<PAGE> 1
================================================================================
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, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1-10643
----------------------
HALLWOOD REALTY PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
----------------------
DELAWARE 75-2313955
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3710 RAWLINS
SUITE 1500
DALLAS, TEXAS 75219-4298
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 528-5588
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO
SUCH FILING REQUIREMENTS FOR THE PAST 90 DAYS.
YES [X] NO [ ]
THE REGISTRANT IS A LIMITED PARTNERSHIP AND ISSUES UNITS REPRESENTING OWNERSHIP
OF LIMITED PARTNER INTERESTS.
NUMBER OF UNITS OUTSTANDING AT MAY 5, 1998: 1,672,556 UNITS.
================================================================================
<PAGE> 2
HALLWOOD REALTY PARTNERS, L.P.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
PAGE
----
<S> <C>
Item 1 Financial Statements (unaudited) :
Consolidated Balance Sheets as of March 31, 1998
and December 31, 1997 3
Consolidated Statements of Operations for the
Three Months Ended March 31, 1998 and 1997 4
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations, Liquidity and Capital Resources 8
PART II - OTHER INFORMATION
- ---------------------------
Items 1 to 6 Other Information 10
Signatures 11
</TABLE>
Page 2
<PAGE> 3
HALLWOOD REALTY PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT UNIT AMOUNTS)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ---------
(unaudited)
<S> <C> <C>
ASSETS
Real estate:
Land $ 56,441 $ 56,441
Buildings and improvements 259,522 259,220
Tenant improvements 18,468 18,734
--------- ---------
334,431 334,395
Accumulated depreciation and amortization (156,799) (155,367)
--------- ---------
Real estate, net 177,632 179,028
Cash and cash equivalents 8,639 6,665
Accounts receivable 1,247 1,162
Deferred lease commissions, net 7,077 7,049
Lease concessions 2,596 2,511
Loan reserves and escrows 7,938 6,215
Loan costs, net 3,803 3,213
Prepaid expenses and other assets, net 1,205 1,291
--------- ---------
Total assets $ 210,137 $ 207,134
========= =========
LIABILITIES AND PARTNERS' CAPITAL
Liabilities:
Mortgages payable $ 162,378 $ 157,911
Unamortized mortgage payable forgiveness 8,501 8,926
Accounts payable and accrued expenses 3,924 4,157
Prepaid rent and security deposits 2,495 2,764
Payable to affiliates 340 335
--------- ---------
Total liabilities 177,638 174,093
--------- ---------
Partners' capital:
Limited partners - 1,672,556 units outstanding 32,174 32,711
General partner 325 330
--------- ---------
Total partners' capital 32,499 33,041
--------- ---------
Total liabilities and partners' capital $ 210,137 $ 207,134
========= =========
</TABLE>
See notes to consolidated financial statements.
Page 3
<PAGE> 4
HALLWOOD REALTY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER UNIT AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
REVENUES:
Property operations $ 13,676 $ 12,773
Interest 147 135
---------- ----------
Total revenues 13,823 12,908
---------- ----------
EXPENSES:
Property operations 5,591 5,821
Interest 3,183 3,217
Depreciation and amortization 3,078 2,985
General and administrative 902 817
---------- ----------
Total expenses 12,754 12,840
---------- ----------
INCOME BEFORE EXTRAORDINARY ITEM 1,069 68
Extraordinary item -
Loss on early extinguishment of debt (1,611) --
---------- ----------
NET INCOME (LOSS) $ (542) $ 68
========== ==========
ALLOCATION OF NET INCOME (LOSS):
Limited partners $ (537) $ 67
General partner (5) 1
---------- ----------
Total $ (542) $ 68
========== ==========
NET INCOME (LOSS) PER UNIT AND
POTENTIAL UNIT:
Earnings per unit - basic
Income before extraordinary item $ .63 $ .04
Loss on early extinguishment of debt (.95) --
---------- ----------
Net income (loss) $ (.32) $ .04
========== ==========
Earnings per unit -assuming dilution
Income before extraordinary item $ .61 $ .04
Loss on early extinguishment of debt (.92) --
---------- ----------
Net income (loss) $ (.31) $ .04
========== ==========
WEIGHTED AVERAGE UNITS USED IN COMPUTING
NET INCOME (LOSS) PER UNIT AND POTENTIAL UNIT:
Basic 1,673 1,673
========== ==========
Assuming dilution 1,739 1,720
========== ==========
</TABLE>
See notes to consolidated financial statements.
Page 4
<PAGE> 5
HALLWOOD REALTY PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1998 1997
---------- ----------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $ (542) $ 68
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 3,078 2,985
Loss on early extinguishment of debt 1,611 --
Amortization of mortgage principal forgiveness (425) (418)
Lease concessions (85) 4
Changes in assets and liabilities:
Receivables (85) (168)
Prepaid lease commissions (600) (578)
Prepaid expenses and other assets, net (981) 5
Accounts payable and other liabilities (497) (727)
---------- ----------
Net cash provided by operating activities 1,474 1,171
---------- ----------
INVESTING ACTIVITIES:
Property and tenant improvements (1,103) (1,080)
Tenant improvement escrow -- 125
Mortgage receivable principal payments -- 23
---------- ----------
Net cash used for investing activities (1,103) (932)
---------- ----------
FINANCING ACTIVITIES:
Mortgage principal proceeds 34,000 --
Mortgage principal refinanced (28,707) --
Mortgage prepayment penalty (1,465) --
Mortgage principal payments (826) (775)
Loan reserves (550) --
Loan fees (849) --
---------- ----------
Net cash provided by (used for) financing activities 1,603 (775)
---------- ----------
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 1,974 (536)
BEGINNING CASH AND CASH EQUIVALENTS 6,665 3,556
---------- ----------
ENDING CASH AND CASH EQUIVALENTS $ 8,639 $ 3,020
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid in cash during the period $ 3,687 $ 3,503
========== ==========
</TABLE>
See notes to consolidated financial statements.
Page 5
<PAGE> 6
HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
1 ORGANIZATION AND ACCOUNTING POLICIES
Hallwood Realty Partners, L.P. ("HRP"), a publicly traded Delaware limited
partnership, is engaged in diversified real estate activities, including the
acquisition, ownership and operation of commercial office and industrial
real estate and other real estate related assets. The limited partners'
interests are traded on the American Stock Exchange under the symbol "HRY".
Hallwood Realty Corporation ("HRC" or "General Partner"), a Delaware
corporation and wholly-owned subsidiary of The Hallwood Group Incorporated
("Hallwood"), is HRP's general partner and is responsible for asset
management of the partnership and its real estate properties. Hallwood
Commercial Real Estate, Inc. ("HCRE"), another wholly-owned subsidiary of
Hallwood, provides property management services for HRP's real estate
properties.
HRP has adopted Statements of Financial Accounting Standards No. 130 -
"Reporting on Comprehensive Income" effective January 1, 1998. As HRP had
no items of other comprehensive income in the period presented,
comprehensive income is not reported.
The consolidated financial statements have been prepared in accordance with
the instructions to Form 10-Q and do not include all of the information and
disclosures required by generally accepted accounting principles, although,
in the opinion of management, all adjustments considered necessary for a
fair presentation have been included. These financial statements should be
read in conjunction with the audited consolidated financial statements and
related disclosures thereto included in Form 10-K for the year ended
December 31, 1997.
2 TRANSACTIONS WITH RELATED PARTIES
HRC and HCRE are compensated for services provided to HRP and its real
estate properties and are set forth in the following table for the periods
presented (in thousands):
<TABLE>
<CAPTION>
Entity Three Months
Paid or Ended
REIMBURSED March 31,
---------- ----------------
1998 1997
----- -----
<S> <C> <C> <C>
Asset management fee HRC $ 121 $ 103
Property management fee HCRE 391 344
Lease commissions HCRE 387 345
Construction fees HCRE 57 69
Reimbursements of costs (a) HRC 646 645
</TABLE>
(a) These costs are mostly recorded as general and administrative
expenses and represent reimbursement to HRC, at cost, for
partnership level salaries, employee and director insurance, and
certain overhead costs. HRP pays, on a monthly basis, the
balance of its account with HRC.
3 MORTGAGES PAYABLE
On February 27, 1998, HRP entered into an agreement to refinance the
mortgage loan secured by Executive Park that became effective March 20,
1998. The new loan reduces the interest rate from 8.87% to an effective
interest rate of 7.32% and extends the amortization period from fifteen
years to approximately twenty-seven years with a maturity date of April 11,
2008. The loan proceeds of $34,000,000 were used (i) to pay the current
principal balance of $28,707,000, (ii) to pay transaction costs of
approximately $766,000, (iii) to pay a prepayment penalty of $1,465,000, and
(iv) for general working capital. The prepayment penalty along with the
write off of $146,000 of unamortized loan costs associated with the retired
loan were expensed and are included in the Statement of Operations as an
extraordinary item as a loss on early extinguishment of debt totaling
$1,611,000.
Page 6
<PAGE> 7
HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
4 EARNINGS PER UNIT
Basic earnings per unit is computed by dividing net income (loss)
attributable to the limited partners' interests by the weighted average
number of units outstanding. Earnings per unit assuming dilution is computed
by dividing net income (loss) attributable to the limited partners'
interests by the weighted average number of units and potential units
outstanding. Options to acquire units were issued during 1995 and are
considered to be potential units. The number of potential units is computed
using the treasury stock method which assumes that the increase in the
number of units is reduced by the number of units which could have been
repurchased by HRP with the proceeds from the exercise of these options. The
following table illustrates the amounts used to calculate the weighted
average number of units outstanding:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1998 1997
------ -------
<S> <C> <C>
Weighted average units outstanding - basic 1,673 1,673
Issuance of units from options 86 86
Repurchase of units from unit option proceeds (20) (39)
------ ------
Weighted average units outstanding - assuming dilution 1,739 1,720
====== ======
</TABLE>
5 LITIGATION
Reference is made to Note 9 to the audited consolidated financial statements
contained in Form 10-K for the year ended December 31, 1997.
Beginning in 1997, HRP has been involved in two lawsuits with Gotham
Partners, L.P. The first complaint seeks access to certain books and
records of HRP, a list of the limited partners and reimbursement of the
plaintiff's expenses. The second complaint alleges claims of breach of
fiduciary duties, breach of HRP's partnership agreement, fraud, and as to
Hallwood, aiding and abetting these alleged breaches.
On June 27, 1997, the parties entered into a Stipulation and Order under
which HRP provided to plaintiff copies of certain of the documents
requested. The other claims in the two actions remain outstanding.
On August 27, 1997, defendants moved to dismiss the complaint in the second
action for plaintiff's failure either to make a demand on the general
partner to bring suit or to allege adequately that such a demand was futile.
On February 6, 1998, the Court granted defendants' motion to dismiss but
gave plaintiff thirty days to file an amended complaint. Plaintiffs filed
an amended complaint on March 6, 1998, which defendants have again moved to
dismiss.
HRP's management believes that the claims are without merit and intend to
defend the cases vigorously, but because of their early stages, cannot
predict the outcome of the claims or any possible effect an adverse outcome
might have.
Page 7
<PAGE> 8
HALLWOOD REALTY PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997
(UNAUDITED)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, LIQUIDITY AND CAPITAL RESOURCES
RESULTS OF OPERATIONS
FIRST QUARTER 1998 COMPARED TO FIRST QUARTER 1997
REVENUE FROM PROPERTY OPERATIONS increased $903,000, or 7.1%, for the first
quarter of 1998, compared to the 1997 first quarter. The following table
illustrates the components of the change, in thousands:
<TABLE>
<S> <C>
Rental income, net $ 880
Expense recoveries (45)
Other property income 68
------
Net increase $ 903
======
</TABLE>
Rental income increased due to a rise in average occupancy between the
comparable periods from 91.6% to 94.0% and due to rental rate increases
primarily at the properties in the Atlanta market. As of March 31, 1998, HRP
had leases executed and in place for 94.1% of the portfolio's net rentable
square feet.
INTEREST INCOME increased $12,000 as a result of additional earnings on
overnight investments due to higher average cash balances available for
investment between the periods.
PROPERTY OPERATING EXPENSES decreased $230,000, or 4.0%, for the first quarter
of 1998, compared to the same period in 1997. The following table illustrates
the components of the change, in thousands:
<TABLE>
<S> <C>
Administrative costs $ (10)
Management fees 66
Marketing and leasing 9
Utilities (154)
Services, including janitorial (57)
Repairs and maintenance (25)
Real estate taxes (45)
Insurance (14)
-------
Net decrease $ (230)
=======
</TABLE>
Management fees increased as a result of the increase in occupancy and net
rental income mentioned above. Most of the decline in utilities costs were due
to a milder winter at the Michigan properties during 1998 as compared to the
comparable period in 1997. Service costs declined due to a decrease in snow
removal costs.
INTEREST EXPENSE diminished $34,000, or 1.1%, principally due to the reduction
in average debt levels between the periods as a result of monthly principal
payments.
DEPRECIATION AND AMORTIZATION EXPENSE increased $93,000 primarily due to an
increase in lease commission amortization as a result of new leases executed
during 1997 which have increased the portfolio's occupancy.
GENERAL AND ADMINISTRATIVE EXPENSES increased $85,000 for the first three
months of 1998, as compared to the 1997 period, primarily due to an increase in
state franchise taxes in Michigan and certain personnel costs.
LOSS ON EARLY EXTINGUISHMENT OF DEBT of $1,611,000 in the 1998 period
represents a prepayment penalty of $1,465,000 incurred with the early payoff of
a loan secured by Executive Park and the write off of $146,000 of unamortized
loan costs associated with the retired loan (see Note 3 to the consolidated
financial statements for more information about the refinancing). The new loan
will generate annual cash flow savings of approximately $750,000 in reduced
principal and interest payments.
Page 8
<PAGE> 9
HALLWOOD REALTY PARTNERS, L.P.
LIQUIDITY AND CAPITAL RESOURCES
HRP is engaged in diversified real estate activities, including the
acquisition, ownership and operation of commercial office and industrial real
estate and other real estate related assets. While it is the General Partner's
primary intention to operate HRP's existing real estate investments and to
acquire and operate additional real estate investments, HRC also continually
evaluates each of HRP's real estate investments in light of current economic
trends and operations to determine if any should be considered for disposal.
As of March 31, 1998, HRP owned twelve real estate properties located in six
states. Seven are commercial office building properties and five are
industrial park properties containing approximately 2,608,000 and 2,554,000 net
rentable square feet, respectively. HRP seeks to maximize the value of its
real estate by making capital and tenant improvements, by executing marketing
programs to attract and retain tenants, and reducing operating expenses where
possible.
On February 27, 1998, HRP entered into an agreement to refinance the mortgage
loan secured by Executive Park that became effective March 20, 1998. The new
loan reduces the interest rate from 8.87% to an effective interest rate of
7.32% and extends the amortization period from fifteen years to approximately
twenty-seven years with a maturity date of April 11, 2008. The loan proceeds of
$34,000,000 were used (i) to pay the current principal balance of $28,707,000,
(ii) to pay transaction costs of approximately $766,000, (iii) to pay a
prepayment penalty of $1,465,000, and (iv) for general working capital. The
new loan will generate annual cash flow savings of approximately $750,000 in
reduced principal and interest payments.
HRP's cash position increased $1,974,000 during the first three months of 1998
from $6,665,000 as of December 31, 1997 to $8,639,000 as of March 31, 1998.
The sources of cash during the period were $34,000,000 of mortgage principal
proceeds and $1,474,000 of cash provided by operating activities. Uses of cash
during the period were $28,707,000 of mortgage principal refinanced, $1,103,000
of property and tenant improvements, $1,465,000 of mortgage prepayment penalty,
$826,000 of mortgage principal payments, $849,000 of loan fees, and $550,000 of
net loan reserve requirements.
Substantially all of the buildings in eleven of HRP's Properties were
encumbered by and pledged as collateral under non-recourse mortgages as of
March 31, 1998. HRP has no mortgage loans maturing or requiring balloon
principal payments until the year 2000. Based upon loan amortizations in
effect, HRP is required to pay $1,951,000 of principal payments in for the
remainder of 1998.
HRP has estimated and budgeted tenant and capital improvements of approximately
$5,370,000 and lease commissions of about $1,570,000 for 1998. HRP has
incurred $1,103,000 of tenant and capital improvements and $600,000 of lease
commissions in the first three months of 1998 of these estimates.
For the foreseeable future, HRP anticipates that mortgage principal payments,
tenant and capital improvements, and lease commissions will be funded by net
cash from operations. The primary sources of capital to fund any future
acquisitions will be proceeds from the sale or financing of one or more of its
Properties.
Each quarter HRC, as General Partner, reviews the Partnership's capacity to
make cash distributions. HRP has not made any cash distributions since
February, 1992.
This Form 10-Q contains certain forward-looking statements. These statements
include the plans and objectives of management for future operations. The
forward-looking statements included herein are based on current expectations
that involve numerous risks and uncertainties. Assumptions relating to the
foregoing involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which
are beyond the control of HRP. Although HRP believes that the assumptions
underlying the forward-looking statements are reasonable, any of the
assumptions could be inaccurate and, therefore, there can be no assurance that
the forward-looking statements included in this Form 10-Q will prove to be
accurate. In light of the significant uncertainties inherent in the
forward-looking statements included herein, the inclusion of such information
should not be regarded as a representation by HRP or any other person that the
objectives and plans of HRP will be achieved.
Page 9
<PAGE> 10
HALLWOOD REALTY PARTNERS, L.P.
