan Documents, and no deficiency judgment shall be sought or enforced against
General Partner. Recourse of Lender shall subject to the limitations and
exceptions contained in subsections (b), (c) and (d) below, be limited to, and
satisfied exclusively from, the collateral and security provided under the Loan
Documents and from Borrower.
(b) A judgment may be sought, obtained, entered and enforced against
General Partner to the extent necessary to preserve or enforce the rights and
remedies of Lender in, to or against the collateral and other security provided
under the Loan Documents, and nothing contained in this Section shall be
construed to limit, prejudice or impair the rights of Lender to enforce its
rights and remedies against any property mortgaged, pledged, encumbered,
assigned or granted to secure payment or performance under this Agreement and
the Loan Documents.
(c) General Partner shall be personally liable to Lender for Lender's
damages (including loss of principal or interest and Lender's attorneys' fees
and collection costs) arising out of any of the following circumstances:
(i) any diversion of funds in violation of this Agreement or
the Loan Documents shall occur, including the (a) misappropriation or
misapplication of insurance proceeds or condemnation awards relating to
the Premises or other collateral security provided under the Loan
Documents, (b) the collection of rents or other income from the
Premises or other collateral or security provided under the Loan
Documents more than thirty (30) days in advance in violation of the
terms and provisions of the Loan Documents, (c) the failure to account
for security deposits of tenants or other occupants at the Premises
(and interest required by law or agreement to be paid thereon) not
turned over to Lender immediately after Lender's demand following the
occurrence of an Event of Default, (d) the failure following the
occurrence and during the continuance of an Event of Default
(retroactive to the date of the default in question) to apply all of
the rents or other income from the Premises or other collateral or
security provided under the this Agreement or Loan Documents to the
payment of the Loan then due and payable and other liabilities of
Borrower under this Agreement and the Loan Documents after paying when
due and playable all reasonable, ordinary and customary expenses
directly incurred for the operation of the Premises, including
insurance, taxes, salaries, capital improvements required pursuant to
law, and maintenance, which are then due and payable;
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<PAGE> 50
(iii) fraud;
(iv) the making by any one or more of Borrower, General
Partner, any affiliate, subsidiary, affiliated and related company of
Borrower, or any of the foregoing entities, successors and assigns, in
connection with the Loan, of any representation or warranty that was
materially incorrect or untrue at the time made;
(v) any breach of any of the terms and provisions of Article
VI of this Agreement;
(vi) the occurrence of a transfer of the Premises in
violation of this Agreement or any of the Loan Documents without the
prior written consent of Lender or the existence of any liens on the
Premises other than those liens which are (A) Permitted Exceptions or
(B) nonconsensual, do not arise out of the act or omission of Borrower
(or any other occupant of the Premises affiliated with Borrower) and
are imposed generally on all owners of real estate;
(vii) the filing, against Borrower by Borrower, General
Partner, Corporate General Partner or an affiliate of Borrower, or the
filing by Borrower, of any petition under any case, chapter or
proceeding under Title 11 of the United States Code as amended and as
it may from time to time be amended and any successor statute; or
(vii) waste.
(d) Nothing contained in this Section shall be construed to release
Borrower or General Partner from liability under the indemnifications contained
in Sections 3.11, 6.5, 8.1, 8.9, 8.10 or 8.24 of this Agreement or under the
General Partner's Agreement.
8.21 Initial Disbursement. Unless all conditions precedent to Lender's
obligation to make the Initial Disbursement of the Loan are satisfied on or
before June 3, 1994, Lender may, at its option, terminate its obligations
hereunder. In such event, Borrower will remain obligated to pay all of Lender's
actual costs and expenses incurred in connection with this Agreement and, in
addition thereto, Lender shall retain the entire Commitment Fee.
8.22 Construction. Borrower and Lender agree that the terms and
conditions of this Agreement are as a result of negotiations between the parties
and that this Agreement shall not be construed in favor of or against any party
by reason of the extent to which any party or its professionals participated in
the preparation of this Agreement.
8.23 Notice of Breach by Lender. Borrower agrees to give Lender written
notice of any action or inaction by Lender or any agent or attorney of Lender in
connection with this Agreement or
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<PAGE> 51
the obligations of Borrower under this Agreement or any of the Loan Documents
that may be actionable against Lender or any agent or attorney of Lender or a
defense to payment of any obligations of Borrower under this Agreement or any of
the Loan Documents for any reason, including, but not limited to, commission of
a tort or a violation of any contractual duty or duty implied by law. Borrower
agrees that unless such notice is given promptly (and in any event within thirty
(30) days after Borrower has knowledge, or with the exercise of reasonable
diligence should have had knowledge, of any such action or inaction) Borrower
shall not assert, and Borrower shall be deemed to have waived, any claim or
defense arising therefrom to the extent, but only to the extent, that Lender
could have mitigated such claim or defense after receipt of such notice.
8.24 Expenses; Taxes; Indemnity:
(1) Without limitation of any other provision hereof, Borrower and
General Partner, jointly and severally, agree to pay or cause to be paid and to
save Lender harmless against liability for the payment of all reasonable
out-of-pocket costs and expenses (including fees and expenses of counsel,
including local counsel, auditors, consulting engineers, appraisers, and all
other professional, accounting, evaluation and consulting costs) incurred by
Lender from time to time arising from or relating to (i) the negotiation,
preparation, execution, delivery, administration and performance of this
Agreement and the other Loan Documents, (ii) any Borrower requested amendments,
modifications, supplements, waivers or consents (whether or not ultimately
entered into or granted) to this Agreement or any Loan Document, including,
without limitation, those relating to Future Acquisitions, and (iii) the
enforcement or preservation of rights under this Agreement or any other Loan
Document (including any such costs or expenses arising from or relating to (A)
the creation, perfection or protection of the Lender's lien on any collateral,
(B) the protection, collection, lease, sale, taking possession of, preservation
of, or realization on, any collateral, including advances for storage, insurance
premiums, transportation charges, taxes, filing fees and the like, (C)
collection or enforcement of the Loan or any other amount owing hereunder or
thereunder by Lender, (D) any litigation, proceeding, dispute, work-out,
restructuring or rescheduling related in any way to this Agreement or the other
Loan Documents, and (E) any environmental matter pursuant to Article VI hereof.
(2) Borrower agrees to pay all stamp, document, transfer, recording,
filing, registration, search, sales and excise fees and taxes and all similar
impositions now or hereafter determined by Lender to be payable in connection
with this Agreement or any other Loan Documents or any other documents,
instruments or transactions pursuant to or in connection herewith or therewith,
and Borrower agrees to save Lender harmless from and against any and all present
or future claims, liabilities or losses with respect to or resulting from any
omission to pay or delay in paying any such fees, taxes or impositions.
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(3) Borrower and, if one or more of the events or conditions described
in Section 8.20(c) shall occur, Borrower and General Partner, jointly agree to
reimburse and indemnify Lender, its officers, directors, attorneys, and their
respective successors and assigns (collectively, "Indemnified Parties") from and
against any and all losses, liabilities, claims, damages, expenses, obligations,
penalties, actions, judgments, suits, costs or disbursements of any kind or
nature whatsoever (including the reasonable fees and disbursements of counsel
for such Indemnified Party in connection with any investigative, administrative
or judicial proceeding commenced or threatened, whether or not such Indemnified
Party shall be designated a party thereto) that may at any time be imposed on,
asserted against or incurred by such Indemnified Party as a result of, or
arising out of, or in any way related to or by reason of, this Agreement or any
other Loan Document, any transaction from time to time contemplated hereby or
thereby, or any transaction financed in whole or in part or directly or
indirectly with the proceeds of the Loan (and without in any way limiting the
generality of the foregoing, including any violation or breach of any
Environmental Law or any other law statute, rules or regulation by Borrower or
any related entity; any grant of collateral; or any exercise by Lender of any of
its rights or remedies under this Agreement or any other Loan Document); but
excluding any such losses, liabilities, claims, damages, expenses, obligations,
penalties, actions, judgments, suits, costs or disbursements resulting solely
from the gross negligence or willful misconduct of such Indemnified Party, as
finally determined by a court of competent jurisdiction. If and to the extent
that the foregoing obligations of Borrower and General Partner under this
subsection (c), or any other indemnification obligation of Borrower and General
Partner hereunder or under any other Loan Document, are unenforceable for any
reason, Borrower and General Partner agree to make the maximum contribution to
the payment and satisfaction of such obligations which is permissible under
applicable Law.