PART II - OTHER INFORMATION
<TABLE>
<CAPTION>
Item
----
<S> <C> <C>
1 Legal Proceedings None.
2 Changes in Securities None.
3 Defaults upon Senior Securities None.
4 Submission of Matters to a Vote of Security Holders None.
5 Other Information None.
6 Exhibits and Reports on Form 8-K
(a) Exhibits
2.1 - Loan Agreement between Hallwood 98, L.P.
and Nomura Asset Capital Corporation Page 12
27 - Financial Data Schedule Page 135
(b) Reports on Form 8-K None.
</TABLE>
Page 10
<PAGE> 11
HALLWOOD REALTY PARTNERS, L.P.
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.
HALLWOOD REALTY PARTNERS, L.P.
-----------------------------------------
(Registrant)
By: HALLWOOD REALTY CORPORATION
General Partner
Date: May 6, 1998 By: /s/ WILLIAM L. GUZZETTI
----------- ----------------------------------
William L. Guzzetti
President
(Chief Operating Officer)
Date: May 6, 1998 By: /s/ JEFFREY D. GENT
----------- ----------------------------------
Jeffrey D. Gent
Vice President - Finance
(Principal Financial and
Accounting Officer)
Page 11
<PAGE> 12
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ -----------
<S> <C>
2.1 Loan Agreement between Hallwood 98, L.P.
and Nomura Asset Capital Corporation
27 Financial Data Schedule
</TABLE>
<PAGE> 1
LOAN AGREEMENT
Dated as of March 20, 1998
by and between
HALLWOOD 98, L.P.
(as Borrower)
and
NOMURA ASSET CAPITAL CORPORATION
(as Lender)
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
----
<S> <C>
ARTICLE I
CERTAIN DEFINITIONS............................................. 1
Section 1.1. Definitions.............................................................................. 1
ARTICLE II
GENERAL TERMS................................................ 37
Section 2.1. Amount of the Loan....................................................................... 37
Section 2.2. Use of Proceeds.......................................................................... 37
Section 2.3. Security for the Loan.................................................................... 37
Section 2.4. Borrower's Note.......................................................................... 38
Section 2.5. Principal and Interest Payments.......................................................... 38
Section 2.6. Prepayment.............................................................................. 40
Section 2.7. Application of Payments................................................................. 41
Section 2.8. Payment of Debt Service, Method and Place of Payment.................................... 41
Section 2.9. Taxes................................................................................... 42
Section 2.10. Defeasance Requirements................................................................. 42
Section 2.11. Central Cash Management................................................................. 47
Section 2.12 Security Agreement...................................................................... 56
Section 2.13. Securitization.......................................................................... 59
ARTICLE III
CONDITIONS PRECEDENT............................................. 61
Section 3.1. Conditions Precedent to the Making of the Loan........................................... 61
Section 3.2. Form of Loan Documents and Related Matters............................................... 67
ARTICLE IV
REPRESENTATIONS AND WARRANTIES........................................ 67
Section 4.1. Representations and Warranties of Borrower............................................... 67
Section 4.2. Survival of Representations and Warranties............................................... 77
ARTICLE V
AFFIRMATIVE COVENANTS............................................ 77
Section 5.1. Borrower Covenants....................................................................... 77
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VI
NEGATIVE COVENANTS.............................................. 93
Section 6.1. Borrower Negative Covenants.............................................................. 93
ARTICLE VII
DEFAULTS................................................... 95
Section 7.1. Event of Default......................................................................... 95
Section 7.2. Remedies................................................................................. 98
Section 7.3. Remedies Cumulative...................................................................... 99
Section 7.4. Lender's Right to Perform................................................................100
ARTICLE VIII
MISCELLANEOUS................................................100
Section 8.1. Survival.................................................................................100
Section 8.2. Lender's Discretion......................................................................100
Section 8.3. Governing Law............................................................................101
Section 8.4. Modification, Waiver in Writing..........................................................102
Section 8.5. Delay Not a Waiver.......................................................................102
Section 8.6. Notices..................................................................................103
SECTION 8.7. TRIAL BY JURY............................................................................104
Section 8.8. Headings.................................................................................104
Section 8.9. Assignment...............................................................................104
Section 8.10. Severability............................................................................104
Section 8.11. Preferences.............................................................................104
Section 8.12. Waiver of Notice........................................................................105
Section 8.13. Remedies of Borrower....................................................................105
Section 8.14. Exculpation.............................................................................105
Section 8.15. Exhibits Incorporated...................................................................107
Section 8.16. Offsets, Counterclaims and Defenses.....................................................107
Section 8.17. No Joint Venture or Partnership.........................................................107
Section 8.18. Waiver of Marshalling of Assets Defense.................................................107
Section 8.19. Intentionally omitted...................................................................108
Section 8.20. Conflict; Construction of Documents.....................................................108
Section 8.21. Brokers and Financial Advisors..........................................................108
Section 8.22. Counterparts............................................................................108
Section 8.23. Estoppel Certificates...................................................................108
Section 8.24. Payment of Expenses.....................................................................109
Section 8.25. Bankruptcy Waiver.......................................................................109
Section 8.26 Entire Agreement........................................................................110
Section 8.27 Dissemination of Information............................................................110
Section 8.28. Limitation of Interest..................................................................110
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 8.29. Indemnification.........................................................................111
Section 8.30. Borrower Acknowledgments................................................................112
Section 8.31. Publicity...............................................................................112
Section 8.32. Buy-Up..................................................................................112
</TABLE>
<PAGE> 5
EXHIBITS
Exhibit A - Operating Expense Certificate
Exhibit B - Additional Definitions
Exhibit C - Capital Improvements and Repair and Environmental Remediation
Exhibit
Exhibit D - Allocated Loan Amounts
<PAGE> 6
LOAN AGREEMENT
THIS LOAN AGREEMENT, made as of March , 1998, is by and between
NOMURA ASSET CAPITAL CORPORATION, a Delaware corporation, having an address at
633 West Fifth Avenue, 68th Floor, Los Angeles, California 90071, Attention:
David Walker, Telefax Number (213) 243-1622 (together, with its successors and
assigns, "Lender"), and HALLWOOD 98, L.P., a Delaware limited partnership, with
an address of c/o Hallwood Realty Partners, L.P., 3710 Rawlins, Suite 1500,
Dallas, Texas 75219, Attention: John G. Tuthill, Telefax Number: (214) 528-8855
(the "Borrower").
RECITALS
WHEREAS, Borrower desires to obtain a loan (the "Loan") from Lender
in the principal amount of $31,440,036.00 (the "Loan Amount");
WHEREAS, Lender is willing to make the Loan on the condition that
Borrower joins in the execution and delivery of this Agreement which shall
establish the terms and conditions of the Loan; and
WHEREAS, Lender and Borrower contemplate that all or any portion of
Lender's interest in the Loan and the Loan Documents may be assigned, in whole
or in part, by Lender to another Person, including, without limitation, to a
trustee on behalf of security holders in connection with a Securitization.
NOW, THEREFORE, in consideration of the making of the Loan by
Lender, and the covenants, agreements, representations and warranties set forth
in this Agreement, the parties hereby covenant, agree, represent and warrant as
follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Definitions. For all purposes of this Agreement:
(a) the capitalized terms defined in this Article I have the
meanings assigned to them in this Article I, and include the plural as well as
the singular;
(b) all accounting terms have the meanings assigned to them in
accordance with GAAP;
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(c) the words "herein", "hereof", and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Article, Section, or other subdivision; and
(d) the following terms have the following meanings:
"Account Collateral" has the meaning provided in Section 2.12(a).
"Accounts" has the meaning provided in the Mortgage.
"Accrued Interest" has the meaning provided in Section 2.5(d).
"Adjusted Net Operating Income" means, for any period, the Net
Operating Income for such period reduced by (i) the Capital Reserve Amount, pro
rated for the applicable period, (ii) an amount necessary to reflect a
management fee equal to four percent (4%) of Gross Revenues, (iii) an amount
necessary to reflect a minimum annual vacancy factor of five percent (5%), pro
rated for the applicable period, (iv) a normalized, annualized, expense
allowance for rollover of Leases, to the extent that the revenue from such
Leases is included in Net Operating Income for the Facility after taking into
account any adjustment pursuant to clauses (v) through (viii) hereof, which
allowance shall be calculated by Lender based upon current market rent, current
market tenant improvement costs, current market leasing commissions and a
retention assumption equal to the lesser of (a) the ratio of the number of
square feet occupied by tenants whose Leases were scheduled to expire within
three years of the date of the calculation which have not been vacated to the
number of square feet occupied by tenants whose Leases were scheduled to expire
within three years of the date of the calculation and (b) seventy percent (70%)
or such lower amount mandated by the Rating Agencies, (v) an income adjustment
for any Rent collected from temporary or month-to-month tenants, (vi) an income
adjustment for any tenants operating under bankruptcy protection, (vii) an
income adjustment to make any above market Leases to market rent, and (viii) an
income adjustment to address any rent adjustments or cancellation options
contained in any Lease. Notwithstanding the foregoing part of this definition of
"Adjusted Net Operating Income" to the contrary, if the period for which
Adjusted Net Operating Income is being calculated includes periods prior to the
Closing Date, Adjusted Net Operating Income shall be calculated for such period
based on the applicable pro rata portion of Base Adjusted NOI.
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"Advisor" means Nomura Securities International, Inc.
"Affiliate" of any specified Person means any other Person
controlling, controlled by or under common control with such specified Person.
For the purposes of this Agreement, "control" when used with respect to any
specified Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities or other beneficial interests, by contract or otherwise; and the
terms "controls", "controlling" and "controlled" have the meanings correlative
to the foregoing.
"Agreement" means this Loan Agreement, as the same may from time to
time hereafter be modified, supplemented or amended.
"Allocated Loan Amount" means the portion of the Loan Amount
allocated to each Parcel as set forth on Exhibit D hereto, as such amounts shall
be adjusted from time to time as hereinafter set forth. Upon each adjustment in
the amount of Principal Indebtedness, each Allocated Loan Amount shall be
decreased by an amount equal to the product of (i) the amount of such principal
payment and (ii) a fraction, the numerator of which is the applicable Allocated
Loan Amount (prior to the adjustment in question) and the denominator of which
is the total of all Allocated Loan Amounts (prior to the adjustment in
question). Notwithstanding the foregoing sentence to the contrary, when the
Principal Indebtedness is reduced as a result of Lender's receipt of proceeds
with respect to a Taking or casualty affecting one hundred percent (100%) of a
Parcel, the Allocated Loan Amount for such Parcel with respect to which the
proceeds were received shall, at Lender's sole discretion, be reduced to zero
(such Allocated Loan Amount prior to reduction being referred to as the
"Withdrawn Allocated Amount"), and each other Allocated Loan Amount shall, if
the Withdrawn Allocated Amount exceeds the proceeds (such excess being referred
to as the "Proceeds Deficiency"), be increased by an amount equal to the product
of (1) the Proceeds Deficiency and (2) a fraction, the numerator of which is the
applicable Allocated Loan Amount (prior to the adjustment in question) and the
denominator of which is the aggregate of all of the Allocated Loan Amounts
(prior to the adjustment in question) other than the Withdrawn Allocated Amount.
"Amortized Amount" means, with respect to any time, an amount
determined by Lender equal to the amount that the outstanding Principal
Indebtedness
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would have been at such time if (i) the Loan Amount on the Closing Date had been
$34,000,000, (ii) the Interest Rate on the Closing Date had been 7.32%, (iii)
the amortization schedule on the Closing Date had been based on 321 months and
(iv) Borrower had made all regularly scheduled payments with respect to the Loan
with the parameters set forth in clauses (i) through (iii) above prior to such
time.
"Annual Operating Budget" means an annual budget for the operations
of the Facility (broken down on a month-by-month basis) prepared and submitted
by Borrower to Lender (i) on the Optional Prepayment Date for the period of time
commencing on the Optional Prepayment Date to and including the last day of the
calendar year in which the Optional Prepayment Date occurs and (ii) on each
December 1, for each succeeding calendar year, all in form and substance
reasonably satisfactory to Lender and as reasonably approved by Lender, as the
same shall be amended by Borrower from time to time, with Lender's written
consent. Lender's approval shall be deemed given if Lender does not respond to
Borrower's proposed budget within thirty (30) days of Lender's receipt thereof.
"Appraisals" means the appraisals, if any, with respect to the
Facility delivered to Lender in connection with the Loan and any more recent
appraisal of any Facility delivered to Lender or Lender's servicer, as
applicable, each made by an Appraiser at the request of Borrower or Lender, as
any of the same may be updated by recertification from time to time (and
pursuant to the terms of this Agreement) by the Appraiser performing such
Appraisal.
"Appraiser" means any reputable Independent appraiser selected by
Borrower, and reasonably satisfactory to Lender, which is (i) a member of the
Appraisal Institute with a national practice and who has at least ten (10) years
experience with real estate of the same type and in the geographic area of the
Facility to be appraised or (ii) otherwise acceptable to Lender. Lender
acknowledges that CB Commercial is an acceptable Appraiser.
"Appurtenant Rights" has the meaning set forth in the Mortgage.
"Assignment of Agreements" means, with respect to the Facility, a
first priority Assignment of Management Agreement and Agreements Affecting Real
Estate, in form and substance satisfactory to Lender, dated as of the Closing
Date, from Borrower, as assignor, to Lender, as assignee, as the same may
thereafter from time to time be supplemented, amended, modified or extended by
one or more written agreements supplemental thereto.
"Assignment of Leases" means, with respect to the Facility, a first
priority Assignment of Leases and Rents, in form and substance satisfactory to
Lender, dated as of the Closing Date, from Borrower, as assignor, to Lender, as
assignee, assigning to Lender all of Borrower's right, title and interest in and
to the Leases and the Rents, as the same may thereafter from time to
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time be supplemented, amended, modified or extended by one or more written
agreements supplemental thereto.
"Base Adjusted NOI" means the amount shown on Exhibit B.
"Base Payment" has the meaning provided in Section 2.5(c).
"Basic Carrying Costs" means the following costs with respect to the
Facility: (i) real property taxes and assessments applicable to the Facility;
and (ii) insurance premiums for policies of insurance required or permitted to
be maintained by Borrower pursuant to this Agreement or the other Loan
Documents.
"Basic Carrying Costs Monthly Installment" means, with respect to
the Facility, Lender's reasonable and good faith estimate of one-twelfth
(1/12th) of the annual amount of the Basic Carrying Costs (provided, that Lender
may calculate reasonably and in good faith the monthly amount to assure that
funds are reserved in sufficient amounts to enable the payment of all Basic
Carrying Costs thirty (30) days prior to their respective due dates). If the
Basic Carrying Costs for the then current Fiscal Year or payment period are not
ascertainable by Lender at the time a monthly deposit is required to be made,
the Basic Carrying Costs Monthly Installment shall be Lender's reasonable and
good faith estimate based on one-twelfth (1/12th) of the aggregate Basic
Carrying Costs for the prior Fiscal Year or payment period, with reasonable
adjustments as determined by Lender. As soon as the Basic Carrying Costs are
fixed for the then current Fiscal Year or period, the next ensuing Basic
Carrying Costs Monthly Installment shall be adjusted to reflect any deficiency
or surplus in prior Basic Carrying Costs Monthly Installments.
"Basic Carrying Costs Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.11 relating
to the payment of Basic Carrying Costs.
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"Borrower" has the meaning provided in the preamble to this
Agreement.
"Business Day" means any day other than (i) a Saturday or a Sunday,
and (ii) a day on which federally insured depository institutions in New York,
New York, Dallas, Texas or any jurisdiction in which the Facility, Cash
Collateral Account or Collection Account is located, are authorized or obligated
by law, regulation, governmental decree or executive order to be closed.
"Capital Improvement Costs" means costs incurred by Borrower in
connection with capital improvements to the Facility, which approval shall not
be unreasonably withheld or delayed, and costs for work described in the
Engineering Reports delivered to Lender at or prior to the Closing Date.
"Capital Reserve Amount" means the amount shown as such on Exhibit
B.
"Capital Reserve Monthly Installment" means an amount equal to
one-twelfth (1/12th) of the Capital Reserve Amount.
"Capital Reserve Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.11 relating
to the payment of Capital Improvement Costs.
"Cash Collateral Account" has the meaning provided in Section
2.11(b).
"Cash Collateral Account Bank" means the bank which holds the Cash
Collateral Account.
"Cash Management Event" shall mean any one or more of the following:
(i) a Late Payment; (ii) a Default (other than a Late Payment) or an Event of
Default; or (iii) the Optional Prepayment Date.
"Casualty Prepayment Amount" means, with respect to any Insurance
Proceeds, a portion of the Insurance Proceeds determined by Lender (at the time
immediately prior to the payment of such amount to Lender) equal to (i) if the
amount of the Insurance Proceeds is less than or equal to the Amortized Amount
at such time,
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the product obtained by multiplying (a) the amount of such Insurance Proceeds by
(b) the quotient obtained by dividing (1) the outstanding Principal Indebtedness
at such time by (2) the Amortized Amount at such time or (ii) if the amount of
the Insurance Proceeds is greater than the Amortized Amount at such time, the
outstanding Principal Indebtedness at such time; provided, however, that after
the Optional Prepayment Date, the Casualty Prepayment Amount shall equal the
lesser of (x) amount of the Insurance Proceeds and (y) outstanding Indebtedness
at such time.
"Casualty Return-of-Fee Amount" means, with respect to any Insurance
Proceeds, a portion of the Insurance Proceeds determined by Lender (at the time
immediately prior to the payment of such amount to Lender) equal to (i) if the
amount of the Insurance Proceeds is less than or equal to the Amortized Amount
at such time, the excess of the amount of the Insurance Proceeds over the
Casualty Prepayment Amount at such time or (ii) if the amount of the Insurance
Proceeds is greater than the Amortized Amount at such time, the excess of the
Amortized Amount at such time over the outstanding Principal Indebtedness at
such time; provided, however, that after the Optional Prepayment Date, the
Casualty Return-of-Fee Amount shall be zero.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, and as
it may be further amended from time to time, any successor statutes thereto,
together with applicable U.S. Department of Treasury regulations issued pursuant
thereto in temporary or final form.
"Collateral" means, to the extent the Borrower has an interest
therein, collectively, the Accounts, Account Collateral, Appurtenant Rights,
Equipment, General Intangibles, goods, Improvements, Instruments, Inventory,
Leases, Land, Money, Permitted Investments, (to the full extent assignable)
Permits, Rents, investment properties, and letters of credit, and all Proceeds
and products of any of the foregoing, all whether now owned or hereafter
acquired, and all other property which is or hereafter may become subject to a
Lien in favor of Lender.
"Collateral Security Instrument" means any right, document or
instrument, other than the Mortgage, given as security for the Loan (including,
without limitation, the Assignment of Leases, the Assignment of Agreements, and
the Manager's Subordination), in each case as the same may hereafter from time
to time
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be supplemented, amended, extended or modified by one or more written agreements
supplemental thereto.
"Collection Account" has the meaning provided in Section 2.11(a).
"Collection Account Agreement" has the meaning set forth in Section
2.11(b).
"Collection Account Bank" means the collection bank for the Facility
and any successor bank hereafter selected by Borrower and approved by Lender in
accordance with the Collection Account Agreement.
"Condemnation Prepayment Amount" means, with respect to any
Condemnation Proceeds, a portion of the Condemnation Proceeds determined by
Lender (at the time immediately prior to the payment of such amount to Lender)
equal to (i) if the amount of the Condemnation Proceeds is less than or equal to
the Amortized Amount at such time, the product obtained by multiplying (a) the
amount of such Condemnation Proceeds by (b) the quotient obtained by dividing
(1) the outstanding Principal Indebtedness at such time by (2) the Amortized
Amount at such time or (ii) if the amount of the Condemnation Proceeds is
greater than the Amortized Amount at such time, the outstanding Principal
Indebtedness at such time; provided, however, that after the Optional Prepayment
Date, the Condemnation Prepayment Amount shall equal the lesser of (x) amount of
the Condemnation Proceeds and (y) the outstanding Indebtedness at that time.
"Condemnation Proceeds" has the meaning provided in the Mortgage.
"Condemnation Return-of-Fee Amount" means, with respect to any
Condemnation Proceeds, a portion of the Condemnation Proceeds determined by
Lender (at the time immediately prior to the payment of such amount to Lender)
equal to (i) if the amount of the Condemnation Proceeds is less than or equal to
the Amortized Amount at such time, the excess of the amount of the Condemnation
Proceeds over the Condemnation Prepayment Amount at such time or (ii) if the
amount of the Condemnation Proceeds is greater than the Amortized Amount at such
time, the excess of the Amortized Amount at such time over the outstanding
Principal Indebtedness at such time; provided, however, that after the Optional
Prepayment Date, the Condemnation Return-of-Fee Amount shall equal zero.
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"Contingent Obligation" means any obligation of Borrower
guaranteeing any indebtedness, leases, dividends or other obligations ("primary
obligations") of any other Person (the "primary obligor") in any manner, whether
directly or indirectly, including, without limitation, any obligation of
Borrower, whether or not contingent; (i) to purchase any such primary
obligation, or any property constituting direct or indirect security therefor;
(ii) to advance or supply funds (x) for the purchase or payment of any such
primary obligation or (y) to maintain working capital or equity capital of the
primary obligor; (iii) to purchase property, securities or services primarily
for the purpose of assuring the owner or obligee under any such primary
obligation of the ability of the primary obligor to make payment of such primary
obligation; or (iv) otherwise to assure or hold harmless the owner or obligee
under such primary obligation against loss in respect thereof. The amount of any
Contingent Obligation shall be deemed to be an amount equal to the stated or
determinable amount of the primary obligation in respect of which such
Contingent Obligation is made or, if not stated or determinable, the maximum
anticipated liability in respect thereof (assuming that Borrower is required to
perform thereunder) as determined by Lender in good faith.
"Current Interest Accrual Period" has the meaning provided in
Section 2.11(g).
"Debt Service" means, for any period, the aggregate of all
principal, interest payments, Default Rate interest, Late Charges and Yield
Maintenance Premium that accrue or are due and payable in accordance with the
Loan Documents during such period.
"Debt Service Coverage Ratio" or "DSCR" means, for any period, the
quotient obtained by dividing Adjusted Net Operating Income for the specified
period by the aggregate amount of the Base Payments due for such period.
"Debt Service Payment Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.11 relating
to the payment of Debt Service.
"Deed of Trust Trustee" means the Trustee, if any, under the
Mortgage.
"Default" means the occurrence of any event which, but for the
giving of notice or the passage of time, or both, would be an Event of Default.
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"Default Collateral" has the meaning provided in Section 8.14.
"Default Rate" means the per annum interest rate equal to the lesser
of (i) the Maximum Amount or (ii) the Interest Rate plus five percent (5%).
"Defeasance Debt Service Coverage Ratio" means, in respect of any
period, the quotient obtained by dividing (i) Adjusted Net Operating Income of
that portion of the Facility remaining after a partial defeasance pursuant to
Section 2.10 by (ii) the aggregate amount of the Base Payments due for such
period minus the payments Lender would have received had the relevant U.S.
Obligations referred to in Section 2.10 been held as security for the Note for
such period.
"Defeasance Deposit" means the following in each of the following
circumstances:
(i) in the case of a total defeasance of the Loan and the
Facility pursuant to Section 2.10, "Defeasance Deposit" means
the amount that will be sufficient to purchase U.S. Obligations (A)
having maturity dates on or prior to, but as close as possible to,
successive scheduled Payment Dates (after the Defeasance Release
Date) upon which Payment Dates interest and principal payments would
be required under the Note as though the maturity date of the Note
was the Optional Prepayment Date and (B) in amounts sufficient to
pay all scheduled principal and interest payments on the Note as if
the maturity date of the Note was the Optional Prepayment Date (but
without any adjustment of the monthly amortization schedule); or
(ii) in the case of a partial defeasance of the Loan on
a Parcel-by-Parcel basis pursuant to Section 2.10, "Defeasance
Deposit" means the amount that will be sufficient to purchase U.S.
Obligations (A) having maturity dates on or prior to, but as close
as possible to, the successive scheduled Payment Dates (after the
date of such voluntary defeasance) upon which Payment Dates interest
and principal payments would be required under the Note as though
the maturity date of the Note was the Optional Prepayment Date, (B)
in amounts sufficient to cause the Defeasance Debt Service Coverage
Ratio to equal the greater of (x) 1.20:1 and (y) the Debt Service
Coverage Ratio (calculated on the
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basis of the prior twelve (12) calendar months) for all Parcels as
of the Payment Date immediately preceding the Defeasance Release
Date and (C) in amounts sufficient to pay all scheduled principal
and interest payments on the Note (1) as if the maturity date of the
Note was the Optional Prepayment Date (but without any adjustment of
the monthly amortization schedule) and (2) as if the outstanding
principal indebtedness due under the Note was an amount equal to one
hundred twenty percent (120%) of the Allocated Loan Amount for the
Parcel being defeased; and
(iii) in the case of a partial defeasance of the Loan pursuant
to Section 5.1(P), "Defeasance Deposit" means the amount that will
be sufficient to purchase U.S. Obligations (A) having maturity dates
on or prior to, but as close as possible to, the successive
scheduled Payment Dates (after the date of such voluntary
defeasance) upon which Payment Dates interest and principal payments
would be required under the Note as though the maturity date of the
Note was the Optional Prepayment Date and (B) in amounts sufficient
to pay all scheduled principal and interest payments on the Note (1)
as if the maturity date of the Note was the Optional Prepayment Date
(but without any adjustment of the monthly amortization schedule)
and (2) as if the outstanding principal indebtedness due under the
Note was an amount equal to the amount required to be defeased
pursuant to Section 5.1(P) in connection with such partial
defeasance.
"Defeasance Release Date" has the meaning provided in Section
2.10(d).
"Eligible Account" means (i) an account maintained with a federal or
state chartered depository institution or trust company whose (x) commercial
paper, short-term debt obligations or other short-term deposits are rated at
least A-1 by each Rating Agency if the deposits in such account are to be held
in such account for thirty (30) days or less or (y) long-term unsecured debt
obligations are rated at least AA- by each Rating Agency if the deposits in such
account are to be held in such account for more than thirty (30) days; or (ii) a
segregated trust account maintained with the trust department of a federal or
state chartered depository institution or trust company acting in its fiduciary
capacity which institution or trust company is subject to regulations regarding
fiduciary funds on deposit substantially similar to 12 C.F.R. ss. 9.10(b); or
(iii)
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an account otherwise acceptable to each Rating Agency, as confirmed in writing
that such account would not, in and of itself, result in a downgrade,
qualification or withdrawal of the then current ratings assigned to any security
issued in connection with a Securitization.
"Engineer" means any reputable Independent engineer, properly
licensed in the relevant jurisdiction and approved by Lender which approval
shall not be unreasonably withheld or delayed. Lender acknowledges that LGI is
an approved Engineer.
"Engineering Report(s)" means the property condition report(s) with
respect to the Facility (i) prepared by an Engineer, (ii) addressed to Lender,
(iii) prepared based on a scope of work determined by Lender in Lender's
reasonable discretion, and (iv) in form and content acceptable to Lender in
Lender's reasonable discretion, together with any amendments or supplements
thereto.
"Entity" means a limited partnership.
"Environmental Claim" means any written request for information by a
Governmental Authority, or any written notice, notification, claim,
administrative, regulatory or judicial action, suit, judgment, demand, decree or
other written communication by any Person or Governmental Authority requiring,
alleging or asserting liability against Borrower, or the Facility, whether for
damages, contribution, indemnification, cost recovery, compensation, injunctive
relief, investigatory, response, remedial or cleanup costs, damages to natural
resources, personal injuries, fines or penalties arising out of, based on,
resulting from or related to: (i) the presence, Use, Release or threatened
Release of any Hazardous Substance originating at or from, or otherwise
affecting the Facility or any part thereof; (ii) any fact, circumstance,
condition or occurrence forming the basis of any violation, or alleged
violation, of any Environmental Law by Borrower or otherwise affecting the
Facility or any part thereof; or (iii) any alleged injury or threat of injury to
health, safety or the environment by Borrower or otherwise affecting the
Facility or any part thereof.
"Environmental Laws" means any and all applicable federal, state,
local and foreign laws, rules, regulations or ordinances, each as amended from
time to time, any judicial or administrative orders, decrees, settlement
agreements or judgments thereunder, and any Permits, approvals, licenses,
registrations, filings and authorizations,
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in each case as in effect as of the relevant date, relating to the environment,
health or safety, or the Release or threatened Release, or otherwise relating to
the presence or Use of Hazardous Substances.
"Environmental Report(s)" means, with respect to the Facility,
environmental audit report(s) (i) prepared by a reputable environmental Engineer
approved by Lender in Lender's reasonable discretion, (ii) addressed to Lender,
(iii) prepared based on a scope of work determined by Lender in Lender's
reasonable discretion, and (iv) in form and content acceptable to Lender in
Lender's reasonable discretion, together with any amendments or supplements
thereto delivered to Lender. Lender acknowledges that LGI is an approved
environmental Engineer.
"Equipment" means, to the extent that Borrower has an ownership
interest therein, all fixtures, appliances, machinery, furniture, furnishings,
decorations, tools and supplies, now owned or hereafter acquired, including but
not limited to, all beds, linen, radios, televisions, carpeting, telephones,
cash registers, computers, lamps, glassware, restaurant and kitchen equipment,
and supplies, any building equipment, including but not limited to, all heating,
lighting, incinerating, waste removal and power equipment, engines, pipes,
tanks, motors, conduits, switchboards, security and alarm systems, plumbing,
lifting, cleaning, fire prevention, fire extinguishing, refrigeration,
ventilating, and communications apparatus, air cooling and air conditioning
apparatus, escalators, elevators, ducts, and compressors, materials and
supplies, and all other machinery, apparatus, equipment, fixtures and fittings
now owned or hereafter acquired by the Borrower, any portion thereof or any
appurtenances thereto, together with all additions, replacements, parts,
fittings, accessions, attachments, accessories, modifications and alterations of
any of the foregoing, to the extent relating to any Facility. In addition to the
foregoing, the term "Equipment" shall include the meaning as such term has in
the UCC.
"Equity Interests" means limited partnership interests in Borrower;
provided, however, Equity Interests shall not include any direct or indirect
legal or beneficial ownership interest, or any other interest of any nature or
kind whatsoever, of any SPE Equity Owner in Borrower or in any other SPE Equity
Owner, as applicable.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations promulgated thereunder.
Section references to ERISA are to ERISA, as in effect at the date of this
Agreement and, as of
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the relevant date, any subsequent provisions of ERISA, amendatory thereof,
supplemental thereto or substituted therefor.
"ERISA Affiliate" means any corporation or trade or business that is
a member of any group of organizations (i) described in Section 414(b) or (c) of
the Code, of which Borrower is a member, and (ii) solely for purposes of
potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of
the Code and the lien created under Section 302(f) of ERISA and Section 412(n)
of the Code, described in Section 414(m) or (o) of the Code, of which Borrower
is a member.
"Event of Default" has the meaning set forth in Section 7.1.
"Event of Default Return-of-Fee Amount" means, with respect to any
time, an amount determined by Lender (at the time immediately prior to the
payment of such amount to Lender), which amount is intended to be a repayment by
Borrower to Lender on account of the fee Lender actually paid to Borrower as set
forth in Section 8.32(ii), and which amount is equal to the excess of (i) the
Amortized Amount at such time over (ii) the outstanding Principal Indebtedness
at such time.
"Excess Cash Flow" has the meaning set forth in Section 2.11(g).
"Extra Funds" has the meaning set forth in Section 2.11(f).
"Facility" means the Land, Improvements and Equipment and all other
Collateral.
"Fiscal Year" means the 12-month period ending on December 31 of
each year or such other fiscal year of Borrower as Borrower may select from time
to time with at least thirty (30) days prior written notice to Lender.
"Fleet" means Home Equity USA, Inc., formerly known as Fleet
Finance, Inc.
"Fleet Reserve Sub-Account" means the Sub-Account of the Cash
Collateral Account maintained and established pursuant to Section 2.11.
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"GAAP" means generally accepted accounting principles consistently
applied in the United States of America as of the date of the applicable
financial report.
"General Intangibles" has the meaning provided in the Mortgage.
"Governmental Authority" means any national, federal, state,
regional or local government, or any other political subdivision of any of the
foregoing, in each case with jurisdiction over Borrower, the Facility, or any
SPE Equity Owner, or any Person with jurisdiction over Borrower, the Facility or
any SPE Equity Owner, exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Gross Revenue" means the total dollar amount of all income and
receipts whatsoever received by Borrower with respect to the Facility,
including, without limitation, all Rents (but excluding security deposits) and
Money.
"Hazardous Substance" means: (i) any petroleum or petroleum products
or waste oils, explosives, radioactive materials, asbestos, urea formaldehyde
foam insulation, polychlorinated biphenyls ("PCBs"), lead in drinking water, and
lead-based paint, the presence, generation, Use, transportation, storage or
disposal of or exposure to which (x) is regulated or could lead to liability
under any Environmental Law or (y) is subject to notice or reporting
requirements under any Environmental Law, (ii) any chemicals or other materials
or substances which are now or hereafter become defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "contaminants," "pollutants" or words of similar import
under any Environmental Law or (iii) any other chemical or any other material or
substance, exposure to which is now or hereafter prohibited, limited or
regulated under any Environmental Law.
"Impositions" has the meaning provided in the Mortgage.
"Improvements" has the meaning provided in the Mortgage.
"Indebtedness" means, at any given time, the Principal Indebtedness,
together with all accrued and unpaid interest thereon and all other obligations
and liabilities due or to become due to Lender pursuant hereto, under the Note
or in
<PAGE> 21
16
accordance with any of the other Loan Documents, and all other amounts, sums and
expenses paid by or payable to Lender hereunder or pursuant to the Note or any
of the other Loan Documents.
"Indemnified Party" shall have the meaning set forth in Section
8.29.
"Independent" means, when used with respect to any Person, a Person
who: (i) does not have any direct financial interest or any material indirect
financial interest in Borrower or in any Affiliate of Borrower (including,
without limitation, in any SPE Equity Owner), (ii) is not connected with
Borrower or any Affiliate of Borrower (including, without limitation, any SPE
Equity Owner), as an officer, employee, promoter, underwriter, trustee, partner,
member, manager, creditor, director or person performing similar functions, and
(iii) is not a member of the immediate family of a Person defined in (i) or (ii)
above.
"Independent Director" means a duly appointed member of the board of
directors of the relevant entity who shall not have been, at the time of such
appointment, at any time after appointment, or at any time in the preceding five
(5) years, (i) a direct or indirect legal or beneficial owner in such entity or
any of its affiliates, (ii) a creditor, supplier, employee, officer, director,
manager or contractor of such entity or any of its affiliates, (iii) a person
who controls such entity or any of its affiliates, or (iv) a member of the
immediate family of a person defined in (i), (ii) or (iii) above.