8.25 Conflict. To the extent that the provisions of this Agreement
conflict with the provisions of any of the Loan Documents, the provisions of
this Agreement will control.
8.26 Waiver of Jury Trial. BORROWER AND LENDER EACH WAIVE THE RIGHT TO
A TRIAL BY JURY IN ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE
SUBJECT MATTER OF THIS AGREEMENT. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND
VOLUNTARILY MADE BY BORROWER AND LENDER, AND BORROWER AND LENDER ACKNOWLEDGE
THAT NO PERSON ACTING ON BEHALF OF ANOTHER PARTY TO THIS AGREEMENT HAS MADE ANY
REPRESENTATIONS OF FACT TO INDUCE THIS WAIVER OF TRIAL .BY JURY OR IN ANY WAY TO
MODIFY OR NULLIFY ITS EFFECT. EACH OF BORROWER AND LENDER FURTHER ACKNOWLEDGE
THAT IT HAS BEEN REPRESENTED (OR HAVE HAD THE OPPORTUNITY TO BE REPRESENTED) IN
THE SIGNING OF THIS AGREEMENT AND IN THE MAKING OF THIS WAIVER BY INDEPENDENT
LEGAL COUNSEL, SELECTED OF ITS OWN FREE WILL, AND IT HAS HAD THE OPPORTUNITY TO
DISCUSS THIS WAIVER WITH COUNSEL.
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8.27 Acceleration. Any provision herein regarding declaring the Note to
be due and payable prior to its stated maturity, or any similar provision, shall
refer to declaring the unpaid indebtedness evidenced by the Note to be due and
payable and in no event shall unaccrued interest become due and payable. Subject
to the provisions of Section 8.19, nothing herein shall be construed as limiting
or impairing Lender's right to impose interest at the Default Rate on past due
amounts.
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<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day, month and year
first above written.
NET 2 L.P., a Delaware limited partnership
By: Lepercq Net 2 L.P., a Delaware
limited partnership, General
Partner
By: Leper Net 2 Inc., a Delaware
corporation
By: __________________________
Its: Vice President
NATIONS FINANCIAL CAPITAL CORPORATION,
a Delaware corporation
By: __________________________
Authorized Signatory
54
<PAGE> 55
Exhibit A-1--Legal Description - Earth City Land
Exhibit A-2--Legal Description - Highland Heights Land
Exhibit A-3--Legal Description -Tempe Land
Exhibit A-4--Legal Description - Seattle Land
Exhibit A-5--Legal Description - Columbus Land
Exhibit A-6--Legal Description - Tucson Land
Exhibit A-7--Legal Description - Texas Land
Exhibit A-8--Legal Description - Michigan Land
Exhibit B--Permitted Exceptions
Exhibit C--Schedule of Licenses, Permits and Approvals
Exhibit D--List of Contracts
Exhibit E--Insurance Requirements
Exhibit F--Permitted Materials
Exhibit G-1--Texas Premises Leases
Exhibit G-2--Michigan Premises Leases
Exhibit H--Representation and Warranty Certificate
Exhibit I--Loan Allocation
55
<PAGE> 1
FIRST AMENDMENT TO LOAN AGREEMENT
This FIRST AMENDMENT TO LOAN AGREEMENT is made as of September 28, 1996,
by NET 2 L.P., a Delaware limited partnership ("Borrower"), and NATIONSCREDIT
COMMERCIAL CORPORATION, a Delaware corporation, successor to Nations Financial
Capital Corporation ("Lender").
R E C I T A L S:
A. Borrower and Lender entered into a Loan Agreement dated as of
May 31, 1994 (the "Loan Agreement"). Capitalized terms used herein will have
the same meanings given them in the Loan Agreement.
B. Lender has issued, and Borrower has accepted, a commitment letter
dated September 23, 1998 (the "Commitment Letter"). Pursuant to the Commitment
Letter, Lender has agreed to loan the Borrower an interim loan in the amount of
$1,500,000 (the "Interim Loan").
C. In connection with the Interim Loan, Borrower and Lender desire to
enter into certain amendment to the Loan Agreement.
In consideration of the foregoing and the mutual covenants and promises
set forth in this Agreement and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Lender and Borrower
agree as follows:
1. Amendments to Loan Agreement. The Loan Agreement is amended as
follows:
a. Recital A is amended by adding subsection (8) following Subsection
(7):
"(8) WILSONVILLE, OREGON. A 8.72 acre parcel of land in Wilsonville,
Oregon legally described on Exhibit A-9 hereto (the "Wilsonville Land") and
the high-tech/flex industrial building located thereon (the "Wilsonville
Building"). The Wilsonville Building contains 122,853 square feet of space
and parking for 656 cars.
"The Wilsonville Building and all other ancillary or related
buildings, structures and improvements referred to above are collectively
referred to herein as the "Wilsonville Improvements". The Wilsonville Land
and the Wilsonville Improvements, together with all fixtures, fittings,
appliances, apparatus, inventory, supplies, provisions, machinery,
furnishings, equipment, furniture or other personal property and any
replacements or substitutes now or at any time hereafter located on or used
in any way in connection with the operation of the Wilsonville Land or
Wilsonville
<PAGE> 2
Improvements excluding personal property owned by tenants and Personal
property leased by Borrower in accordance with the provisions of this
Agreement (the "Wilsonville Personal Property"), are hereinafter sometimes
collectively referred to herein as the "Wilsonville Premises"."
b. Section 2.1 is added by adding the following subsections N. and O. after
subsection M.:
"N. On or before September 28, 1998, a promissory note (the
"Interim Note") in the amount of One Million Five Hundred Thousand
Dollars ($1,500,000), payable to the order of Lender with interest as
provided therein."
"O. On or before September 28, 1998, a deed of trust encumbering
the Wilsonville Premises."
c. Section 4.6 is amended by adding the following at the end thereof:
"4.6 Notwithstanding the foregoing, all of the Net Proceeds from
sale of the Seattle Premises will be used to pay a portion of the
purchase price of the Wilsonville Premises."
d. Section 4.8 is added after Section 4.7:
"4.8 The Interim Loan will be disbursed to pay a portion of the
purchase price of the Wilsonville Premises upon Borrower furnishing
Lender with Loan Documents described in Section 2.1 N, 2.1 O, 2.2 C and
2.2 F and an Acknowledgement and Agreement executed by General Partner.
Borrower acknowledges that a disbursement of the Increased Loan, as
defined in the Commitment, shall be subject to the satisfaction of
Section 2.3 of this Agreement and such other conditions are set forth in
the Commitment."
e. Section 7.1 is amended by adding Sections W after Section V, such
Sections to read as follows:
"W. Borrower fails to pay, when due, any installment of interest
on the Interim Note or Borrower fails to pay the Interim Note when due."
f. Section 8.7 of the Loan Agreement is amended by updating the following
addresses:
to Borrower:
Net 2 L.P.
c/o The LCP Group L.P.
711 Westchester Avenue
White Plains, NY 10604
Attn: E. Robert Roskind
2
<PAGE> 3
with a COPY to:
Paul, Hastings, Janofsky & Walker LLP
Thirty-First Floor
399 Park Avenue
New York, New York 10022-4697
Attn: Richard C. Hamlin
to Lender:
NationsCredit Commercial Corporation
187 Danbury Road
Wilton CT 06897-4079
Attn: Vice President Commercial Real Estate
with a copy to:
NationsCredit Commercial Corporation
187 Danbury Road
Wilton CT 06897-4079
Attn: General Counsel
2. Representations. In order to induce Lender to enter into this
Amendment, Borrower represents and warrants to Lender as follows:
a. All of the representations and warranties of Borrower in the Loan
Agreement and the Loan Documents are true and complete in all material
respects.
b. The Loan Agreement and the Loan Documents are in full force and
effect and free from an Event of Default or Default.
c. The principal amount of the Loan outstanding as of September 1,
1998 is $10,433,306.60, and Borrower has no offsets, defenses or
counterclaims with respect thereto.
d. The execution and delivery by Borrower of this Agreement and the
Interim Note, and the performance by Borrower of this Agreement and the
Interim Note (i) are within its powers; (ii) have been duly authorized by
all necessary partnership action; and (iii) do not conflict with, violate
or constitute a default under any law, rule, regulation, decree or judgment
applicable to Borrower or any indenture, mortgage, deed of trust,
agreement, instrument, contract or other restriction binding on or
affecting Borrower.
e. This Agreement and the Interim Note are the legal, valid and
binding obligations of Borrower enforceable in accordance with their terms.