"Initial Basic Carrying Costs Amount" means the amount shown as such
on Exhibit B.
"Initial Capital Reserve Amount" means the amount shown as such on
Exhibit B.
"Initial DSCR" means the amount shown as such on Exhibit B.
"Initial Fleet Reserve Amount" shall mean $500,000.
"Initial Interest Rate" means 8.50% per annum.
"Initial Securitization Expense Amount" means the amount shown as
such on Exhibit B.
<PAGE> 22
17
"Initial Tenant Rollover Reserve Amount" shall mean $1,000,000.00.
"Instruments" has the meaning provided in the Mortgage.
"Insurance Proceeds" has the meaning provided in the Mortgage.
"Insurance Requirements" has the meaning provided in the Mortgage.
"Interest Accrual Period" means each period of time running from and
including the eleventh (11th) day of a calendar month to and including the tenth
(10th) day of the following calendar month during the term of the Loan. If the
Closing Date shall occur prior to the tenth (10th) day of a calendar month, the
first Interest Accrual Period shall commence on and include the Closing Date and
end on and include the tenth (10th) day of the calendar month in which the
Closing Date occurs. If the Closing Date shall occur after the tenth (10th) day
of a calendar month, the first Interest Accrual Period shall commence on the
Closing Date and end on and include the tenth (10th) day of the calendar month
following the month in which the Closing Date occurs. If the Closing Date shall
occur on the tenth (10th) day of a calendar month, the first Interest Accrual
Period shall consist of a one (1) day period consisting of the Closing Date.
"Interest Rate" means, as applicable, before the Optional Prepayment
Date, the Initial Interest Rate and, on and after the Optional Prepayment Date,
the Revised Interest Rate.
"Inventory" has the meaning provided in the Mortgage.
"Investor" has the meaning provided in Section 8.27.
"Issuer" means any issuer of securities issued in connection with a
Securitization.
"Land" has the meaning provided in the Mortgage.
"Late Charge" means the lesser of (i) five percent (5%) of any
unpaid amount and (ii) the maximum late charge permitted to be charged under the
laws of the State of New York.
<PAGE> 23
18
"Late Payment" means Borrower's failure to pay any amount due to
Lender hereunder when due, without giving effect to any cure period, if any.
"Leases" has the meaning provided in the Mortgage.
"Legal Requirements" means all statutes, laws, rules, orders,
regulations, ordinances, judgments, orders, decrees and injunctions of
Governmental Authorities affecting Borrower, the Loan Documents, the Facility or
any part thereof, or the ownership, construction, use, alteration or operation
thereof, or any part thereof, enacted or entered and in force as of the relevant
date, and all Permits and regulations relating thereto, and all covenants,
agreements, restrictions and encumbrances contained in any instruments, either
of record or known to Borrower, at any time in force affecting the Facility or
any part thereof, including, without limitation, any which (i) may require
repairs, modifications, or alterations in or to the Facility or any part
thereof, or (ii) in any way limit the use and enjoyment thereof, and further
including, without limitation, all Environmental Laws and the Americans with
Disabilities Act, as they may be amended from time to time, together with all
regulations promulgated pursuant thereto or in connection therewith.
"LGI" means Lexington Group International, Inc.
"Lender" has the meaning provided in the preamble to this Agreement.
"Liabilities" has the meaning set forth in Section 2.13.
"Lien" means any mortgage, deed of trust, deed to secure debt, lien
(statutory or other), pledge, easement, restrictive covenant, hypothecation,
assignment, preference, priority, security interest, or any other encumbrance or
charge on or affecting the Facility or any portion thereof or any Collateral or
the Borrower, or any interest in any of the foregoing, including, without
limitation, any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, the filing of any financing statement or similar instrument under the
UCC or comparable law of any other jurisdiction, domestic or foreign, and
mechanic's, materialmen's and other similar liens and encumbrances.
"Loan" has the meaning provided in the Recitals hereto.
<PAGE> 24
19
"Loan Amount" has the meaning provided in the Recitals hereto.
"Loan Documents" means, collectively, this Agreement, the Note, the
Mortgage, the Assignment of Leases, the Assignment of Agreements, the Manager's
Subordination, the Collection Account Agreement, and all other agreements,
instruments, certificates and documents executed or delivered by or on behalf of
Borrower or any Affiliate to evidence or secure the Loan or otherwise in
satisfaction of the requirements of this Agreement, the Mortgage or the other
documents listed above.
"Losses" has the meaning provided in Section 5.1(I).
"Management Agreement" means the Management Agreement entered into
between Manager and Borrower pertaining to the management of the Facility in the
form attached to the Manager's Subordination.
"Manager" means Hallwood Commercial Real Estate, Inc., as Manager of
the Facility, or any successor or assignee, provided that each successor or
assignee shall be reasonably acceptable to Lender in Lender's discretion.
"Manager's Subordination" means the Manager's Consent and
Subordination of Management Agreement in form and substance satisfactory to
Lender, dated as of the Closing Date, executed by Manager, Borrower and Lender,
as the same may thereafter from time to time be supplemented, amended, modified
or extended by one or more written agreements supplemental thereto.
"Material Adverse Effect" means a material adverse effect upon (i)
the business or the financial position or results of operation of Borrower, (ii)
the ability of Borrower to perform, or of Lender to enforce, any of the Loan
Documents or (iii) the value of (x) the Collateral taken as a whole or (y) the
Facility.
"Material Lease" has the meaning set forth in the Mortgage.
"Maturity Date" means April 11, 2028 or such earlier date resulting
from acceleration of the Indebtedness by Lender.
"Maximum Amount" means the maximum rate of interest designated by
applicable laws relating to payment of interest and usury.
<PAGE> 25
20
"Money" means all moneys, cash, rights to deposit or savings
accounts, credit card receipts, rents or other items of legal tender obtained
from or for use in connection with the ownership or operation of the Facility.
"Mortgage" means the first priority Deed to Secure Debt, Assignment
of Rents and Security Agreement or such other comparable document which is
customarily used by prudent lenders in the jurisdiction in which the Facility is
located, in form and substance satisfactory to Lender in Lender's discretion,
dated as of the Closing Date, granted by Borrower to Lender (or, in the case of
a Deed of Trust, to Deed of Trust Trustee for the benefit of Lender) with
respect to the Facility as security for the Loan, as the same may thereafter
from time to time be supplemented, amended, modified or extended by one or more
written agreements supplemental thereto.
"Mortgaged Property" means, as applicable, the "Mortgaged Property"
or the "Trust Estate" as defined in the Mortgage.
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by Borrower or any
ERISA Affiliate and which is covered by Title IV of ERISA.
"Net Operating Income" means for any period the excess, if any, of
Operating Income for such period over Operating Expenses for such period.
"Note" means and refers to the promissory note, in form and
substance satisfactory to Lender in Lender's discretion, dated the Closing Date,
made by Borrower to Lender pursuant to this Agreement as such promissory note
may be modified, amended, supplemented, extended or consolidated in writing, and
any note(s) issued in exchange therefor or in replacement thereof.
"Officer's Certificate" means a certificate of the Borrower which is
signed by an authorized officer of the corporate managing member of Borrower's
general partner.
"Operating Expense Certificate" means a certificate of the Borrower
in the form attached hereto as Exhibit A.
<PAGE> 26
21
"Operating Expense Monthly Installment" means, with respect to a
given calendar month, the amount shown on the Annual Operating Budget for such
period.
"Operating Expense Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.11 relating
to the payment of operating expenses, as reasonably approved by Lender.
"Operating Expenses" means, for any period, all expenditures by
Borrower as and to the extent required to be expensed under GAAP during such
period in connection with the ownership, operation, maintenance, repair or
leasing of the Facility, including, without limitation or duplication:
(i) expenses in connection with cleaning, repair,
replacement, painting and maintenance;
(ii) wages, benefits, payroll taxes, uniforms, insurance
costs and all other related expenses for employees of Borrower or
any Affiliate engaged in repair, operation, maintenance of the
Facility or service to tenants, patrons or guests of the Facility,
as applicable;
(iii) any management fees and expenses;
(iv) the cost of all electricity, oil, gas, water, steam,
heat, ventilation, air conditioning and any other energy, utility or
similar item and overtime services;
(v) the cost of cleaning supplies;
(vi) Impositions; (but excluding income, franchise and single
business, taxes of the Borrower or any partner thereof);
(vii) business interruption, liability, casualty and fidel
insurance premiums;
(viii) legal, accounting and other professional fees and
expenses incurred in connection with the ownership, leasing or
operation of the Facility, including, without limitation, collection
costs and expenses;
<PAGE> 27
22
(ix) costs and expenses of security and security systems;
(x) trash removal and exterminating costs and expenses;
(xi) advertising and marketing costs;
(xii) costs of environmental audits and monitoring,
environmental, investigation, remediation or other response actions
or any other expenses incurred with respect to compliance with
Environmental Laws; and
(xiii) all other ongoing expenses which in accordance
with GAAP are required to be or are included in Borrower's annual
financial statements as operating expenses of the Facility.
Notwithstanding the foregoing, Operating Expenses shall not include (v) any item
of expense paid by a Person other than Borrower and not reimbursed by Borrower,
(w) any capital improvement costs, (x) depreciation, amortization, income taxes
and other non-cash charges, (y) any extraordinary items not normally considered
an operating expense in accordance with GAAP or (z) Debt Service and other
payments in connection with the Indebtedness.
"Operating Income" means, for any period, for Borrower, all regular
ongoing income of Borrower during such period from the operation of the
Facility, including, without limitation:
(i) all amounts payable as Rents (other than security deposits)
and all other amounts payable under Leases or other third party
agreements relating to the ownership and operation of the Facility;
(ii) business interruption insurance proceeds; and
(iii) all other amounts which in accordance with GAAP are
required to be or are included in Borrower's annual financial
statements as operating income of the Facility.
<PAGE> 28
23
Notwithstanding the foregoing, Operating Income shall not include (u) security
deposits, (v) any Condemnation Proceeds or Insurance Proceeds, (w) any proceeds
resulting from the sale, exchange, transfer, financing or refinancing of all or
any portion of one or more of the Parcels, (x) any Rent attributable to a Lease
prior to the date on which the actual payment of Rent is required to be made
thereunder, (y) any item of income otherwise includable in Operating Income but
paid directly to a Person other than the Borrower provided, that Operating
Income shall include payments of Rent (other than security deposits) which are
paid directly to Manager, or (z) security deposits received from tenants until
forfeited.
"Optional Prepayment Date" means April 11, 2008.
"Other Borrowings" means, without duplication (but not including the
Indebtedness or any Transaction Costs payable in connection with the
Transactions), (i) all indebtedness of Borrower for borrowed money or for the
deferred purchase price of property or services, (ii) all indebtedness of
Borrower evidenced by a note, bond, debenture or similar instrument, (iii) the
face amount of all letters of credit issued for the account of Borrower and,
without duplication, all unreimbursed amounts drawn thereunder, (iv) all
indebtedness of Borrower secured by a Lien on any property owned by Borrower
whether or not such indebtedness has been assumed, (v) all Contingent
Obligations of Borrower, and (vi) all payment obligations of Borrower under any
interest rate protection agreement (including, without limitation, any interest
rate swaps, caps, floors, collars or similar agreements) and similar agreements.
"Parcel" means each separate tax lot identified on Exhibit D hereto.
"Payment Date" means the eleventh (11th) day of each calendar month
during the term of the Loan; provided, however, that for purposes of making
payments hereunder, but not for purposes of calculating interest accrual
periods, if the eleventh (11th) day of a given month shall not be a Business
Day, then the Payment Date for such month shall be the next succeeding Business
Day.
"PBGC" means the Pension Benefit Guaranty Corporation established
under ERISA, or any successor thereto.
"PCBs" has the meaning provided in the definition of "Hazardous
Substance".
<PAGE> 29
24
"Permits" has the meaning provided in the Mortgage.
"Permitted Encumbrances" means, with respect to the Facility,
collectively, (i) the Lien created by the Mortgage or the other Loan Documents,
(ii) all Liens and other matters disclosed in the Title Insurance Policy
concerning the Facility, or any part thereof (iii) Liens, if any, for
Impositions imposed by any Governmental Authority not yet due or delinquent or
being contested in good faith and by appropriate proceedings in accordance with
the Mortgage, (iv) subject to Section 2.6(b) of the Mortgage, any mechanics' and
materialmen's Liens deleted from the exceptions to, or affirmatively insured
against collection with respect to, the Facility under the Title Insurance
Policy, (v) without limiting the foregoing, any and all governmental, public
utility and private restrictions, covenants, reservations, easements, licenses
or other agreements of an immaterial nature which may be granted by Borrower
after the Closing Date and which do not materially and adversely affect (a) the
ability of Borrower to pay any of its obligations to any Person as and when due,
(b) the marketability of title to the Facility, (c) the fair market value of the
Facility, or (d) the use or operation of the Facility as of the Closing Date
and thereafter and (vi) any written Leases in effect and supplied to Lender on
or before the Closing Date.
"Permitted Investments" means any one or more of the following
obligations or securities payable on demand or having a scheduled maturity on or
before the Business Day immediately preceding the date upon which the funds in
the Cash Collateral Account are required to be drawn, and having at all times
the required ratings, if any, provided for in this definition, unless each
Rating Agency shall have confirmed in writing to Lender that a lower rating
would not, in and of itself, result in a downgrade, qualification or withdrawal
of the then current ratings assigned to any security issued in connection with a
Securitization:
(i) obligations of, or obligations fully guaranteed as to
payment of principal and interest by, the United States
or any agency or instrumentality thereof provided such
obligations are backed by the full faith and credit of
the United States of America including, without
limitation, obligations of: the U.S. Treasury (all
direct or fully guaranteed obligations), the Farmers
Home Administration (certificates of beneficial
ownership), the General Services Administration
(participation certificates), the U.S. Maritime
Administration (guaranteed Title XI financing), the
Small Business
<PAGE> 30
25
Administration (guaranteed participation certificates
and guaranteed pool certificates), the U.S. Department
of Housing and Urban Development (local authority bonds)
and the Washington Metropolitan Area Transit Authority
(guaranteed transit bonds); provided, however, that the
investments described in this clause must (A) have a
predetermined fixed dollar amount of principal due at
maturity that cannot vary or change, (B) if rated by
S&P, must not have an "r" highlighter affixed to their
rating, (C) if such investments have a variable rate of
interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and
must move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to
their maturity;
(ii) Federal Housing Administration debentures;
(iii) obligations of the following United States government
sponsored agencies: Federal Home Loan Mortgage Corp. (debt
obligations), the Farm Credit System (consolidated
systemwide bonds and notes), the Federal Home Loan Banks
(consolidated debt obligations), the Federal National
Mortgage Association (debt obligations), the Student Loan
Marketing Association (debt obligations), the Financing
Corp. (debt obligations), and the Resolution Funding Corp.
(debt obligations); provided, however, that the investments
described in this clause must (A) have a predetermined fixed
dollar amount of principal due at maturity that cannot vary
or change, (B) if rated by S&P, must not have an "r"
highlighter affixed to their rating, (C) if such investments
have a variable rate of interest, such interest rate must
be tied to a single interest rate index plus a fixed spread
(if any) and must move proportionately with that index, and
(D) such investments must not be subject to liquidation
prior to their maturity;
(iv) federal funds, unsecured certificates of deposit, time
deposits, bankers' acceptances and repurchase agreements
with maturities of not more than 365 days of any bank,
the short term obligations of which are rated in the
highest short term rating category by
<PAGE> 31
26
each Rating Agency (or otherwise acceptable to each Rating
Agency, as confirmed in writing that such investment would
not, in and of itself, result in a downgrade, qualification
or withdrawal of the then current ratings assigned to any
security issued in connection with a Securitization),
provided, however, that the investments described in this
clause must (A) have a predetermined fixed dollar amount of
principal due at maturity that cannot vary or change, (B)
if rated by S&P, must not have an "r" highlighter affixed to
their rating, (C) if such investments have a variable rate
of interest, such interest rate must be tied to a single
interest rate index plus a fixed spread (if any) and must
move proportionately with that index, and (D) such
investments must not be subject to liquidation prior to
their maturity;
(v) fully Federal Deposit Insurance Corporation-insured
demand and time deposits in, or certificates of deposit
of, or bankers' acceptances issued by, any bank or trust
company, savings and loan association or savings bank,
the short term obligations of which are rated in the
highest short term rating category by each Rating Agency
(or otherwise acceptable to each Rating Agency, as
confirmed in writing that such investment would not, in
and of itself, result in a downgrade, qualification or
withdrawal of the then current ratings assigned to any
security issued in connection with a Securitization),
provided, however, that the investments described in
this clause must (A) have a predetermined fixed dollar
amount of principal due at maturity that cannot vary or
change, (B) if rated by S&P, must not have an "r"
highlighter affixed to their rating, (C) if such
investments have a variable rate of interest, such
interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such
investments must not be subject to liquidation prior to
their maturity;
(vi) debt obligations with maturities of not more than 365 days
and rated by each Rating Agency (or otherwise acceptable
to each Rating Agency, as confirmed in writing that such
investment would not, in and of itself, result in a
downgrade, qualification or
<PAGE> 32
27
withdrawal of the then current ratings assigned to any
security issued in connection with a Securitization), in
its highest long-term unsecured rating category; provided,
however, that the investments described in this clause must
(A) have a predetermined fixed dollar amount of principal
due at maturity that cannot vary or change, (B) if rated
by S&P, must not have an "r" highlighter affixed to
their rating, (C) if such investments have a variable
rate of interest, such interest rate must be tied to a
single interest rate index plus a fixed spread (if any)
and must move proportionately with that index, and (D)
such investments must not be subject to liquidation
prior to their maturity;
(vii) commercial paper (including both non-interest-bearing
discount obligations and interest-bearing obligations
payable on demand or on a specified date not more than
one year after the date of issuance thereof) with
maturities of not more than 365 days and that is rated
by each Rating Agency (or otherwise acceptable to each
Rating Agency, as confirmed in writing that such
investment would not, in and of itself, result in a
downgrade, qualification or withdrawal of the then
current ratings assigned to any security issued in
connection with a Securitization), in its highest
short-term unsecured debt rating; provided, however, that
the investments described in this clause must (A) have a
predetermined fixed dollar amount of principal due at
maturity that cannot vary or change, (B) if rated by S&P,
must not have an "r" highlighter affixed to their rating,
(C) if such investments have a variable rate of interest,
such interest rate must be tied to a single interest rate
index plus a fixed spread (if any) and must move
proportionately with that index, and (D) such investments
must not be subject to liquidation prior to their maturity;
(viii) the Federated Prime Obligation Money Market Fund (the
"Fund") so long as the Fund is rated "AAAm" or "AAAm-G" by
S&P, or the equivalent by each other Rating Agency (or
otherwise acceptable to each Rating Agency, as confirmed
in writing that such investment would not, in and of
itself, result in a downgrade,
<PAGE> 33
28
qualification or withdrawal of the then current ratings
assigned to any security issued in connection with a
Securitization);
(ix) any other demand, money market or time deposit, demand
obligation or any other obligation, security or investment,
provided that each Rating Agency has confirmed in writing
to Lender, that such investment would not, in and of
itself, result in a downgrade, qualification or withdrawal
of the then current ratings assigned to any security issued
in connection with a Securitization; and
(x) such other obligations as are acceptable as Permitted
Investments to each Rating Agency, as confirmed in writing
to Lender, that such obligations would not, in and of
itself, result in a downgrade, qualification or withdrawal
of the then current ratings assigned to any security issued
in connection with a Securitization;
provided, however, that, in the judgment of Lender, such instrument continues to
qualify as a "cash flow investment" pursuant to Code Section 860G(a)(6) earning
a passive return in the nature of interest and provided further that no
instrument or security shall be a Permitted Investment if (i) such instrument or
security evidences a right to receive only interest payments, (ii) the right to
receive principal and interest payments derived from the underlying investment
provides a yield to maturity in excess of one hundred twenty percent (120%) of
the yield to maturity at par of such underlying investment or (iii) such
investments have a maturity in excess of one year.
"Permitted Transfers" shall mean: (i) Permitted Encumbrances; (ii)
all transfers of worn out or obsolete furnishings, fixtures or equipment that
are promptly replaced with property of equivalent value and functionality; (iii)
provided that no Event of Default has occurred, all Leases which are not
Material Leases; (iv) provided that no Event of Default has occurred, all
Material Leases which have been approved by Lender in writing in Lender's
discretion or which have been provided to Lender on or before the Closing Date;
(v) provided that no Event of Default has occurred, transfers of Equity
Interests which in the aggregate during the term of the Loan (a) do not exceed
forty-nine percent (49%) of the total interests in Borrower and (b) do not
result in any partner's, member's or other Person's interest in Borrower
exceeding forty-nine percent (49%) of the total interests in Borrower; (vi)
provided that no Event of Default has occurred, any other transfer of Equity
Interests provided that (a) prior to any Securitization, Lender
<PAGE> 34
29
shall have consented to such transfer or transfers, which consent shall not be
unreasonably withheld or delayed, (b) after any Securitization, (1) Lender shall
have consented to such transfer or transfers, which consent shall not be
unreasonably withheld or delayed, and (2) the Rating Agencies shall have
confirmed in writing that such transfer or transfers shall not result in a
downgrade, withdrawal or qualification of any securities issued in connection
with such Securitization, (c) acceptable opinions relating to such transfer or
transfers shall have been delivered by Borrower to Lender and the Rating
Agencies (including, without limitation, bankruptcy opinions), and (d) Borrower
pays all reasonable expenses incurred by Lender in connection with such transfer
or transfers; and (vii) provided that no Event of Default has occurred, a
transfer of the Facility to a single purchaser not more than one time during the
term of the Loan, provided that prior to such transfer (a) prior to a
Securitization, Lender shall have consented to such transfer, (b) after a
Securitization, (1) Lender shall have consented to such transfer and (2) the
Rating Agencies shall have confirmed in writing that such transfer or transfers
shall not result in a downgrade, withdrawal or qualification of any securities
issued in connection with such Securitization, (c) acceptable opinions relating
to such transfer shall have been delivered by Borrower to Lender and to the
Rating Agencies (including without limitation, bankruptcy opinions), (d) the
transferee assumes in writing all obligations of the transferor under the Loan
Documents and executes and delivers such other documentation as may be required
by Lender or the Rating Agencies, and (e) Borrower pays all reasonable expenses
incurred by Lender in connection with such transfer.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, estate, trust, unincorporated association,
or any other entity, any federal, state, county or municipal government or any
bureau, department or agency thereof and any fiduciary acting in such capacity
on behalf of any of the foregoing.
"Plan" means an employee benefit or other plan established or
maintained by Borrower or any ERISA Affiliate and that is covered by Title IV of
ERISA, other than a Multiemployer Plan.
"Principal Indebtedness" means the principal amount of the entire
Loan outstanding as the same may be increased or decreased, as a result of
prepayment or otherwise, from time to time.
<PAGE> 35
30
"Proceeds" means all of Borrower's "proceeds," as such term is
defined in the UCC, and, to the extent not included in such definition, all
proceeds whether cash or non-cash, movable or immovable, tangible or intangible
(including Insurance Proceeds, Condemnation Proceeds and proceeds of proceeds),
from the Collateral, including, without limitation, those from the sale,
exchange, transfer, collection, loss, damage, disposition, substitution or
replacement of any of the Collateral and all income, gain, credit, distributions
and similar items from or with respect to the Collateral.
"Rating Agencies" means Fitch Investors Service, Inc., Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. and S&P or any
successor thereto, and any other nationally recognized statistical rating
organization to the extent that any of the foregoing have been or will be
engaged by Lender or its designees in connection with or in anticipation of a
Securitization (each, individually a "Rating Agency").
"Recourse Distributions" has the meaning provided in Section 8.14.
"Release" means any release, threatened release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment of Hazardous Substances,
including, without limitation, the movement of Hazardous Substances through
ambient air, soil, surface water, ground water, wetlands, land or subsurface
strata.
"Remedial Work" has the meaning provided in Section 5.1(D)(i).
"REMIC" means a real estate mortgage investment conduit as defined
under Section 860D of the Code.
"Rents has the meaning provided in the Mortgage.
"Required Base Debt Service Payment" means all of the Required Debt
Service Payment except for that portion of the Required Debt Service Payment
which consists of payments of Excess Cash Flow which may be due and payable on
and after the Optional Prepayment Date.
"Required Debt Service Payment" means, on any Payment Date, the Debt
Service then due and payable by Borrower.
<PAGE> 36
31
"Revised Interest Rate" means the greater of (i) the sum of the
Initial Interest Rate plus five hundred (500) basis points, and (ii) as of the
Optional Prepayment Date, the sum of the Twenty Year Treasury Rate plus six
hundred and fifty-five (655) basis points, such Revised Interest Rate not to
exceed the Maximum Amount.
"S&P" means Standard & Poor's Ratings Services, a division of The
McGraw Hill Companies, Inc.
"Secretary's Certificate" means a certificate signed by an
authorized representative of the certifying entity in form and substance
satisfactory to Lender in Lender's reasonable discretion dated as of the Closing
Date.
"Securitization" shall have the meaning provided in Section 2.13.
"Securitization Closing Date" means the date on which a
Securitization is effected.
"Securitization Costs" shall have the meaning set forth in Section
2.13.
"Securitization Expense Sub-Account" means the Sub-Account of the
Cash Collateral Account established and maintained pursuant to Section 2.11.
"Security Agreement" has the meaning provided in Section 2.10(d).
"Single-Purpose Entity" means a corporation, limited partnership, or
limited liability company which, at all times since its formation and thereafter
(i) was and will be organized solely for the purpose of (x) owning the Facility
or (y) acting as the general partner of the limited partnership which owns the
Facility or (z) acting as the managing member of the general partner of the
limited partnership which owns the Facility, (ii) has not and will not engage in
any business unrelated to (x) the ownership of the Facility or (y) acting as the
general partner of the limited partnership which owns the Facility or (z) acting
as the managing member of the general partner of the limited partnership which
owns the Facility, (iii) has not and will not have any assets other than (x)
those related to the Facility or (y) its partnership interest in the limited
partnership which owns the Facility or (z) its member interest in the general
partner of the limited partnership which owns the Facility, as applicable, (iv)
has not and will not engage in, seek or consent to any dissolution, winding up,
liquidation, consolidation or merger, and,
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except as otherwise expressly permitted by this Agreement, has not and will not
engage in, seek or consent to any asset sale, transfer of partnership or
membership or shareholder interests, or amendment of its limited partnership
agreement, articles of incorporation, articles of organization, certificate of
formation or operating agreement (as applicable), (v) if such entity is a
limited partnership, has and will have as its only general partners, general
partners which are and will be Single-Purpose Entities which are corporations or
limited liability companies which are and will be Single-Purpose Entities having
as their only managing members, managing members which are and will be
Single-Purpose Entities which are corporations, (vi) if such entity is a
corporation, at all relevant times, has and will have at least one Independent
Director, (vii) the board of directors of such entity has not taken and will not
take any action requiring the unanimous affirmative vote of 100% of the members
of the board of directors unless all of the directors, including without
limitation all Independent Directors, shall have participated in such vote,
(viii) has not and will not fail to correct any known misunderstanding regarding
the separate identity of such entity, (ix) if such entity is a limited liability
company, has and will have at least one member that is and will be a
Single-Purpose Entity which is and will be a corporation, and such corporation
is and will be the managing member of such limited liability company, (x)
without the unanimous consent of all of the partners, directors (including
without limitation all Independent Directors) or members, as applicable, has not
and will not with respect to itself or to any other entity in which it has a
direct or indirect legal or beneficial ownership interest (a) file a bankruptcy,
insolvency or reorganization petition or otherwise institute insolvency
proceedings or otherwise seek any relief under any laws relating to the relief
from debts or the protection of debtors generally; (b) seek or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator,
custodian or any similar official for such entity or all or any portion of such
entity's properties; (c) make any assignment for the benefit of such entity's
creditors; or (d) take any action that might cause such entity to become
insolvent, (xi) has maintained and will maintain its accounts, books and records
separate from any other person or entity, (xii) has maintained and will maintain
its books, records, resolutions and agreements as official records, (xiii) has
not commingled and will not commingle its funds or assets with those of any
other entity, (xiv) has held and will hold its assets in its own name, (xv) has
conducted and will conduct its business in its name or the name "Executive
Park", (xvi) has maintained and will maintain its financial statements,
accounting records and other entity documents separate from any other person or
entity, (xvii) has paid and will pay its own liabilities out of its own funds
and assets, (xviii) has observed and will observe all partnership, corporate or
limited liability company formalities as applicable, (xix) has maintained and
<PAGE> 38
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will maintain an arms-length relationship with its affiliates, (xx) (a) if such
entity owns the Facility, has and will have no indebtedness other than the
Indebtedness and unsecured trade payables in the ordinary course of business
relating to the ownership and operation of the Facility which (1) do not exceed,
at any time, a maximum amount of three percent (3%) of the Loan Amount and (2)
are paid within thirty (30) days of the date invoiced (except for leasing
commissions which shall be paid within thirty (30) days of the date due) or (b)
if such entity acts as the general partner of a limited partnership which owns
the Facility, has and will have no indebtedness other than unsecured trade
payables in the ordinary course of business relating to acting as general
partner of the limited partnership which owns the Facility which (1) do not
exceed, at any time, Ten Thousand Dollars ($10,000.00) and (2) are paid within
thirty (30) days of the date incurred, or (c) if such entity acts as a managing
member of the general partner of the limited partnership which owns the
Facility, has and will have no indebtedness other than unsecured trade payables
in the ordinary course of business relating to acting as a member of the limited
liability company which acts as the general partner of the limited partnership
which owns the Facility which (1) do not exceed, at any time, Ten Thousand
Dollars ($10,000.00) and (2) are paid within thirty (30) days of the date
incurred, (xxi) has not and will not assume or guarantee or become obligated for
the debts of any other entity or hold out its credit as being available to
satisfy the obligations of any other entity except for the Indebtedness, (xxii)
has not acquired and will not acquire obligations or securities of its partners,
members or shareholders, (xxiii) has allocated and will allocate fairly and
reasonably shared expenses, including, without limitation, shared office space
and use separate stationery, invoices and checks, (xxiv) except pursuant hereto,
has not and will not pledge its assets for the benefit of any other person or
entity, (xxv) has held and identified itself and will hold itself out and
identify itself as a separate and distinct entity under its own name and not as
a division or part of any other person or entity, (xxvi) has not made and will
not make loans to any person or entity, (xxvii) has not and will not identify
its partners, members or shareholders, or any affiliates of any of them as a
division or part of it, (xxviii) if such entity is a limited liability company,
such entity shall dissolve only upon the bankruptcy of the managing member, and
such entity's articles of organization, certificate of formation and/or
operating agreement, as applicable, shall contain such provision, (xxix) has not
entered and will not enter into or be a party to, any transaction with its
partners, members, shareholders or its affiliates except in the ordinary course
of its business and on terms which are intrinsically fair and are no less
favorable to it than would be obtained in a comparable arms-length transaction
with an unrelated third party, (xxx) has paid and will pay the salaries of its
own employees from its own funds, (xxxi) has maintained and will maintain
adequate capital in light of its
<PAGE> 39
34
contemplated business operations and (xxxii) if such entity is a limited
liability company or limited partnership, and such entity has one or more
managing members or general partners, as applicable, then such entity shall
continue (and not dissolve) for so long as a solvent managing member or general
partner, as applicable, exists and such entity's organizational documents shall
contain such provision.
"SPE Equity Owner" means HRP 98, L.L.C., a Delaware limited
liability company and HWG 98 Advisors, Inc., a Delaware corporation.
"SPE Equity Owner's Certificate" means the SPE Equity Owner's
Certificate in form and substance satisfactory to Lender dated as of the Closing
Date.
"Start-Up Day" means the "start-up day," within the meaning of
Section 860G(a)(9) of the Code, of any REMIC that holds the Note.
"Sub-Account" shall have the meaning provided in Section 2.11(c).
"Successor Obligor" has the meaning provided in Section 2.10(h).
"Survey" means a survey of the Facility satisfactory to Lender, (i)
prepared by a registered Independent surveyor satisfactory to Lender and Title
Insurer, (ii) together with a metes and bounds legal description of the land
corresponding with the survey and containing the Surveyor's Certification, and
(iii) prepared based on a scope of work determined by Lender in Lender's
discretion. Lender acknowledges that Mayes, Sudderth & Etheredge, Inc. is a
satisfactory surveyor.
"Surveyor's Certification" means a surveyor's certification in form
and substance satisfactory to Lender.
"Taking" has the meaning provided in the Mortgage.
"Tax Fair Market Value" means, with respect to the Facility, the
fair market value of the Facility, and (x) shall not include the value of any
personal property or other property that is not an "interest in real property"
within the meaning of Treasury Regulation ss.ss.1.860G-2 and 1.856-3(c), or is
not "qualifying real property" within the meaning of Treasury Regulation
ss.1.593-11(b)(iv), and (y) shall be reduced by the "adjusted issue price"
(within the meaning of Code ss. 1272(a)(4)) (the "Tax Adjusted
<PAGE> 40
35
Issue Price") of any indebtedness, other than the Loan, secured by a Lien
affecting the Facility, which Lien is prior to or on a parity with the Lien
created under the Mortgage.
"Tenant Rollover Monthly Installment" means $75,000 or such lesser
amount which would result in a balance of $1,000,000 in the Tenant Rollover
Reserve Sub-Account; provided, however, that at the end of the ninth Interest
Accrual Period following any particular disbursement from the Tenant Rollover
Reserve Sub-Account the amount of such disbursement will have been replenished.
"Tenant Rollover Sub-Account" means the Sub-Account of the Cash
Collateral Account established and maintained pursuant to Section 2.11 relating
to the payment of tenant rollover costs.
"Title Instruction Letter" means Lender's instruction letter in form
and substance satisfactory to Lender in Lender's reasonable discretion.
"Title Insurance Policy" means a loan policy of title insurance for
the Facility issued by Title Insurer with respect to the Facility in an amount
acceptable to Lender and insuring the first priority lien in favor of Lender
created by the Mortgage, in each case acceptable to Lender in Lender's
reasonable discretion.
"Title Insurer" means Lawyers Title Insurance Company and any
reinsurer reasonably required by Lender and/or any other nationally recognized
title insurance company acceptable to Lender in Lender's reasonable discretion;
provided, however, that the reinsurer of any Title Insurance Policy may include,
in amounts acceptable to Lender, First American Title Insurance Company and
Stewart Title Insurance Company.
"Transaction Costs" means all fees, costs, expenses and
disbursements paid or payable by Borrower relating to the Transactions,
including, without limitation, all structuring fees, appraisal fees, legal fees,
accounting fees and the costs and expenses described in Section 8.24.