3
<PAGE> 4
3. Miscellaneous.
a. This Agreement shall be construed according to and governed by the
laws of the State of Connecticut.
b. If any provision of this Agreement is adjudicated to be invalid,
illegal or unenforceable, in whole or in part, it will be deemed omitted to
that extent and all other provisions of this Agreement will remain in full force
and effect.
c. This Agreement shall be binding upon and inure to the benefit of the
parties and their respective legal representatives, successors and assigns.
d. Except as amended hereby, the Loan Agreement is and shall remain in
full force and effect in accordance with its terms and is hereby ratified and
confirmed.
[EXECUTION PAGE TO FOLLOW]
4
<PAGE> 5
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written,
NET 2 L.P., a Delaware limited
partnership
By: LEPERCQ NET 2 P., a Delaware
limited partnership, Its General Partner
By: LEPERCQ NET 2 INC., a Delaware
corporation
By: __________________________
Its President
NATIONSCREDIT COMMERCIAL CORPORATION, a
Delaware corporation
By: ___________________________________
Name:
Title:
5
<PAGE> 1
SECOND AMENDMENT TO LOAN AGREEMENT
This SECOND AMENDMENT TO LOAN AGREEMENT (the "Second Amendment") is
made as of October 27, 1998, by NET 2 L.P., a Delaware limited partnership
("Borrower"), and NATIONSCREDIT COMMERCIAL CORPORATION, a Delaware corporation,
successor to Nations Financial Capital Corporation ("Lender").
R E C I T A L S:
A. Borrower and Lender entered into a Loan Agreement dated as of May
31, 1994, as amended by a First Amendment to Loan Agreement dated as of
September 28, 1998 (the "First Amendment"; the Loan Agreement, as amended by
the First Amendment, is referred to as the "Loan Agreement"). Capitalized terms
used herein will have the same meanings given them in the Loan Agreement.
B. Pursuant to the First Amendment, Lender made Borrower an interim
loan in the amount of $1,500,000 (the "Interim Loan"), Borrower acquired the
Wilsonville Premises using Future Acquisition Funds from the sale of the
Seattle Premises, and Borrower placed a first lien deed of trust on the
Wilsonville Premises in favor of Lender. The Seattle Premises are no longer
part of the Land, Buildings, Improvements or Premises and all references in the
Loan Agreement to the Seattle Unit and the Seattle Premises are hereby deleted.
C. Borrower has requested that Lender increase the Loan by $12,500,000
(the "Loan Increase") to $24,500,000, and Lender has agreed to do so upon
certain terms and conditions.
D. In connection with such increase, Borrower and Lender desire to
enter into certain amendments to the Loan Agreement.
In consideration of the foregoing and the mutual covenants and promises
set forth in this Second Amendment and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Lender and
Borrower agree as follows:
1. Amendments to Loan Agreement. The Loan Agreement is amended as
follows:
a. Recital B is amended and restated to read as follows:
"B. The Loan. Borrower desires to borrow from Lender an amount
(the "Loan") up to $24,500,000."
b. Section 1.1.I. is amended by adding the following at the end
thereof: "The Wilsonville Premises is duly and validly zoned PID (Planned
Industrial Development), which permits the use thereof for office and
distribution purposes, which zoning has been enacted without any limitations to
its effectiveness and is in full force and effect."
1
<PAGE> 2
c. Section 1.1 U. is amended by deleting clause (4) and adding the
following at the end of clause (10):
"(11) The Amended and Restated Office Lease dated as of
October 17, 1997 between Hollywood Entertainment Corporation and TC
Portland, Inc. relating to the Wilsonville Premises."
d. Section 1.1 is amended by adding Section 1.1 X., such section to
read as follows:
"X. Year 2000 Compliance. Borrower has (i) initiated a review
and assessment of all areas within its and each of its Affiliates'
business and operations (including those affected by suppliers and
vendors) that could be adversely affected by the Year 2000 Problem
(i.e., the risk that computer applications used by Borrower or any of
its Affiliates, suppliers or vendors may be unable to recognize and
properly perform date-sensitive functions involving certain dates prior
to and any date after December 31, 1999), (ii) developed a plan and
timeline for addressing the Year 2000 Problem on a timely basis, and
(iii) to date, implemented that plan in accordance with that timetable.
Borrower reasonably believes that all computer applications (including
those of its suppliers and vendors) that are material to its or any of
its Affiliates' business and operations will on a timely basis be able
to properly perform date-sensitive functions for all dates before and
after January 1, 2000 (that is, be "Year 2000 Compliant"), except to
the extent that a failure to do so could not reasonably be expected to
have a material adverse effect on Borrower or the Premises."
e. Section 2.1 A is amended and restated to read as follows:
A. Note. An amended and restated promissory note (the "Note")
in the amount of TWENTY-FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS
($24,500,000) payable to the order of Lender on or before May 1, 2000
(the "Initial Maturity Date"), subject to two one-year extension
options which may be exercised on the terms and conditions set forth in
the Note (any date to which the maturity date of the Note has been
extended is referred to as an "Extended Maturity Date" and the term of
the Note after the Initial Maturity Date and before the Extended
Maturity Date is called an "Extended Term").
f. Section 2.1 K. and Section 2.1 L. are deleted.
g. The definition of "Major Premises" in Section 2.2 B is amended to
delete the Seattle Premises and add the Wilsonville Premises and the New Haven,
Connecticut Premises previously acquired by Borrower.
h. Section 2.3 is amended to provide that such the requirements of this
Section are applicable to the Wilsonville Premises.
2
<PAGE> 3
i. Section 3.1 M is amended by changing "(C)" to "C."
j. The first two paragraphs of Section 3.1 Q. are amended and restated
to read as follows:
"Q. Commencing on the first day of the first month following
the Initial Disbursement and continuing until the Initial Maturity
Date, Net Operating Income (hereinafter defined) from the Premises
shall be tested each month, on an aggregate basis from all Premises,
and annualized. If the Debt Service Coverage ratio (hereinafter
defined) falls below 1.50 during the term prior to the Initial Maturity
Date or below 1. 15 during the first Extended Term, then Borrower shall
deposit in an account (the "Excess Funds Account") with Lender all Net
Cash Flow (hereinafter defined) for the following months, such deposit
to be made on or before the fifteenth (15th) day of each month. In the
event that the Premises achieves the requisite Debt Service Coverage
ratio as set forth above for a period of three (3) consecutive calendar
months (a "Period") then the funds on deposit with Lender in the Excess
Funds Account and interest thereon will be paid to Borrower upon such
achievement, provided no Default or Event of Default has occurred and
is continuing. Notwithstanding such achievement, Borrower shall
continue to comply with the calculation provisions of this section and,
if the Debt Service Coverage ratio is less than the requisite amount
for any month, the provisions for the deposit of Net Cash Flow in this
Section with respect to Excess Funds will continue to apply. If Excess
Funds are required to be held by Lender for two consecutive Periods,
all Excess Funds on deposit with Lender in the Excess Funds Account
together with interest thereon and all Net Cash Flow subsequently
deposited with Lender will be applied as a mandatory prepayment of the
Note in inverse order of maturity, except that the provisions of the
fourth and subsequent sentences of this paragraph will continue to
apply. Mandatory prepayments made under this section are not subject to
the Prepayment Fee under the Note.