"Transactions" means the transactions contemplated by the Loan
Documents.
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36
"Transfer" means any conveyance, transfer (including, without
limitation, any transfer of any direct or indirect legal or beneficial interest
(including, without limitation, any profit interest) in Borrower or any SPE
Equity Owner), sale, Lease (including, without limitation, any amendment,
extension, modification, waiver or renewal thereof), or Lien, whether by law or
otherwise, of, on or affecting any Collateral, Borrower or any SPE Equity Owner,
other than a Permitted Transfer.
"Twenty Year Treasury Rate" means the yield, calculated by linear
interpolation (rounded to three decimal places) of the yields of United States
Treasury Constant Maturities with terms (one longer and one shorter) most nearly
approximating that of noncallable United States Treasury obligations having
maturities as close as possible to twenty (20) years from the Optional
Prepayment Date, as determined by Lender on the basis of Federal Reserve
Statistical Release H.15-Selected Interest Rates under the heading U.S.
Governmental Security/Treasury Constant Maturities, or other recognized source
of financial market information selected by Lender for the week prior to the
Optional Prepayment Date.
"UCC" means, with respect to any Collateral, the Uniform Commercial
Code in effect in the jurisdiction in which the relevant Collateral is located.
"UCC Searches" has the meaning provided in Section 3.1.
"U.S. Obligations" means obligations or securities not subject to
prepayment, call or early redemption which are direct obligations of, or
obligations fully guaranteed as to timely payment by, the United States of
America or any agency or instrumentality of the United States of America, the
obligations of which are backed by the full faith and credit of the United
States of America.
"Use" means, with respect to any Hazardous Substance, the
generation, manufacture, processing, distribution, handling, use, treatment,
recycling or storage of such Hazardous Substance or transportation to or from
the property by any Person of any Hazardous Substance.
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"Yield Maintenance Premium" means, if all or any portion of the Note
is accelerated, an amount determined by Lender in its discretion (at the time
immediately prior to the payment of such amount to Lender) equal to the excess
of (i) the amount that, when added to all amounts otherwise due as a result of
such acceleration (except for the Event of Default Return-of-Fee Amount at such
time), would be sufficient to purchase U.S. Obligations (a) having maturity
dates on or prior to, but as close as possible to, successive scheduled Payment
Dates (after the date of such acceleration of the Note) upon which Payment Dates
interest and principal payments would be required under the Note as though the
Maturity Date of the Note was the Optional Prepayment Date and (b) in amounts
sufficient to pay all scheduled principal and interest payments on the Note as
if the Maturity Date of the Note was the Optional Prepayment Date (but without
any adjustment of the monthly amortization schedule) over (ii) the Event of
Default Return-of-Fee Amount at such time; provided, however, under no
circumstances shall the Yield Maintenance Premium be less than zero.
ARTICLE II
GENERAL TERMS
Section 2.1. Amount of the Loan. Lender shall lend to Borrower a
total aggregate amount equal to the Loan Amount.
Section 2.2. Use of Proceeds. Proceeds of the Loan shall be used for
the following purposes: (a) to pay off the existing indebtedness secured by the
Facility (b) to pay the refinancing costs for the Facility owned by Borrower,
(c) to fund any upfront reserves or escrow amounts required hereunder, and (d)
to pay any Transaction Costs. Any excess will be available to Borrower and may
be used for any lawful purpose.
Section 2.3. Security for the Loan. The Note and Borrower's
obligations hereunder and under the other Loan Documents shall be secured by the
Mortgage, the Assignment of Leases, the Assignment of Agreements, the Manager's
Subordination, and the security interests and Liens granted in this Agreement
and in the other Loan Documents.
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Section 2.4. Borrower's Note.
(a) Borrower's obligation to pay the principal of and interest on
the Loan (including Late Charges, Default Rate interest, and the Yield
Maintenance Premium, if any), shall be evidenced by this Agreement and by the
Note, duly executed and delivered by Borrower. The Note shall be payable as to
principal, interest, Late Charges, Default Rate interest and Yield Maintenance
Premium, if any, as specified in this Agreement, with a final maturity on the
Maturity Date. Borrower shall pay all outstanding Indebtedness on the Maturity
Date.
(b) Lender is hereby authorized, at its option, to endorse on a
schedule attached to the Note (or on a continuation of such schedule attached to
the Note and made a part thereof) an appropriate notation evidencing the date
and amount of each payment of principal, interest, Late Charges, Default Rate
interest and Yield Maintenance Premium, if any, in respect thereof, which
schedule shall be made available to Borrower, at Borrower's sole cost and
expense on reasonable advance notice, for examination at Lender's offices.
Section 2.5. Principal and Interest Payments.
(a) Accrual of Interest before the Optional Prepayment Date.
Before the Optional Prepayment Date, interest shall accrue on the outstanding
principal balance of the Note and all other amounts due to Lender under the Loan
Documents at the Initial Interest Rate.
(b) Accrual of Interest on or after the Optional Prepayment
Date. Commencing on the Optional Prepayment Date, interest shall accrue on the
outstanding principal balance of the Note and all other amounts due to Lender
under the Loan Documents at the Revised Interest Rate.
(c) Monthly Base Payments of Principal and Interest at the
Initial Interest Rate. On each Payment Date, Borrower shall pay to Lender a
monthly constant payment as indicated on Exhibit B, which payment is based on
the Initial Interest Rate and an amortization schedule of 360 months. Each
payment required to be made by Borrower pursuant to this Section 2.5(c) is
hereinafter sometimes referred to as a "Base Payment".
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39
(d) Payments of Excess of Revised Interest Rate Over Initial
Interest Rate. To the extent, for any period, that accrued interest at the
Revised Interest Rate exceeds interest required to be paid hereunder for such
period at the Initial Interest Rate (such amount, the "Accrued Interest"),
Borrower shall only be required to pay such Accrued Interest after the
outstanding principal balance of the Note has been paid in full. Unpaid Accrued
Interest shall accrue interest at the Revised Interest Rate and shall be
computed based on the actual number of days elapsed in each year over a 360 day
year.
(e) Payment Dates. All payments required to be made pursuant
to paragraphs (a) through (d) above shall be made beginning on the first Payment
Date immediately after the end of the second Interest Accrual Period; provided,
however, that Borrower shall pay interest for the first Interest Accrual Period
on the Closing Date.
(f) Calculation of Interest. Interest shall accrue on the
outstanding principal balance of the Loan and all other amounts due to Lender
under the Loan Documents commencing upon the Closing Date. Interest shall accrue
on Accrued Interest commencing on the first Payment Date following the Optional
Prepayment Date. Interest shall be computed on the actual number of days elapsed
in each year over a 360 day year.
(g) Default Rate Interest. Upon the earlier to occur and
during the continuance of a Late Payment or an Event of Default, if any, the
entire unpaid amount outstanding hereunder and under the Note will bear interest
at the Default Rate.
(h) Late Charge. If Borrower fails to make any payment of any
sums due to Lender under the Loan Documents on the date when the same is due,
without giving effect to any cure period, if any, Borrower shall pay a Late
Charge.
(i) Maturity Date. On the Maturity Date, Borrower shall pay to
Lender all amounts owing under the Loan Documents including, without limitation,
interest, principal, Late Charges, Default Rate interest, Accrued Interest, any
Yield Maintenance Premium and the Event of Default Return-of-Fee Amount;
provided, however, Yield Maintenance Premium and the Event of Default
Return-of-Fee Amount shall only be due and payable if the Maturity Date occurs
as a result of acceleration of the Note.
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(j) Cash Management Fees. After the occurrence of a Cash
Management Event, Borrower shall pay to Lender the amount of any fees charged by
the Cash Collateral Account Bank to service and maintain the Cash Collateral
Account, which fees shall be paid by Borrower to Lender, on each Payment Date,
for the Interest Accrual Period immediately preceding such Payment Date.
Section 2.6. Prepayment.
(a) On and after the earlier to occur of (i) the Optional Prepayment
Date or (ii) at Lender's election, upon the occurrence and during the
continuation of an Event of Default hereunder, in addition to all other payments
required hereunder, Borrower shall pay and use all Excess Cash Flow to prepay
the Loan on each Payment Date in accordance with Section 2.11(g) and Section 2.7
and, after payment in full of the Principal Indebtedness (but not Accrued
Interest or interest thereon) to pay Accrued Interest and interest thereon and
all other amounts then owing.
(b) If Borrower is required by Lender under the provisions of the
Mortgage to prepay the Loan or any portion thereof (i) in the event of damage to
or destruction of all or any portion of the Facility, Borrower shall (A) prepay
the Loan in an amount equal to the Casualty Prepayment Amount and (B) with
respect to any such event, also pay to Lender, for Lender's own account, an
amount equal to the Casualty Return-of-Fee Amount or (ii) in the event of a
Taking of all or any portion of any Facility, Borrower shall (A) prepay the Loan
in an amount equal to the Condemnation Prepayment Amount and (B) with respect to
any such event, also pay to Lender, for Lender's own account, an amount equal to
the Condemnation Return-of-Fee Amount. There shall be no Yield Maintenance
Premium or penalty assessed against Borrower by reason of such prepayment.
(c) On and after the third Payment Date prior to the Optional
Prepayment Date (provided no Default or Event of Default has occurred), Borrower
may voluntarily prepay the Loan in whole or in part, and there shall be no Yield
Maintenance Premium or penalty assessed against Borrower by reason of such
prepayment.
(d) All prepayments made pursuant to this Section shall be applied
in accordance with the provisions of Section 2.7.
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(e) Any prepayment of the Loan by Borrower shall be made on a
Payment Date.
(f) Borrower shall not be permitted at any time to prepay all or any
part of the Loan except as expressly provided in this Section.
Section 2.7. Application of Payments. Prior to the occurrence of
an of Default, all proceeds of any repayment, including prepayments, of the
Loan shall be applied to pay: first, any costs and expenses of Lender,
including, without limitation, the Lender's reasonable attorney's fees and
disbursements actually arising as a result of such repayment or reasonably
expended by Lender to protect the Collateral; second, accrued and unpaid
interest at the Initial Interest Rate; third, to the Principal Indebtedness (but
not to Accrued Interest or interest thereon); fourth, to Accrued Interest and
interest accrued thereon; and fifth, any other amounts then due and owing under
the Loan Documents; provided, however, that any payment of the Casualty
Return-of-Fee Amount, the Condemnation Return-of-Fee Amount, or the Event of
Default Return-of-Fee Amount shall be for Lender's own account to be applied in
any manner Lender determines in its discretion. After the occurrence and
continuance of an Event of Default, all proceeds of repayment, including any
payment or recovery on the Collateral shall, unless otherwise provided in the
Mortgage, be applied in such order and in such manner as Lender shall elect in
Lender's discretion.
Section 2.8. Payment of Debt Service, Method and Place of Payment.
(a) Except as otherwise specifically provided herein, all payments
and prepayments under this Agreement and the Note shall be made to Lender not
later than 12:00 noon, New York City time, on the date when due, and shall be
made in lawful money of the United States of America in federal or other
immediately available funds to an account specified to Borrower by Lender in
writing, and any funds received by Lender after such time, for all purposes
hereof, shall be deemed to have been paid on the next succeeding Business Day.
(b) All payments made by Borrower hereunder or by Borrower under
the Loan Documents, shall be made irrespective of, and without any deduction
for, any set-offs or counterclaims.
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(c) Prior to the occurrence of a particular Cash Management Event,
or after the cure, if any, of such Cash Management Event pursuant to this
paragraph (c), Borrower shall pay to the Lender or its designee, on or prior to
each Payment Date, the Required Debt Service Payment for such Payment Date, the
Basic Carrying Costs Monthly Installment for the Interest Accrual Period
immediately preceding such Payment Date and the Capital Reserve Monthly
Installment for the Interest Accrual Period immediately preceding such Payment
Date and the Tenant Rollover Monthly Installment for the Interest Accrual Period
immediately preceding such Payment Date. After the occurrence of a particular
Cash Management Event and prior to its cure, if any, under this paragraph (c),
the Collection Account Bank shall transfer to Lender all amounts due under the
Loan Documents (and all other amounts in the Collection Account pursuant to the
Collection Account Agreement and Section 2.11). On the date that is twelve (12)
months after the occurrence of a particular Cash Management Event, if (i) the
Debt Service Coverage Ratio for the Facility exceeds the Initial DSCR and (ii)
none of the events in the definition of "Cash Management Event" exist at such
time as determined by Lender in its discretion, then such Cash Management Event
shall be deemed to not have occurred for purposes of this paragraph (c),
provided that this sentence shall in no way limit the definition of "Cash
Management Event" with respect to events after such date.
Section 2.9. Taxes. All payments made by Borrower under this
Agreement and under the other Loan Documents shall be made free and clear of,
and without deduction or withholding for or on account of, any present or future
income, stamp or other taxes, levies, imposts, duties, charges, fees, deductions
or withholdings, now or hereafter imposed, levied, collected, withheld or
assessed by any Governmental Authority.
Section 2.10. Defeasance Requirements.
(a) Provided that no Default or Event of Default has
occurred, after the earlier to occur of (i) two (2) years after the Start-Up Day
and (ii) three (3) years after the Closing Date (but only before the Optional
Prepayment Date), Borrower may voluntarily defease (A) all of the Loan or (B)
part of the Loan on a Parcel-by-Parcel basis, or (C) part of the Loan on a non-
Parcel-by-Parcel basis, but only pursuant to Section 5.1(P).
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(b) Any defeasance of the Loan by Borrower shall be
made on a Payment Date.
(c) Borrower shall not be permitted at any time to
defease all or any part of the Loan except as expressly provided in this
Section.
(d) Subject to the terms and conditions of this
Agreement, Borrower may defease the Loan if Borrower: (i) provides, in the case
of a defeasance pursuant to Section 5.1(P), not less than ten (10) days, and, in
all other cases, not less than thirty (30) days prior written notice to the
Lender specifying a Payment Date (the "Defeasance Release Date") on which the
payments provided in clauses (ii) and (iii) below are to be made and the deposit
provided in clause (iv) below is to be made, (ii) pays all interest accrued and
unpaid on the Principal Indebtedness to and including the Defeasance Release
Date, (iii) pays all other sums then due and payable under the Loan Documents,
(iv) deposits with the Lender an amount equal to the Defeasance Deposit, and (v)
in the case of a defeasance in part on a Parcel-by-Parcel basis, provides to
Lender evidence satisfactory to Lender that the Defeasance Debt Service Coverage
Ratio for all Parcels (after giving effect to the defeasance and payment of the
Defeasance Deposit and calculated on the basis of the prior twelve (12) calendar
months) shall be greater than the greater of (x) 1.20:1 and (y) the Debt Service
Coverage Ratio (calculated on the basis of the prior twelve (12) calendar
months) for all Parcels as of the Payment Date immediately preceding the
Defeasance Release Date, and (vi) delivers to the Lender (A) a security
agreement, in form and substance satisfactory to Lender, creating a first
priority perfected Lien on the deposits required pursuant to this Section and
the U.S. Obligations purchased on behalf of Borrower in accordance with this
Section (the "Security Agreement"), (B) for execution by the Lender, a release
of each relevant Parcel from the lien of the Mortgage in a form appropriate for
each jurisdiction in which the relevant Parcel is located, (C) an Officer's
Certificate of Borrower certifying that the requirements set forth in this
Section have been satisfied including, without limitation, that no Default or
Event of Default has occurred, (D) an opinion of Borrower's counsel in form and
substance satisfactory to the Lender stating, among other things, (x) that,
without qualification, the U.S. Obligations have been duly and validly assigned
and delivered to Lender and Lender has a first priority perfected security
interest in and Lien on the deposits required pursuant to this Section and a
first priority perfected security interest in and Lien on the U.S. Obligations
purchased pursuant hereto and the Proceeds thereof, and (y) that the defeasance
will not adversely affect the status of any REMIC formed in connection with a
Securitization, and (E) such other
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certificates, documents or instruments as the Lender may request including,
without limitation, (x) written confirmation from the relevant Rating Agencies
that such defeasance will not cause any Rating Agency to withdraw, qualify or
downgrade the then-applicable rating on any security issued in connection with
any Securitization and (y) a certificate from an Independent certified public
accountant certifying that the amounts of the U.S. Obligations comply with all
of the requirements of this Loan Agreement.
(e) The U.S. Obligations shall mature on or be
redeemable, or provide for payment thereon, on or prior to the Business Day
immediately preceding the date on which payments under the Note are due and
payable and the proceeds thereof shall be payable directly to the Lender. In
connection with the foregoing, Borrower appoints the Lender as Borrower's agent
for the purpose of applying the amounts delivered pursuant to clause (d)(iv)
above to purchase U.S. Obligations.
(f) If any notice of defeasance is given, Borrower
shall be required to defease the Loan (or a portion thereof if such defeasance
is a partial defeasance) on the specified Payment Date (unless such notice is
revoked in writing by Borrower prior to the date specified therein in which
event Borrower shall immediately reimburse Lender for any costs incurred by
Lender in connection with Borrower's giving of such notice and revocation).
(g) Upon compliance with the requirements of this
Section in the event of a total defeasance of the Loan, or a partial defeasance
of the Loan on a Parcel-by-Parcel basis, the relevant Mortgaged Property as to
which such defeasance has been consummated shall be released from the lien of
the Mortgage.