"As used herein, "Debt Service Coverage" ratio will mean the
ratio of Net Operating Income to the amount of principal and interest
payable on the average outstanding amount of the Loan during such month
or Period less any regularly scheduled payments of principal on the
Note made by Borrower."
k. Sections 3.1 R. and 3.1.U are deleted.
l. Sections 3.1. V. and W are added, such sections to read as follows:
"V. Year 2000 Compliance. Borrower will promptly notify Lender
in the event the Borrower discovers or determines that any computer
application (including those of its suppliers and vendors) that is
material to its or any of its Affiliates, business and operations will
not be Year 2000 compliant on a
3
<PAGE> 4
timely basis, except to the extent that such failure could not
reasonably be expected to have a material adverse effect.
"W. Wilsonville UST. Borrower agrees to remove or cause to be
removed, in compliance with Environmental Laws, the 2,000 gallon
underground storage tank located on the Wilsonville Premises and to
replace same with a new 2,000 gallon double wall tank, which new tank
shall be installed in compliance with Environmental Laws, on or before
March 1, 1999. Borrower will cause appropriate testing to be done in
connection with said removal to establish the absence of soil
contamination in the area of said tank. If there is any contamination
disclosed by said tests, Borrower will remove or cause to be removed
all such contamination. Borrower will furnish Lender copies of all such
reports."
m. Section 4.1 is amended by adding the following after subparagraph D:
"E. Loan Increase. On the basis of the covenants, agreements
and representations of Borrower contained in this Agreement (including
the Second Amendment) and the Loan Documents, and subject to the terms
and conditions set forth in this Agreement and the Loan Documents,
Lender agrees to lend to Borrower the Loan Increase. Borrower agrees to
use the proceeds of the Loan Increase for the purpose for which they
were advanced and for no other purpose. The Loan Increase will be
disbursed when the conditions in Section 3 of the Second Amendment have
been satisfied, for the following purposes and subject to the following
conditions:
"A. Up to $1,500,000 of the Loan Increase will repay
the Interim Note.
"B. Up to $1,100,000 of the Loan increase will repay
a loan from LCP Group to Borrower.
"C. Up to $525,000 will be used to pay Lender's
Expenses and the expenses of Borrower in connection with the
sale of the Seattle Premises, the purchase of the Wilsonville
Premises, the First Amendment and the Second Amendment.
"D. Up to $1,500,000 will be disbursed to the
partners of Borrower.
"E. Up to $8,775,000 will be deposited in the Future
Acquisition Account to be used in connection with Future
Acquisitions as provided in Section 4.3 below. To the extent
that less than all of the funds allocated in clauses B, C and
D are disbursed for the stated purposes, the positive
difference, if any, shall be funded into the Future
Acquisition Account."
n. Section 4.3 A is amended and restated to read as follows:
4
<PAGE> 5
"A. Borrower and Lender anticipate that Borrower may make
acquisitions of property from time to time (such acquisitions are
called "Future Acquisitions"). Borrower may acquire Future Acquisitions
without Lender's approval only if (1) the only sources of funds for
such Future Acquisition are Net Cash Flow which is not restricted under
Section 3.1 Q., (2) no Future Acquisition Funds are used in connection
with such acquisition, (3) title to such property is taken in the name
of a subsidiary of Borrower and not in Borrower's name, and (4) neither
Borrower nor General Partner has or will have any liability, direct or
indirect, in connection with any financing in connection with such
property, whether as a direct obligor, contingent obligor, guarantor,
partner or otherwise."
o. Section 4.3 B is amended by adding the word "and" before the word
"value" in the last line.
p. Section 4.5 is amended by adding the words "or Future Acquisition
Funds" after the words "Loan proceeds" in the fourth to last line of said
section.
q. Section 4.6 is amended and restated to read as follows:
"4.6 Release Payments. A Premises may be sold by Borrower and
Lender agrees to release such Premises from the applicable Mortgage in
connection with such sale (but not in connection with a refinance) upon
the following conditions:
"A. The net sales proceeds (i.e. the gross purchase price less
normal and customary closing costs paid to third parties) paid to
Lender are equal to or greater than 80% of the amount listed in the
column "1998 Appraised Value" with respect to such Premises on Exhibit
I (First Revised) (the "Release Payment") and all of such net sales
proceeds are paid to Lender;
"B. Borrower pays Lender a release fee of $5,000 (the "Release
Feel") for the release of each Premises other than the Texas Premises,
as to which no Release Fee is payable; and
"C. Borrower pays Lender all net sales proceeds to be either,
at Borrower's discretion, held in the Future Acquisition Fund Account
or used to repay the Loan. Notwithstanding the foregoing, if in
connection with such a sale Borrower desires to attempt to effect a
delayed tax-free exchange, then instead of depositing the net sales
proceeds in the Future Acquisition Fund Account, Borrower may deposit
up to $7,000,000 of net sales proceeds, in the aggregate at any time
(the "Exchange Amount"), in a tax free exchange account established
with a reputable exchange company on the following conditions:
(1) E. Robert Roskind and The LCP Group L.P. jointly
and severally guarantee, pursuant to a guaranty
5
<PAGE> 6
in form and substance satisfactory to Lender, payment to
Lender all of any portion of the Exchange Amount if for any
reason, including action by Borrower or a creditor of
Borrower, all of the funds deposited in said account are not
either applied as set forth in the preceding sentence or used
for Future Acquisitions in accordance with the terms and
conditions of this Agreement, and
(2) the exchange agreement provides that at the end
of the exchange period, if Borrower has not used all of the
Exchange Amount to fund Future Acquisitions in accordance with
this Agreement, all of the Exchange Proceeds will be paid to
Lender, as well as such other modifications consistent with
the foregoing, as Lender may request, excluding a grant of a
security interest (unless applicable law is changed to permit
such a security interest without adversely affecting
Borrower's claim for benefits under Section 1031 of the
Internal Revenue Code).
In the event Borrower chooses to repay the Loan, then the
Prepayment Fee (as defined in the Note) will not be payable
with respect to such Premises but the Release Fee will be
payable.
"Notwithstanding the foregoing, if an Event of Default or
Default exists at the time of a sale of a Premises, all net sales
proceeds will be paid to Lender to pay the Prepayment Fee and then
applied to the Loan as a prepayment.
"In addition, Borrower may request that Lender accept a
Release Payment with respect to a Premises if a condemnation or eminent
domain proceeding is commenced with respect to such Premise or if
Borrower is unable to satisfy the provisions of Section 5.3 for use of
Proceeds with respect to such Premises, or if a Premises is rezoned
without the agreement or acquiescence of Borrower.
"Upon receipt of a Release Payment and all net sales proceeds
with respect to a Premises and the release of such Premises from the
lien of the applicable Mortgage, such Premises will no longer be
considered a Premises for purposes of this Agreement."
r. Exhibit I is replaced by Exhibit I (First Revised) attached hereto.
s. Section 8.7 is amended to delete the name "E. Robert Roskind" from
the Borrower's address and to substitute the name "David Walsh".
2. Representations. In order to induce Lender to enter into this
Amendment, Borrower represents and warrants to Lender as follows:
6
<PAGE> 7
a. All of the representations and warranties of Borrower in
the Loan Agreement and the Loan Documents are true and complete on the
date hereof in all material respects.
b. The Loan Agreement and the Loan Documents are in full force
and effect and free from an Event of Default or Default.
c. The principal amount of the Loan (including the Interim
Loan) outstanding as of October 27, 1998 is $11,908,789.35, and
Borrower has no offsets, defenses or counterclaims with respect
thereto.
d. The execution and delivery by Borrower of this Second
Amendment and all documents executed and delivered by Borrower pursuant
hereto, and the performance by Borrower of this Second Amendment and
such documents W are within its powers; (ii) have been duly authorized
by all necessary partnership action; and (iii) do not conflict with,
violate or constitute a default under any law, rule, regulation, decree
or judgment applicable to Borrower or any indenture, mortgage, deed of
trust, agreement, instrument, contract or other restriction binding on
or affecting Borrower.
e. This Second Amendment and all documents executed and
delivered by Borrower pursuant hereto are the legal, valid and binding
obligations of Borrower enforceable in accordance with their terms.
3. Conditions to Effectiveness. As a condition to the effectiveness of
this Second Amendment, Borrower shall satisfy all of the following conditions:
a. Borrower shall pay Lender a commitment fee equal to $70,500, less
$50,000 which has already been paid to Lender. Said commitment fee is deemed
fully earned upon execution hereof and is not refundable.
b. Borrower shall pay Lender all of Lenders Expenses in connection with
the First Amendment and the Second Amendment.
c. Borrower will execute and deliver or cause to be executed and
delivered to Lender all of the following, all of which shall constitute "Loan
Documents" under the Loan Agreement:
(1) The Note.
(2) An Acknowledgement and Agreement executed by General
Partner with respect to the General Partner's Agreement.
(3) An amended and restated Deed of Trust on the Wilsonville
Premises and, if requested by Lender, an assignment of rents.
7
<PAGE> 8
(4) An opinion of counsel of Borrower and General Partner
dated the date of this Amendment and relating to such matters with
respect to this Second Amendment and the Loan Documents executed
pursuant hereto and the transaction contemplated hereby as Lender may
reasonably request.
(5) Amendments to each of the Mortgages ("Mortgage
Amendments") reflecting the increase to the principal amount of the
Note and this Amendment.
(6) Such other documents and instruments as Lender may
request.
d. Borrower shall deliver authorization documents as outlined in
Section 2.2 F with respect to this Second Amendment, the Note, the Mortgage
Amendments and the other Loan Documents executed pursuant to this Second
Amendment
e. Borrower shall deliver endorsements to each Title Policy later
dating the Title Policy, reflecting the Mortgage Amendments and increasing the
amount of coverage to the amount of the Loan.
f. Borrower shall satisfy all of the requirements and conditions set
forth in Section 2.3 with respect to the Wilsonville Premises.
4. Miscellaneous.
a. This Second Amendment shall be construed according to and governed
by the laws of the State of Connecticut.
b. If any provision of this Second Amendment is adjudicated to be
invalid, illegal or unenforceable, in whole or in part, it will be deemed
omitted to that extent and all other provisions of this Second Amendment will
remain in full force and effect.
c. This Second Amendment shall be binding upon and inure to the benefit
of the parties and their respective legal representatives, successors and
assigns.
d. Except as amended hereby, the Loan Agreement is and shall remain in
full force and effect in accordance with its terms and is hereby ratified and
confirmed.
[EXECUTION PAGE TO FOLLOW]
8
<PAGE> 9
IN WITNESS WHEREOF, the parties have executed this Second Amendment as
of the date first above written.
NET 2 L.P., a Delaware limited partnership
By: LEPERCQ NET 2 L.P., a Delaware
limited partnership, Its General
Partner
By: LEPERCQ NET 2 INC., a Delaware
corporation
By:
-------------------------------
Its Vice President
NATIONSCREDIT COMMERCIAL CORPORATION, a
Delaware corporation
By:
-----------------------------------------
Name:
Title:
9
<PAGE> 10
EXHIBIT I
<TABLE>
<CAPTION>
Property 1998 Appraised Value
-------- --------------------
<S> <C>
Highland Heights, OH $6,863,000
Tempe, AZ $2,050,000
Seattle, WA n/a
Columbus, OH $1,779,000
Earth City, MO $3,170,000
Tucson, AZ $3,155,000
Milford, CT $3,064,000
Wilsonville, OR $13,700,000
El Paso, TX $754,000
12 Michigan sites $,792,000
13 San Antonio, TX $5,293,000
</TABLE>
<PAGE> 1
AMENDED AND RESTATED PROMISSORY NOTE (SECURED)
$24,500,000.00 October 27, 1998
FOR VALUE RECEIVED, the undersigned, NET 2 L.P., a Delaware limited
partnership Borrower"), promises to pay to the order of NATIONSCREDIT COMMERCIAL
CORPORATION, a Delaware corporation with a principal place of business at 187
Danbury Road, Wilton, Connecticut 06897 ("Lender"), to the account set forth in
Section 2.6 below or at such other place as Lender may from time to time direct,
the principal sum of TWENTY-FOUR MILLION FIVE HUNDRED THOUSAND DOLLARS
($24,500,000.00), or so much thereof as may have been advanced pursuant hereto
and to the Loan Agreement, on or before the Maturity Date (both as defined
below), together with interest thereon, all as hereinafter provided. Except as
otherwise provided for herein, interest shall be computed and accrue on the
principal amount hereof from time to time outstanding from the date advanced to
the date of payment at a rate per annum equal to the Interest Rate (as defined
below).
1. Definitions. In addition to terms defined elsewhere in this Note,
the following terms shall have the following definitions:
1.1. "Additional Amortization Payment" shall mean an
additional payment of principal equal to 100% of the Net Cash Flow (as defined
in the Loan Agreement) for the Loan Month in question.
1.2. "Advance" shall have the meaning set forth in the Loan
Agreement.
1.3. "Base Rate" shall mean the LIBOR Rate plus three and
fifteen hundredths percent (3.15%) per annum.
1.4. "Business Day" shall have the meaning set forth in the
Loan Agreement.
1.5. "Commercial Paper Rate" shall mean, for each Loan Month,
the highest discount rate reported as having been the rate in effect for
"high-grade unsecured notes" having thirty (30) day maturities "sold through
dealers by major corporations" (whether or not such notes have actually been
sold by such dealers at such rates) in the "Money Rates" column of The Wall
Street Journal (the "Published Rate") published on the first Publication Date of
the applicable Loan Month. If The Wall Street Journal (i) publishes more than
one Published Rate on any Publication Date, the higher of such rates shall
apply, or (ii) publishes a retraction or correction of any Published Rate, the
corrected rate reported in such retraction or correction shall apply. If the
Published Rate is no longer published at least monthly, in the sole and absolute
<PAGE> 2
discretion of Lender, either (x) the Commercial Paper Rate shall be deemed to be
such other discount rate reported as having been the rate in effect for "high
grade unsecured notes" reported in The Wall Street Journal and reasonably
satisfactory to Lender, or (y) the Interest Rate shall be deemed to be the
Substitute Rate.
1.6. "Default Rate" shall mean a rate per annum equal to the
lesser of (i) five percent (5%) per annum plus the Base Rate, and (ii) the
Maximum Rate.
1.7. "Dollars" and the symbol "$" shall mean lawful money of
the United States of America.
1.8. "Excess Funds" shall have the meaning set forth in
Section 3.1.O of the Loan Agreement.
1.9. "Extension Fee" shall mean one percent 1% of the
outstanding principal balance of the Loan on the first (1st) day of first
Extended Term and 2% of the outstanding principal balance of the Loan on the
first (1st) day of the second Extended Term.
1.10. "Extension Notice" shall mean written notice from
Borrower to Lender of the exercise by Borrower of one of its options to extend
the term of the Loan pursuant to Section 4 below.
1.11. "Extended Term" shall mean the period commencing May 2,
2000 and terminating May 1, 2001 with respect to the first Extended Term, and
the period commencing May 2, 2001 and terminating May 1, 2002 with respect to
the second Extended Term.
1.12. "Event of Default" shall mean any one or more of the
following: (i) failure by Borrower to pay any installment of principal or
interest under this Note within five (5) days following the due date thereof,
(ii) the failure by Borrower to pay all sums owed to Lender under this Note and
every Loan Document on or before the Maturity Date, and (iii) the occurrence of
any Event of Default under the Loan Agreement, any of the Mortgages or any other
Loan Document.
1.13. "Incipient Default" shall have the meaning set forth in
the Loan Agreement.
1.14. "Interest Rate" shall mean the lesser of (i) the Maximum
Rate, and (ii) the Base Rate, the Default Rate or the Substitute Rate, as
applicable, from time to time in effect hereunder.