(h) In connection with a complete defeasance of the
Loan, with the prior written consent of Lender, which consent Lender may
withhold in its discretion, Borrower may assign to such other entity or entities
established or designated by Borrower (the "Successor Obligor") all of
Borrower's obligations under the Note, the other Loan Documents and the Security
Agreements together with the pledged U.S. Obligations. The Successor Obligor
shall assume, in a writing or writings satisfactory to Lender in Lender's
discretion, all of Borrower's obligations under the Note, the other Loan
Documents and the Security Agreements and, upon such assignment Borrower shall,
except as set forth herein, be relieved of its obligations hereunder.
<PAGE> 50
45
(i) Nothing in this Section shall release Borrower
from any liability or obligation relating to any environmental matters arising
under Sections 4.1(V) or 5.1(D) through 5.1(I), inclusive, hereof.
(j) Notwithstanding anything to the contrary set forth
herein or in the other Loan Documents, Borrower shall not be permitted to
defease the Loan on a Parcel-by- Parcel basis until the following conditions, in
addition to the conditions set forth above, are satisfied:
(i) Borrower shall give Lender written notice of
Borrower's intent to request release of a Parcel, which notice shall
(A) be given at least thirty (30) days prior to the Defeasance
Release Date, and (B) include (1) a current Survey of the Parcel to
be released and a Surveyor's Certification, (2) all draft
documentation purporting to convey the Parcel, which documentation
shall be in form and substance satisfactory to Lender in Lender's
reasonable discretion, (3) all information necessary to process the
request for release of the Parcel, including the name and address of
the prospective transferee, and the intended use of the Parcel to be
released and such other documents and information concerning the
release of the Parcel as Lender may reasonably request, (4) such
endorsements to the Title Insurance Policy as may be reasonably
required by Lender including, without limitation, an endorsement
insuring the continued priority of the lien of the Mortgage, subject
only to Permitted Encumbrances and (5) such insurance, construction
bonds, completion guaranties and other documentation and assurances
that Lender may reasonably require to protect the remaining Parcels
and Lender's security interest therein;
(ii) at the time of the release of the Parcel, Borrower
shall transfer and convey the Parcel being released to a Person
other than Borrower and any SPE Equity Owner;
(iii) the release of the Parcel shall not impair or
otherwise adversely affect any remaining Parcel, the value thereof,
or the use thereof as then being conducted by Borrower;
(iv) both prior to and following the release of the
Parcel, the Facility and Borrower's use thereof shall not violate
any Legal Requirements, including without limitation, state and
local zoning, land use, and subdivision laws and ordinances;
<PAGE> 51
46
(v) the Parcel to be released shall constitute a
separate tax lot which is separately taxed from the remainder of the
Facility;
(vi) acceptable opinions relating to the release of the
Parcel shall have been delivered by Borrower to Lender and the
Rating Agencies including, without limitation, a substantive
non-consolidation opinion and an opinion that the release of the
Parcel will not constitute a "significant modification" of the Loan
within the meaning of Section 1.1001-3 of U.S. Treasury Regulations
and that the release of the Parcel will not adversely affect the
tax status of any REMIC utilized in connection with a securitization
of the Loan;
(vii) Borrower shall pay all reasonable expenses
incurred by Lender in connection with the release of the Parcel
including, without limitation, reasonable attorney's fees;
(viii) Borrower shall deliver to Lender, (A) for
execution by Lender, a release of the Parcel from the Lien of the
Mortgage in a form appropriate for recordation and (B) Officer's
Certificates on behalf of Borrower certifying that the requirements
set forth in this Section have been satisfied. If Borrower or Lender
reasonably determines that any rights and easements in addition to
the rights and easements included within the definition of Parcel
are reasonably required by Borrower, any prospective purchaser,
transferee, or lessee of all or part of the Parcel, or any person or
entity extending credit on or for the Parcel for the acquisition,
development, improvement or operation of the Parcel, Lender shall
negotiate in good faith with Borrower concerning (i) the grant of
any such additional rights and easements, and (ii) the terms and
conditions (including, without limitation, payment of a reasonable
release price) upon which such rights and easements will be granted;
and
(ix) Borrower shall deliver to Lender replacement Leases
for any Leases which include space in both the Parcel to be released
and the remainder of the Facility, which replacement Leases shall be
on substantially the same terms as the Leases they replace and
divide the rent on a pro rata basis acceptable to Lender in Lender's
reasonable discretion.
<PAGE> 52
47
Section 2.11. Central Cash Management.
(a) Collection Account.
(i) Borrower shall open and maintain at the Collection Account
Bank a trust account (the "Collection Account"). Borrower may designate
a new financial institution to serve as a Collection Account Bank if
approved by Lender in Lender's reasonable discretion. If any Collection
Account Bank resigns pursuant to the terms of any Collection Account
Agreement, Borrower shall replace such Collection Account Bank with a
bank and documentation acceptable to Lender prior to the date that such
resignation becomes effective pursuant to such Collection Account
Agreement.
(ii) The Collection Account shall be assigned an
identification number by the Collection Account Bank and shall be
opened and maintained in the name "Nomura Asset Capital Corporation as
Mortgagee of Hallwood 98, L.P." Neither Borrower nor Manager shall have
any right of withdrawal from the Collection Account. The Borrower shall
instruct (a) the tenants to make all payments under the Leases payable
to the name of the Collection Account and (b) the Manager to collect
all Rents, Money and other items of Gross Revenue and within one
Business Day of receipt deposit such funds in the Collection Account;
provided, and without limiting the obligation of the Manager to collect
the Rents (other than security deposits), if Manager shall fail to
comply with Borrower's instructions, Borrower shall collect all Rents
(other than security deposits) and shall endorse all checks and deposit
all such funds and any other Rents (other than security deposits),
Money or other items of Gross Revenue, within one Business Day after
receipt thereof, directly into the Collection Account. The Collection
Account Bank will transfer funds deposited in the Collection Account as
set forth in Section 2(j) of the Collection Account Agreement.
(iii) Any breach of this Section by Borrower shall be an Event
of Default.
(b) Payments. Prior to the occurrence of a Cash Management Event,
Borrower shall pay to Lender or Lender's designee on or prior to each Payment
Date, the Required Debt Service Payment for such Payment Date, the Basic
Carrying Costs Monthly Installment for the Interest Accrual Period immediately
preceding such Payment Date and the Capital Reserve Monthly Installment for the
Interest Accrual Period immediately preceding such
<PAGE> 53
48
Payment Date, and the Tenant Rollover Monthly Installment for the Interest
Accrual Period immediately preceding such Payment Date. Lender shall transfer
all such payments to an Eligible Account established by Lender or Lender's
designee (the "Cash Collateral Account"). After the occurrence of a Cash
Management Event, pursuant to the Collection Account Agreement among the
Collection Account Bank, Borrower and Lender (the "Collection Account
Agreement"), Lender will authorize and direct the Collection Account Bank to
transfer on a daily basis all funds deposited in the Collection Account to the
Cash Collateral Account. The Cash Collateral Account shall be under the sole
dominion and control of Lender. Borrower shall have no right of withdrawal in
respect to the Cash Collateral Account.
(c) Establishment of Sub-Accounts. The Cash Collateral Account
shall contain a Debt Service Payment Sub-Account, a Basic Carrying Costs
Sub-Account, a Capital Reserve Sub-Account, a Fleet Reserve Sub-Account, a
Securitization Expense Sub-Account, a Tenant Rollover Sub-Account and an
Operating Expense Sub-Account, each of which sub- accounts may be ledger or book
entry accounts and need not be actual accounts (individually, a "Sub-Account"
and collectively, the "Sub-Accounts") and each of which shall be an Eligible
Account to which certain funds shall be allocated and from which disbursements
shall be made pursuant to the terms of this Loan Agreement.
(d) Permitted Investments. Upon the written request of Borrower,
which request may be made once per Interest Accrual Period, Lender shall direct
the Cash Collateral Account Bank to invest and reinvest any balance in the Cash
Collateral Account from time to time in Permitted Investments as instructed by
Borrower; provided, however, that: (i) if Borrower fails to so instruct Lender,
or if a Default or an Event of Default shall have occurred and is continuing,
Lender may direct the Cash Collateral Account Bank to invest and reinvest such
balance in Permitted Investments as Lender shall determine in Lender's
discretion; (ii) the maturities of the Permitted Investments on deposit in the
Cash Collateral Account shall, to the extent such dates are ascertainable, be
selected and coordinated to become due not later than the day before any
disbursements from the Sub-Accounts must be made; (iii) all such Permitted
Investments shall be held in the name and be under the sole dominion and control
of Lender; (iv) no Permitted Investment shall be made unless Lender shall retain
a first priority perfected Lien in such Permitted Investment and all filings and
other actions necessary to ensure the validity, perfection, and priority of such
Lien have been taken; (v) Lender shall only be required to follow the written
investment instructions which were most recently
<PAGE> 54
49
received by Lender and Borrower shall be bound by such last received investment
instructions; and (vi) any request from Borrower containing investment
instructions shall contain an Officer's Certificate from Borrower (which may be
conclusively relied upon by Lender and its agents) that any such investments
constitute Permitted Investments. It is the intention of the parties hereto that
all amounts deposited in the Cash Collateral Account shall at all times be
invested in Permitted Investments. All funds in the Cash Collateral Account that
are invested in a Permitted Investment are deemed to be held in such Cash
Collateral Account for all purposes of this Agreement and the other Loan
Documents. Lender shall have no liability for any loss in investments of funds
in the Cash Collateral Account that are invested in Permitted Investments
(unless invested contrary to Borrower's request other than after the occurrence
of a Default or an Event of Default) and no such loss shall affect Borrower's
obligation to fund, or liability for funding, the Cash Collateral Account and
each Sub-Account, as the case may be. Borrower and Lender agree that Borrower
shall include all such earnings and losses (other than those for Lender's
account in accordance with immediately preceding sentence) on the Cash
Collateral Account as income of Borrower for federal and applicable state tax
purposes. Borrower shall be responsible for any and all fees, costs and
expenses with respect to Permitted Investments.
(e) Interest on Accounts. All interest paid or other earnings on
the Permitted Investments made hereunder shall be income of Borrower and shall
be deposited into the Cash Collateral Account and shall be subject to allocation
and distribution like any other monies deposited therein.
(f) Payment of Basic Carrying Costs, Debt Service, Capital
Improvement Costs, Securitization Expenses, Tenant Rollover Costs, Operating
Expenses and Release of Fleet Reserve Sub-Account.
(i) Payment of Basic Carrying Costs.
(x) At least five (5) Business Days prior to the due date of any
Basic Carrying Cost payment, Borrower shall notify Lender in writing and request
that Lender make such Basic Carrying Cost payment on behalf of Borrower on or
prior to the due date thereof or reimburse Borrower to the extent such Basic
Carrying Cost was paid by, or on behalf of, Borrower. Together with each such
request, Borrower shall furnish Lender with copies of bills and other
documentation as may be reasonably required by Lender to establish that such
Basic Carrying Cost payment is then due or has been paid.
<PAGE> 55
50
Lender shall be entitled to conclusively rely on all bills or other
documentation received from Borrower, in each case without independent
investigation or verification. If Lender is making such payments on behalf of
Borrower, Lender shall make such payments out of the Basic Carrying Cost
Sub-Account before the same shall be delinquent to the extent that there are
funds available in the Basic Carrying Cost Sub-Account and Lender has received
appropriate documentation to establish the amount(s) due and the due date(s) as
and when provided above.
(y) Except to the extent that Lender is obligated to pay Basic
Carrying Costs from the Basic Carrying Costs Sub-Account pursuant to the terms
of this Section, Borrower shall pay all Basic Carrying Costs with respect to
itself and the Facility in accordance with the provisions of the Mortgage.
Borrower's obligation to pay (or enable Lender to pay) Basic Carrying Costs
pursuant to this Agreement shall include, to the extent permitted by applicable
law, Impositions resulting from future changes in law which impose upon Lender
or any Deed of Trust Trustee an obligation to pay any property taxes or other
Impositions or which otherwise adversely affect Lender's or the Deed of Trust
Trustee's interests. (In the event such a change in law prohibits Borrower from
assuming liability for payment of any such Imposition, the outstanding
Indebtedness shall, at the option of Lender, become due and payable on the date
that is one hundred twenty (120) days after such change in law; and failure to
pay such amounts on the date due shall be an Event of Default.) If an Event of
Default has occurred and is continuing, the proceeds on deposit in the Basic
Carrying Costs Sub-Account may be applied by Lender in any manner as Lender in
its discretion may determine.
(ii) Payment of Debt Service. At or before 12:00 noon, New York
City time, on each Payment Date during the term of the Loan, Lender shall
transfer to Lender's own account from the Debt Service Payment Sub-Account
an amount equal to the Required Debt Service Payment for the applicable
Payment Date. Borrower shall be deemed to have timely made the Required
Debt Service Payment pursuant to Section 2.8 regardless of the time Lender
makes such transfer as long as sufficient funds are on deposit in the Debt
Service Payment Sub-Account at 12:00 noon, New York City time on the
applicable Payment Date.
(iii) Payment of Capital Improvement Costs. Not more frequently
than twice each Interest Accrual Period, and provided that no Default or
Event of Default has occurred and is continuing, Borrower may notify Lender
in writing and request that Lender release to Borrower or its designee
funds from the
<PAGE> 56
51
Capital Reserve Sub-Account, to the extent funds are available therein, for
payment of Capital Improvement Costs. Together with each such request,
Borrower shall furnish Lender with copies of bills and other documentation
as may be reasonably required by Lender to establish that such Capital
Improvement Costs are reasonable, that the work relating thereto has been
completed and that such amounts are then due or have been paid. Lender
shall approve or disapprove such request within ten (10) Business Days
after Lender's receipt of such request and, if Lender fails to approve or
disapprove such request within such period, Lender shall be deemed to have
approved such request. If the request is approved or deemed approved,
Lender shall release the funds to Borrower or Borrower's designee within
ten (10) Business Days after Lender's approval or deemed approval.
(iv) Payment of Tenant Rollover Costs. Not more frequently than
twice each Interest Accrual Period, and provided that no Default or Event
of Default has occurred and is continuing, Borrower may notify Lender in
writing and request that Lender release to Borrower or its designee funds
from the Tenant Rollover Sub-Account, to the extent funds are available
therein for payment of costs and expenses in connection with any tenant
rollovers, including tenant improvements, leasing commissions and down
time. Together with each such request, Borrower shall furnish Lender with
copies of bills and other documentation as may be reasonably required by
Lender to establish that such costs are reasonable, that the work relating
thereto has been completed and that such amounts are then due or have been
paid. Lender shall approve or disapprove such request within ten (10)
Business Days after Lender's receipt of such request and, if Lender fails
to approve or disapprove such request within such period, Lender shall be
deemed to have approved such request. If the request is approved or deemed
approved, Lender shall release the funds to Borrower or Borrower's designee
within ten (10) Business Days after Lender's approval or deemed approval.
(v) Release of Fleet Reserve Sub-Account. Not more than once each
Interest Accrual Period after any space in the Facility currently leased to
Fleet is re-leased such that fifty percent (50%) or more of the Rents
generated from the Fleet Lease immediately prior to its termination are
replaced, and provided that no Default or Event of Default has occurred and
is continuing, Borrower may notify Lender in writing and request that
Lender release to
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52
Borrower or its designee a portion of the funds from the Fleet Reserve
Sub-Account. Together with each such request, Borrower shall furnish Lender
with copies of the relevant Lease or Leases to establish that such Rents
(on an annualized basis) have been replaced. Lender shall approve or
disapprove such request in its reasonable discretion within ten (10)
Business Days after Lender's receipt of such request and, if Lender fails
to approve or disapprove such request in its reasonable discretion within
such period, Lender shall be deemed to have approved such request. If the
request is approved or deemed approved, Lender shall release the funds to
Borrower or Borrower's designee within ten (10) Business Days after
Lender's approval or deemed approval. The amount in the Fleet Reserve
Sub-Account to be released to Borrower pursuant to this Section will be an
amount equal to the product of (i) $500,000 and (ii) a fraction no greater
than one, the numerator of which is the Rents (on an annualized basis and
which have not been included in any prior releases of funds pursuant
hereto) that have been replaced by tenants occupying the Fleet space and
the denominator of which is $588,077 (the annual amount of Rent paid by
Fleet). After so much space in the Facility currently leased to Fleet is
re-leased such that all $588,077 of the annual Rent generated from the
Fleet Lease is replaced, and provided that no Default or Event of Default
has occurred and is continuing, the balance in the Fleet Reserve
Sub-Account, if any, shall be released to Borrower within ten (10) Business
Days of Borrower's delivery of written notice and satisfactory evidence of
such Rent replacement to Lender.
(vi) Payment of Securitization Expenses. To the extent funds are
available therein to pay the amounts for which Borrower is responsible
pursuant to Section 2.13, Lender may release funds out of the
Securitization Expense Sub-Account to (a) pay such amounts or, (b) after
Lender has paid all of the amounts for which Borrower is responsible
pursuant to Section 2.13, provided no Default or Event of Default has
occurred and is continuing, refund to Borrower all amounts remaining in the
Securitization Expense Sub-Account.
(vii) Payment of Operating Expenses. On and after the Optional
Prepayment Date, not more frequently than once each Interest Accrual Period
and provided that no Default or Event of Default has occurred and is
continuing, Lender shall direct the Cash Collateral Account Bank to, within
five (5) Business Days after Lender's receipt of an Operating Expense
Certificate from Borrower, such Operating Expense Certificate to be
delivered by Borrower not more
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53
frequently than once each Interest Accrual Period, transfer funds to
Borrower or its designee from the Operating Expense Sub-Account, to the
extent that there are funds available therein, in an amount not to exceed
the amount stated in the Operating Expense Certificate up to the Operating
Expense Monthly Installment. Together with each such Operating Expense
Certificate, Borrower shall furnish Lender with an Officer's Certificate
stating that all operating expenses from previous periods have been paid in
full and that such amounts being requested are then due or have been paid.