1.15. "LIBOR Rate" shall mean, for each Loan Month the one
month LIBOR (London Interbank Offered Rate) Rate published in The Wall Street
Journal (the "Reported Rate") on the first Publication Date of the applicable
Loan Month. If The Wall Street Journal (i) publishes more than one Reported Rate
on any
2
<PAGE> 3
Publication Date, the higher or highest of such rates shall apply, or (ii)
publishes a retraction or correction of any Reported Rate, the corrected rate
reported in such retraction or correction shall apply. If the Reported Rate is
no longer published at least monthly, in the sole and absolute discretion of
Lender, either (x) the LIBOR Rate shall be deemed to be such other London
Interbank Offered Rate published in The Wall Street Journal and reasonably
satisfactory to Lender, or (y) the Interest Rate shall be deemed to be the
Substitute Rate.
1.16. "Loan" shall mean the loan from Lender to Borrower
evidenced by this Note.
1.17. "Loan Agreement" shall mean that certain Loan Agreement
of dated May 31, 1994 between Lender and Borrower, as amended by a First
Amendment to Loan Agreement dated as of September 28, 1998 and by a Second
Amendment to Loan Agreement dated this date, as the same may be modified or
amended from time to time.
1.18. "Loan Documents" shall have the meaning set forth in the
Loan Agreement.
1.19. "Loan Month" shall mean any full calendar month during
the term of this Note. The first Loan Month shall be November, 1998 and shall
deemed to include the partial month commencing on the date of this Note.
1.20. "Maturity Date" shall mean the earliest to occur of: (i)
May 1, 2000; or (ii) if the term of this Note is extended pursuant to Section 4
below, the last day of the applicable Extended Term; or (111) the date on which
the entire principal amount evidenced by this Note and all accrued and unpaid
interest thereon shall be paid or be required to be paid in full, whether by
prepayment, acceleration or otherwise in accordance with the terms of this Note
or any of the Loan Documents.
1.21. "Maximum Rate" shall mean the maximum interest rate
allowed by applicable law in effect with respect to the Loan on the date for
which a determination of interest accrued hereunder is made and after taking
into account all fees, payments and other charges which are, under applicable
law, characterized as interest.
1.22. "Mortgage" shall mean the Mortgages (as defined in the
Loan Agreement) from Borrower to or for the benefit of Lender securing the Loan,
as the same may be modified or amended from time to time and any additional
mortgages or deeds of trust from Borrower to or for the benefit of Lender
securing the Loan.
1.23. "Mortgaged Property" shall have the meaning set forth in
the Mortgages.
3
<PAGE> 4
1.24. "Prepayment Factor" shall mean (i) five percent (5%)
commencing on the first day of the first Loan Month through and including the
last day of the first Loan Month, declining by 0.278% per month on the first day
of each subsequent Loan Month. Commencing on and at all times after the first
day of the nineteenth (19th) Loan Month, the Prepayment Factor shall be zero.
1.25. "Prepayment Fee" shall mean the product of (i) the
outstanding principal balance of this Note at the time of a prepayment, and (ii)
the Prepayment Factor then in effect.
1.26. "Publication Date" shall mean for purposes of
calculating the Commercial Paper Rate and/or the LIBOR Rate, any date on which
the Commercial Paper Rate and/or the LIBOR Rate, as applicable, is published in
The Wall Street Journal.
1.27. "Prime Rate" shall mean the rate per annum announced by
Citibank, N.A. as its prime or base rate from time to time and in effect on the
first day of each Loan Month or such other rate announced by a New York City
based money center bank reasonably satisfactory to Lender as its prime or base
rate.
1.28. "Substitute Rate" shall mean the Commercial Paper Rate
plus three and fifteen hundredths percent (3.15%) per annum; provided, however,
if the Commercial Paper Rate is not available to Lender, the Substitute Rate
shall be deemed to be the sum of the Prime Rate and two and one-half percent
(2.5%) per annum.
2. Payment of Interest and Principal.
2.1. Commencing on the first day of the second Loan Month and
on the first day of each Loan Month thereafter and on the Maturity Date,
Borrower shall pay to Lender (i) interest at the Interest Rate on the principal
amount hereof then outstanding, and (ii) installments of principal for each Loan
Month in the amounts set forth on Exhibit A attached hereto, which monthly
installments are calculated to be equal to the amount which would be sufficient
to amortize the principal balance of this Note over a twenty (20) year term
commencing on the date hereof, with respect to the primary term, and, with
respect to the first Extended Term, if any, over a ten (10) year term commencing
on the date hereof, with interest accruing thereon at 8.75% per annum.
2.2. Commencing on the twentieth (20th) day of each Loan Month
during the second Extended Term and on the 20th day of each Loan Month
thereafter in addition to the foregoing payments of principal and interest,
Borrower shall, pursuant to Section 5 below, pay to Lender the Additional
Amortization Payment. All such Additional Amortization Payments shall be applied
to the repayment of the Loan in the order and priority set forth in subsection
2.10 below.
4
<PAGE> 5
2.3. In addition to the payments required under subsections
2.1 and 2.2 above, Lender shall have the right, subject to and in accordance
with Subsection 3.1 0. of the Loan Agreement, to apply Excess Funds held by
Lender to payment of (x) the outstanding principal balance of this Note, or (y)
upon the occurrence of an Event of Default, amounts then due and payable under
the Loan Documents in such order and priority as Lender may elect in its sole
and absolute discretion. Said mandatory payments made pursuant to Subsection 3.1
0. of the Loan Agreement shall not be subject to the Prepayment Fee.
2.4. The entire outstanding principal amount of the Loan, and
all accrued and unpaid interest thereon, shall be due and payable on the
Maturity Date. Borrower acknowledges and agrees that a substantial portion of
the principal balance evidenced by this Note will be outstanding and due and
payable on the Maturity Date.
2.5. All payments hereunder shall be made by wire transfer of
immediately available federal funds without set-off or counterclaim and shall be
made to the following account of Lender prior to 1:30 p.m., Eastern Time, on the
date due:
THE FIRST NATIONAL BANK OF CHICAGO
CHICAGO, ILLINOIS 60670
ABA #071000013
ACCOUNT NUMBER: #55-84043
ACCOUNT NAME: NATIONSCREDIT COMMERCIAL CORPORATION
REFERENCE: NET 2 L.P.
Whenever any payment to be made hereunder shall be stated to be due on a date
other than a Business Day, such payment may be made on the next Business Day,
and such extension of time shall be included in the calculation of interest on
such principal. Any payments received after 1:30 p.m., Eastern Standard Time
shall be deemed received on the next Business Day and shall include interest to
such next Business Day.
2.6. All interest required to be paid by Borrower hereunder
shall be calculated on the basis of a year consisting of 360 days and shall be
paid in arrears for the actual number of days elapsed, calculated as to each
Advance from and including the date the applicable period commences to, but not
including, the date such period ends.
2.7. If any regular monthly installment of principal and
interest shall not be paid at the place required under this Note on or before
the fifth (5th) day following the due date thereof, Borrower shall pay to Lender
a late charge (the "Late Charge") of five cents ($0.05) for each Dollar so
overdue in order to compensate Lender for its frustration in the meeting of its
financial and loan commitments and to defray part of Lender's expenses incident
to handling such delinquent payments. This
5
<PAGE> 6
charge shall be in addition to any other remedy Lender may have and is in
addition to Lender's right to collect reasonable fees and charges of any agents
or attorneys which Lender employs in connection with any Event of Default. To
the extent that any Late Charge shall constitute interest under applicable law,
the amount thereof, together with all other interest hereunder and under the
Loan Documents, shall be expressly limited to the Maximum Rate. Nothing herein
contained shall be deemed to constitute a waiver or modification of the due date
for such installments or any deposits required to be made hereunder or under any
of the Loan Documents or the requirement that Borrower make all payments of
installments and deposits as and when the same are due and payable. In addition,
Borrower shall pay to Lender interest at the Default Rate on (i) any part of any
regular monthly installment of principal and interest which is not paid on or
before the fifth (5th) day following the due date thereof, and (ii) any other
amounts owed to Lender hereunder or under any Loan Document which are not paid
on or before the fifth (5th) day following the due date thereof; such interest
at the Default Rate shall be calculated from the date the payment in question
became due to the date such payment is made.
2.8. If at any time the Base Rate exceeds the Maximum Rate and
the Interest Rate is reduced to the Maximum Rate, any subsequent reductions in
the Base Rate to a level which is less than the Maximum Rate shall not reduce
the Interest Rate below the Maximum Rate unless and until the total amount of
the interest accrued and actually paid on this Note equals the amount of
interest which would have been paid or accrued if the Interest Rate had at all
times been equal to the Base Rate.
2.9. All agreements between Borrower and Lender, whether now
existing or hereafter arising and whether written or oral, are hereby expressly
limited so that in no contingency or event, whether by reason of acceleration of
the maturity of this Note or otherwise, shall the amount paid, or agreed to be
paid to Lender for the use, forbearance, or detention of the money to be loaned
under this Note or otherwise or for the payment or performance of any covenant
or obligation contained herein or in any other document evidencing, securing or
pertaining to the Loan exceed the Maximum Rate. If from any circumstances
whatsoever fulfillment of any provision hereof or any of such other agreements
shall cause the amount paid to exceed the Maximum Rate, then ipso facto, the
amount paid to Lender shall be reduced to the Maximum Rate, and if from any such
circumstances Lender shall ever receive interest which exceeds the Maximum Rate,
such amount which would be excessive interest shall be applied to the reduction
of the principal of this Note and not to the payment of interest, or if such
excessive interest exceeds the unpaid balance of principal of this Note, such
excess shall be refunded to Borrower. All sums paid or agreed to be paid to
Lender for the use, forbearance or detention of the indebtedness of Borrower to
Lender shall, to the extent permitted by applicable law, (i) be amortized,
prorated, allocated and spread throughout the full term of such indebtedness
6
<PAGE> 7
until payment in full, so that the actual rate of interest on account of such
indebtedness does not exceed the Maximum Rate throughout the term thereof; (ii)
be characterized as a fee, expense or charge other than interest; and (iii)
exclude any voluntary prepayments and the effects thereof. The terms and
provisions of this subsection 2.9 shall control and supersede every other
provision of all agreements between Lender and Borrower.
2.10. Except as otherwise expressly provided in this Note, the
Loan Agreement or the Mortgage, each payment received by Lender shall be applied
by Lender to amounts outstanding under the Loan Documents in the following order
and priority: (a) first, to the payment of all costs and expenses incurred by
Lender in connection with the Loan, which expenses are reimbursable by Borrower
pursuant to the terms and conditions of the Loan Documents, including but not
limited to the payment of Lender's costs and expenses of taking possession of
the Mortgaged Property and of holding, using, leasing, repairing, improving, and
selling the same, including, without limitation, payment of legal fees and
expenses including fees and expenses incurred on appeals, and the fees of a
receiver; (b) second, to the payment of any applicable Prepayment Fee; (c)
third, to all unpaid Late Charges; (d) fourth, to the payment of accrued and
unpaid interest on this Note at the Default Rate; (e) fifth, to the payment of
accrued and unpaid interest on this Note at the Base Rate; (f) sixth, so long as
no Event of Default or Incipient Default exists, to the payment of any reserves
or escrows required under the Loan Documents; (g) seventh, to the unpaid
principal balance of this Note; and (h) eighth, to Borrower's obligations under
Section 8.20 of the Loan Agreement and to Borrower's obligations under the
Hazardous Substances Indemnity Agreement of dated May 31, 1994.
3. Prepayment.
3.1. The Loan may not be prepaid, in whole or in part, at any
time during the term hereof, except as expressly set forth below.
3.2. Prepayment in full of the Loan is permitted at any time
on or after the first day of the first (1st) Loan Month and prior to the
Maturity Date; provided, however, that upon any such prepayment in full which is
made on or before the last day of the eighteenth (18th) Loan Month, Borrower
shall also pay Lender the Prepayment Fee. Any prepayment in full which is made
on the Stated Maturity Date of May 1, 2000 or after the first day of the
nineteenth (19th) Loan Month shall not be subject to the Prepayment Fee. The
Prepayment Fee is consideration for the privilege of making such prepayment, and
shall be paid to Lender simultaneously with the making of the prepayment. The
Prepayment Fee shall not apply to (i) payments made pursuant to subsection 2.3
hereof, and (ii) prepayment in part or in full made with condemnation or
insurance proceeds. Any such prepayment permitted hereunder and made by Borrower
shall be applied to the repayment of the Loan in
7
<PAGE> 8
accordance with subsection 2.10 of this Note; provided however, that any sums
applied to the principal balance of this Note shall be so applied in the inverse
order of maturity.
3.3. Borrower shall give Lender thirty (30) days prior written
notice of a proposed prepayment, which notice shall be irrevocable.
3.4. Any tender of payment by Borrower or any other party,
except as expressly set forth in this Section 3.4, shall constitute a prohibited
prepayment hereunder.
3.5. If an Event of Default shall occur, whether or not the
maturity of this Note has been accelerated, then a tender of payment by
Borrower, or by any entity on behalf of Borrower, of the amount necessary to
satisfy all sums due under this Note and the Loan Documents (including, without
limitation, any sums due on any judgment rendered in any foreclosure action, or
any amounts necessary to redeem the property subject to the Loan Documents) made
at a time prior to, during or after a judicial foreclosure or a sale pursuant to
the exercise of a power of sale of the property subject to the Loan Documents,
must, to the extent permitted by law and subject to the provisions of subsection
2.9 of this Note, be accompanied by the Prepayment Fee, if the Prepayment Fee
would otherwise be applicable at the time of said Event of Default. Borrower
acknowledges that Lender has relied upon the anticipated investment return under
this Note in entering into this transaction and in making commitments to third
parties.
3.6. Borrower acknowledges that the Prepayment Fee represents
a reasonable estimate of a fair and equitable compensation for the loss that may
be sustained by Lender due to the prepayment of the principal sum evidenced by
this Note. The Prepayment Fee shall be paid without prejudice to the right of
Lender to collect any other amounts provided to be paid under the Loan
Documents. Nothing herein contained shall constitute an agreement on the part of
Lender to accept any prepayment, other than as expressly provided in subsection
3.2 above.
4. Extension Options.
4.1. Borrower shall have two (2) successive options (each, an
"Extension Option") to extend the term of the Loan for a period of one (1) year
each. Borrower's right to exercise any Extension Option shall be conditioned
upon satisfaction by Borrower of each of the following conditions:
4.2. Borrower shall deliver an Extension Notice to Lender no
earlier than the date that is ninety (90) days prior to the first day of the
Extended Term to which such Extension Notice relates and no later than the date
that is thirty (30) days prior to the first day of the Extended Term to which
such Extension
8
<PAGE> 9
Notice relates, TIME BEING OF THE ESSENCE WITH RESPECT TO SUCH DATES;
4.3. No Event of Default or Incipient Default shall exist on
the date of delivery of the Extension Notice or on the first day of the Extended
Term to which such Extension Notice relates; and
4.4. Borrower shall, simultaneously with the delivery of the
Extension Notice, pay to Lender the Extension Fee, which fee shall be deemed
fully earned by Lender upon payment thereof (irrespective of whether. the Loan
is accelerated prior to the commencement or expiration of the Extended Term to
which such payment relates).
5. Net Cash Flow Payments.
5.1. At all times during the second Extended Term, Borrower
shall, on the twentieth day of each Loan Month, pay to Lender the Additional
Amortization Payment for the immediately preceding Loan Month. So long as no
Event of Default or Incipient Default exists hereunder, Lender shall apply all
Additional Amortization Payments to the reduction of the outstanding principal
balance of the Loan in the inverse order of maturity. Upon the occurrence of an
Event of Default, Lender shall apply the Additional Amortization Payments in the
order and priority set forth in subsection 2.10 of the Note.
5.2. For purposes of calculating and making the Additional
Amortization Payment due on the twentieth day of each Loan Month, Borrower shall
base such calculation upon Borrower's unaudited, internally generated financial
statements, which Borrower hereby covenants will be substantially true, correct
and accurate at the time delivered to Lender. Following Lender's receipt of
Borrower's audited financial statements (as required under Section 3. 1. K of
the Loan Agreement), Lender shall recalculate the Additional Amortization
Payments based upon said audited financial statements. Any shortage in the
aggregate Additional Amortization Payments shall be paid to Lender by Borrower
immediately following written notice thereof from Lender to Borrower.
6. Default. Upon the occurrence of any Event of Default, the principal
amount of the Loan, together with all accrued interest thereon and all amounts
due and payable hereunder (including the Prepayment Fee, if applicable) shall
immediately become due and payable on demand. If this Note, or any part hereof,
is not paid when due, whether by acceleration or otherwise, Borrower promises to
pay all costs of collection, including, but not limited to, reasonable
attorneys, fees and disbursements, incurred by the holder hereof on account of
such collection, whether or not suit is filed hereon. Additionally, after an
Event of Default or the Maturity Date, the Interest Rate shall without notice
immediately become the Default Rate.
9
<PAGE> 10
7. Notices. All notices, demands and requests required or desired to be
given hereunder shall be in writing and shall be delivered in accordance with
the provisions of Section 8.7 of the Loan Agreement which is hereby incorporated
by reference.
8. Governing Law. In all respects, including, without limitation,
matters of construction and performance of this Note and the obligations arising
hereunder, this Note shall be governed by, and construed in accordance with, the
internal laws of the State of Connecticut applicable to contracts and
obligations made in such state and any applicable laws of the United States of
America.
9. Waiver. Borrower hereby (a) waives demand, presentment for payment,
notice of nonpayment, notice of intent to accelerate, notice of acceleration,
protest, notice of protest and all other notice (except notice specifically
provided for herein or in the Loan Documents), filing of suit and diligence in
collecting this Note or enforcing any of the security for this Note, (b) agrees
to any substitution, exchange or release of any party primarily or secondarily
liable hereon, (c) agrees that Lender or any other holder hereof shall not be
required first to institute suit or exhaust its remedies herein or to enforce
its rights under any Loan Document in order to enforce payment of this Note, (d)
consents to any extension or postponement of time of payment of this Note and to
any other indulgence with respect hereto without notice thereof to Borrower, and
(e) agrees that the failure to exercise any option or election herein provided
upon the occurrence of any default in respect hereto shall not be construed as a
waiver of the right to exercise such option or election at any later date or
upon the occurrence of a subsequent default in respect hereto.
10. Business Purpose. Borrower represents and warrants that the
proceeds of this Note will be used for business purposes and not for personal,
family or household purposes.
11. Severability. If any provision of this Note or any payments
pursuant to this Note shall be invalid or unenforceable to any extent, the
remainder of this Note and any other payments hereunder shall not be affected
thereby and shall be enforceable to the greatest extent permitted by applicable
law.
12. Miscellaneous.
12.1. BORROWER HEREBY WAIVES THE RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING BASED UPON, OR RELATED TO, THE SUBJECT MATTER OF THIS
NOTE. THIS WAIVER IS KNOWINGLY, INTENTIONALLY, AND VOLUNTARILY MADE BY BORROWER,
AND BORROWER ACKNOWLEDGES THAT LENDER HAS NOT MADE ANY REPRESENTATIONS OF FACT
TO INDUCE THIS WAIVER OF TRIAL BY JURY OR IN ANY WAY TO MODIFY OR NULLIFY ITS
EFFECT. BORROWER FURTHER ACKNOWLEDGES THAT BORROWER HAS BEEN REPRESENTED (OR HAS
HAD THE OPPORTUNITY TO BE REPRESENTED) IN THE SIGNING OF THIS NOTE AND IN THE
MAKING OF THIS WAIVER BY
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<PAGE> 11
INDEPENDENT LEGAL COUNSEL, SELECTED BY BORROWER, AND THAT BORROWER HAS HAD THE
OPPORTUNITY TO DISCUSS THIS WAIVER WITH COUNSEL.
12.2. Borrower hereby submits to personal jurisdiction in the
State of Connecticut for the enforcement of the provisions of this Note and
irrevocably waives any and all rights to object to such jurisdiction for the
purposes of litigation to enforce any provision of this Note. Borrower hereby
consents to the jurisdiction of and agrees that any action, suit or proceeding
to enforce this Note may be brought in any state or federal court in the State
of Connecticut. Borrower hereby irrevocably waives any objection which Borrower
may have to the laying of the venue of any such action, suit, or proceeding in
any such court and hereby further irrevocably waives any claim that any such
action, suit or proceeding brought in such a court has been brought in an
inconvenient forum. Borrower hereby appoints the Secretary of the State of
Connecticut as its agent for service of process; provided, however, Lender shall
deliver to Borrower in accordance with the requirements of Section 7 of this
Note a copy of any such service of process made upon the Secretary of the State
of Connecticut. Borrower hereby consents that service of process in any action,
suit or proceeding may be made by service upon the aforesaid agent for service
of process, by personal service upon Borrower, or by delivery in accordance with
the notice requirements of Section 7 of this Note or in such other manner
permitted by law.
12.3. TO INDUCE LENDER TO ENTER INTO THE COMMERCIAL LOAN
TRANSACTION EVIDENCED BY THIS NOTE AND THE LOAN AGREEMENT AND SECURED BY THE
OTHER LOAN DOCUMENTS, BORROWER AGREES THAT THE SAID TRANSACTION IS COMMERCIAL
AND NOT A CONSUMER TRANSACTION.
12.4. This Note shall be binding upon Borrower and its
representatives, successors and assigns.
12.5. This Note may not be changed orally, but only by an
agreement in writing signed by Borrower and Lender.
12.6. The headings used in this Note are for ease of reference
only and shall not be used to construe or interpret this Note.
12.7. Borrower agrees that the terms and conditions of this
Note are the result of negotiations between Borrower and Lender and that this
Note shall not be construed in favor of or against any party by reason of the
extent to which any party or its professionals participated in the preparation
of this Note.
12.8. This Note amends and restates the Note (Secured) dated
May 31, 1994 executed by Borrower in favor of Lender in the principal amount of
$12,000,000, and evidences the indebtedness previously evidenced thereby.
11
<PAGE> 12
13. Limitation on Liability. The provisions of Section 8.20 of the Loan
Agreement are incorporated herein by reference.
IN WITNESS WHEREOF, the undersigned has caused this Note to be executed
by its duly authorized representative as of the date and year first above
written.
NET 2 L.P., a Delaware limited
partnership
By: LEPERCQ NET 2 L.P., a Delaware
limited partnership, Its
General Partner
By: LEPERCQ NET 2 INC., a
Delaware corporation
By:
--------------------------------------
Its Vice President
Borrower's Taxpayer Identification
Number: 13-3497738
12
<PAGE> 13
Net 2 L.P. Amortization Schedule
<TABLE>
<CAPTION>
Loan Month Principal Payment Balance
---------- ----------------- -------
<S> <C> <C>
$24,500,000.00
1 $ 37,863.29 $24,462,136.71
2 $ 38,139.38 $24,423,997.33
3 $ 38,417.48 $24,385,579.86
4 $ 38,697.60 $24,346,882.25
5 $ 38,979.77 $24,307,902.48
6 $ 39,264.00 $24,268,638.48
7 $ 39,550.30 $24,229,088.18
8 $ 39,838.69 $24,189,249.49
9 $ 40,129.18 $24,149,120.31
10 $ 40,421.79 $24,108,698.52
11 $ 40,716.53 $24,067,981.99
12 $ 41,013.42 $24,026,968.57
13 $ 41,312.48 $23,985,656.09
14 $ 41,613.71 $23,944,042.37
15 $ 41,917.15 $23,902,125.23
16 $ 42,222.79 $23,859,902.43
17 $ 42,530.67 $23,817,371.76
18 $ 42,840.79 $23,774,530.98
19 $133,694.58 $23,640,836.39
20 $134,669.44 $23,506,166.95
21 $135,651.40 $23,370,515.55
22 $136,640.53 $23,233,875.02
23 $137,636.87 $23,096,238.15
24 $138,640.47 $22,957,597.68
25 $139,651.39 $22,817,946.29
26 $140,669.68 $22,677,276.61
27 $141,695.40 $22,535,581.22
28 $142,728.59 $22,392,852.63
29 $143,769.32 $22,249,083.30
30 $144,817.64 $22,104,265.66
</TABLE>