(viii) Extra Funds for Operating Expenses. On and after the Optional
Prepayment Date, not more frequently than once each Interest Accrual Period
and provided that no Default or Event of Default has occurred and is
continuing, if in a given Interest Accrual Period, Borrower requires
amounts in excess of the Operating Expense Monthly Installment (such excess
amounts, "Extra Funds"), Borrower, at the time it delivers the Operating
Expense Certificate, may deliver a written request to Lender for a
disbursement of Extra Funds stating the amount of such Extra Funds and the
purpose for such amount, together with copies of bills and other
documentation as may be required by Lender to establish that such Extra
Funds operating expenses are reasonable and that such amounts are then due
or expected to become due in that month. Lender shall approve or disapprove
such request within ten (10) Business Days after Lender's receipt of such
request and, if Lender fails to approve or disapprove such request within
such period, Lender shall be deemed to have approved such request. If such
request is approved or deemed approved, Lender shall release the Extra
Funds to Borrower or its designee within ten (10) Business Days after
Lender's approval or deemed approval.
(ix) Reconciliation. Borrower shall furnish Lender monthly, on each
Payment Date on and after the Optional Prepayment Date, a budget variance
report reconciling the Operating Expenses shown on the Annual Operating
Budget with requested disbursements for payment of Operating Expenses
pursuant to Section 2.11(f).
(g) Monthly Funding of Sub-Accounts. During each Interest Accrual
Period and, except as provided below, during the term of the Loan commencing
with the Interest Accrual Period in which the Closing Date occurs (each, the
"Current Interest Accrual Period"), Lender shall allocate all funds then on
deposit (irrespective of
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54
whether such funds were transferred by the Collection Account Bank to the Cash
Collateral Account Bank or by Borrower to Lender pursuant to Section 2.8(c)) in
the Cash Collateral Account among the Sub-Accounts as follows and in the
following priority:
(i) first, to the Basic Carrying Costs Sub-Account, until
an amount equal to the Basic Carrying Costs Monthly Installment for the
Current Interest Accrual Period has been allocated to the Basic
Carrying Costs Sub-Account;
(ii) second, to the Debt Service Payment Sub-Account, until
an amount equal to the Required Base Debt Service Payment for the
Payment Date immediately after the Current Interest Accrual Period has
been allocated to the Debt Service Payment Sub-Account;
(iii) third, to the Capital Reserve Sub-Account, until an
amount equal to the Capital Reserve Monthly Installment for the Current
Interest Accrual Period has been allocated to the Capital Reserve
Sub-Account;
(iv) fourth, to the Securitization Expense Sub-Account;
provided, however, that only the Initial Securitization Expense Amount
shall be allocated to the Securitization Sub-Account;
(v) fifth, to the Fleet Reserve Sub-Account; provided,
however, that only the Initial Fleet Reserve Amount shall be allocated
to the Fleet Reserve Sub-Account;
(vi) sixth, to the Tenant Rollover Expense Sub-Account until
an amount equal to the Tenant Rollover Monthly Installment for the
Current Interest Accrual Period has been allocated to the Tenant
Rollover Sub-Account;
(vii) seventh, on and after the Optional Prepayment Date, or
at Lender's election, upon the occurrence of an Event of Default, any
date on or after the occurrence of such Event of Default, to the
Operating Expense Sub-Account, until an amount equal to the Operating
Expense Monthly Installment for the Current Interest Accrual Period has
been allocated to the Operating Expense Sub-Account; and
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(viii) eighth, provided that (i) no Event of Default has
occurred and is continuing and (ii) Lender has received all financial
information described in Section 5.1(Q) for the most recent periods for
which the same are due, Lender agrees that in each Current Interest
Accrual Period any amounts deposited into or remaining in the Cash
Collateral Account after (A) the minimum amounts set forth in clauses
(i), (ii), (iii), (iv), (v), (vi) and (vii) above have been satisfied
with respect to the Current Interest Accrual Period and any periods
prior thereto and (B) the funding of additional reserves at levels
determined by Borrower to be prudent for working capital, Capital
Improvement Costs and other Borrower costs, which levels shall be
satisfactory to Lender, in Lender's discretion, shall be disbursed by
Lender on the first Payment Date after the end of the then Current
Interest Accrual Period, at Borrower's expense, to such account that
Borrower may request in writing. Lender and its agents shall not be
responsible for monitoring Borrower's use of any funds disbursed from
the Cash Collateral Account or any of the Sub-Accounts. Notwithstanding
anything in this Agreement to the contrary, on and after the Optional
Prepayment Date, any amounts deposited into or remaining in the Cash
Collateral Account after (A) the minimum amounts set forth in clauses
(i), (ii), (iii), (iv), (v), (vi) and (vii) above have been satisfied
with respect to the Current Interest Accrual Period and any periods
prior thereto and (B) the funding of additional reserves at levels
determined by Borrower to be prudent for working capital, Capital
Improvement Costs and other Borrower costs, which levels shall be
satisfactory to Lender, in Lender's discretion (such remaining amounts,
the "Excess Cash Flow"), shall be allocated to the Debt Service
Sub-Account and be applied by Lender on each Payment Date in accordance
with Section 2.7 and shall not be disbursed to Borrower; and further
provided, however, that if an Event of Default has occurred any amounts
deposited into or remaining in the Cash Collateral Account shall be
for the account of Lender and may be withdrawn by Lender to be applied
in any manner as Lender may elect in Lender's discretion.
If an Event of Default has occurred and is continuing or if on
any Payment Date the balance in any Sub-Account is insufficient to make the
required payment due from such Sub- Account, Lender may, in its sole discretion,
in addition to any other rights and remedies available hereunder, withdraw funds
from any other Sub-Account to pay such deficiency. If Lender elects to apply
funds of any such Sub-Account to pay any Required Base Debt Service Payment,
Borrower shall, upon demand, repay to Lender the amount of such withdrawn funds
to replenish such Sub-Account, and if Borrower
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shall fail to repay such amounts within one (1) Business Day after notice of
such withdrawal, an Event of Default shall exist hereunder. Notwithstanding
anything contained herein to the contrary, on the Closing Date Borrower shall
deposit (i) the Initial Basic Carrying Costs Amount into the Basic Carrying
Costs Sub-Account, (ii) the Initial Capital Reserve Amount into the Capital
Reserve Sub-Account, (iii) the Initial Tenant Rollover Reserve Amount into the
Tenant Rollover Sub-Account and (iv) the Initial Fleet Reserve Amount into the
Fleet Reserve Sub-Account.
(h) Termination of Central Cash Management. The obligations of
Borrower under Section 2.11 and Section 2.12 to maintain and fund the Collection
Account and the Cash Collateral Account shall terminate in their entirety and be
of no further force or effect upon the satisfaction of all of the following
conditions: (i) no Default or Event of Default shall have occurred; (ii) the
total defeasance of the Loan in accordance with the provisions of this Agreement
and the other Loan Documents; (iii) the release of the Mortgage by Lender in
accordance with the provisions of this Agreement and the other Loan Documents;
and (iv) Borrower's receipt of Lender's written acknowledgement that the
conditions described in (i), (ii) and (iii) above have been satisfied to
Lender's satisfaction.
Section 2.12 Security Agreement.
(a) Pledge of Accounts. To secure the full and punctual payment and
performance of all of the Indebtedness, Borrower hereby sells, assigns, conveys,
pledges and transfers to Lender and grants to Lender a first and continuing Lien
on and security interest in and to, the following property, whether now owned or
existing or hereafter acquired or arising and regardless of where located
(collectively, the "Account Collateral"):
(i) all of Borrower's right, title and interest in the Cash
Collateral Account (including all Sub-Accounts) and all Money and Permitted
Investments, if any, from time to time deposited or held in the Cash Collateral
Account;
(ii) all of Borrower's right, title and interest in the
Collection Account and all Money, if any, from time to time deposited or held
in the Collection Account;
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(iii) all interest, dividends, Money, Instruments and other
property from time to time received, receivable or otherwise payable in respect
of, or in exchange for, any of the foregoing; and
(iv) to the extent not covered by clauses (i), (ii), or (iii)
above, all Proceeds and products of any or all of the foregoing.
(b) Covenants. Borrower covenants that (i) all Rents, Money and
other items of Gross Revenue shall be deposited into the Collection Account in
accordance with Section 2.11(a), and (ii) so long as any portion of the
Indebtedness is outstanding, Borrower shall not open (nor permit Manager or any
Person to open) any other account for the collection of Rents, Money or other
items of Gross Revenue, other than a replacement Collection Account approved by
Lender in Lender's discretion.
(c) Instructions and Agreements. On or before the Closing Date,
Borrower will submit to the Collection Account Bank for the Facility a
Collection Account Agreement to be executed by the Collection Account Bank.
(d) Financing Statements; Further Assurances. Borrower will execute
and deliver to Lender for filing a financing statement or statements in
connection with the Account Collateral in the form required to properly perfect
Lender's security interest in the Account Collateral to the extent that it may
be perfected by such a filing. Borrower agrees that at any time and from time to
time, at the expense of Borrower, Borrower shall promptly execute and deliver
all further instruments, and take all further action, that Lender may reasonably
request, in order to perfect and protect the pledge, security interest and Lien
granted or purported to be granted hereby, or to enable Lender to exercise and
enforce Lender's rights and remedies hereunder with respect to, the Account
Collateral.
(e) Transfers and Other Liens. Borrower agrees that it will not
sell or otherwise dispose of any of the Account Collateral other than pursuant
to the terms hereof and of the other Loan Documents, or create or permit to
exist any Lien upon or with respect to all or any of the Account Collateral,
except for the Lien granted to Lender under this Agreement.
(f) Lender's Reasonable Care. Beyond the exercise of reasonable
care in the custody thereof, Lender shall not have any duty as to any Account
Collateral or any
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income thereon in Lender's possession or control or in the possession or control
of any agents for, or of Lender, or the preservation of rights against any
Person or otherwise with respect thereto. Lender shall be deemed to have
exercised reasonable care in the custody of the Account Collateral in Lender's
possession if the Account Collateral is accorded treatment substantially equal
to that which Lender accords Lender's own property, it being understood that
Lender shall not be liable or responsible for (i) any loss or damage to any of
the Account Collateral, or for any diminution in value thereof from a loss of,
or delay in Lender's acknowledging receipt of, any wire transfer from the
Collection Account Bank or (ii) any loss, damage or diminution in value by
reason of the act or omission of Lender, or Lender's agents, employees or
bailees, except to the extent that such loss or damage or diminution in value
results from Lender's gross negligence or willful misconduct or the gross
negligence or willful misconduct of any such agent, employee or bailee of
Lender.
(g) Lender Appointed Attorney-In-Fact. Borrower hereby irrevocably
constitutes and appoints Lender as Borrower's true and lawful attorney-in-fact,
with full power of substitution, at any time after the occurrence and
continuance of an Event of Default and the continuation thereof to execute,
acknowledge and deliver any instruments and to exercise and enforce every right,
power, remedy, option and privilege of Borrower with respect to the Account
Collateral, and do in the name, place and stead of Borrower, all such acts,
things and deeds for and on behalf of and in the name of Borrower with respect
to the Account Collateral, which Borrower could or might do or which Lender may
deem necessary or desirable to more fully vest in Lender the rights and remedies
provided for herein with respect to the Account Collateral and to accomplish the
purposes of this Agreement. The foregoing powers of attorney are irrevocable and
coupled with an interest. Notwithstanding the foregoing, Lender shall not be
entitled to exercise the foregoing power of attorney until the occurrence of an
Event of Default and the continuation thereof.
(h) Continuing Security Interest; Termination. This Section shall
create a continuing pledge of, Lien on and security interest in the Account
Collateral and shall remain in full force and effect until payment in full of
the Indebtedness. Upon payment in full of the Indebtedness, Borrower shall be
entitled to the return, upon Borrower's written request and at Borrower's
expense, of such of the Account Collateral as shall not have been sold or
otherwise applied pursuant to the terms hereof, and Lender shall execute such
instruments and documents as may be reasonably requested by Borrower in writing
to evidence such termination and the release of the pledge and Lien hereof,
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provided, however, that Borrower shall pay on demand all of Lender's expenses in
connection therewith.
Section 2.13. Securitization. Borrower hereby acknowledges that
Lender, its successors or assigns, may sell or securitize the Loan or portions
thereof in one or more transactions through the issuance of securities, which
securities may be rated by the Rating Agencies (each, a "Securitization"; and
collectively, the "Securitizations"). Borrower agrees that it shall cooperate
with Lender and use Borrower's best efforts to facilitate the consummation of
each Securitization including, without limitation, by: (i) amending or causing
the amendment of this Agreement and the other Loan Documents (provided that such
amendments shall not materially increase Borrower's obligations hereunder or
thereunder), and executing such additional documents, instruments and agreements
including amendments to Borrower's organizational documents and preparing
financial statements as requested by the Rating Agencies to conform the terms of
the Loan to the terms of similar loans underlying completed or pending
securitized transactions having or seeking ratings similar to those then being
sought in connection with the relevant Securitization; (ii) promptly and
reasonably providing such information as may be requested in connection with the
preparation of a private placement memorandum, prospectus or a registration
statement required to privately place or publicly distribute the securities in a
manner which does not conflict with federal or state securities laws; (iii)
providing in connection with each of (a) a preliminary and a private placement
memorandum or (b) a preliminary and final prospectus, as applicable, an
indemnification certificate (x) certifying that Borrower has carefully examined
such private placement memorandum, prospectus or registration statement, as
applicable, including, without limitation, the sections entitled "Special
Considerations," "Description of the Mortgage Loan," "The Underlying Mortgaged
Property," "The Manager," "Borrower" and "Certain Legal Aspects of the Mortgage
Loan," and such sections (and any other sections requested) insofar as they
relate to Borrower, its Affiliates, the Loan or the Facility do not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements made, in the light of the circumstances under
which they were made, not misleading; provided, however, that Borrower shall not
be required to indemnify Lender for any losses relating to untrue statements or
omissions which Borrower identified to Lender in writing at the time of
Borrower's examination of such memorandum or prospectus, as applicable, and (y)
indemnifying each Indemnified Party, the Issuer and the Advisor for any losses,
claims, damages, costs, expenses or liabilities (including, without limitation,
all liabilities under all applicable federal and state securities laws)
(collectively, the
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"Liabilities") to which any of them may become subject (i) insofar as the
Liabilities arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact relating to Borrower, its Affiliates, the
Loan, the Facility, the Manager or any aspect of the subject financing contained
in such sections or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated in such sections
or necessary in order to make the statements in such sections, in light of the
circumstances under which they were made, not misleading or (ii) as a result of
any untrue statement of material fact in any of the financial statements of
Borrower incorporated into any placement memorandum, prospectus, registration
statement or other document connected with the issuance of securities or the
failure to include in such financial statements or in any placement memorandum,
prospectus, registration statement or other document connected with the issuance
of securities any material fact relating to Borrower, its Affiliates, the
Facility, the Loan, the Manager and any aspect of the subject financing
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading; and (z) agreeing to reimburse
Lender, the Issuer and the Advisor for any legal or other expenses reasonably
incurred by Lender, the Issuer and the Advisor in connection with investigating
or defending the Liabilities; (iv) causing to be rendered such customary opinion
letters as shall be requested by the Rating Agencies for other securitizations
having or seeking ratings comparable to that then being sought for the relevant
Securitization; (v) making such representations, warranties and covenants, as
may be reasonably requested by the Rating Agencies and comparable to those
required in other securitized transactions having or seeking the same rating as
is then being sought for the Securitization; (vi) providing such information
regarding the Collateral as may be reasonably requested by the Rating Agencies
or otherwise reasonably required in connection with the formation of a REMIC;
and (vii) providing any other information and materials required in the
Securitization. Subject to Lender's application of funds in the Securitization
Expense Sub-Account, Borrower agrees to pay on the Securitization Closing Date
and, if earlier, within thirty (30) days after the incurrence thereof, upon
demand, all reasonable out-of-pocket costs of Lender (and not previously
reimbursed by Borrower) in connection with the Securitization (or any attempt to
securitize the Loan), including, without limitation, the cost of preparing a
private placement memorandum, prospectus or registration statement, Rating
Agency fees and expenses (including ongoing surveillance fees), legal fees and
disbursements (including, without limitation, in connection with the rendering
of legal opinions), third party due diligence expenses, including, without
limitation, appraisals, engineering reports and environmental reports, the fees
and expenses of any trustee, servicer or special servicer, including any ongoing
servicing or special servicing fees, and the cost of market
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studies and SEC filing fees (collectively, "Securitization Costs"), provided,
however, that Borrower's liability for Securitization Costs shall not exceed the
Initial Securitization Expense Amount. Borrower acknowledges and agrees that the
Lender may, at any time on or after the Closing Date, assign its duties, rights
or obligations hereunder or under any Loan Document in whole, or in part, to a
servicer and/or a trustee in Lender's discretion. Nothing herein shall in any
way limit Lender's right to sell all or a portion of the Loan in a transaction
which is not a Securitization.
ARTICLE III
CONDITIONS PRECEDENT
Section 3.1. Conditions Precedent to the Making of the Loan.
(a) As a condition precedent to the making of the Loan, the
following conditions shall have been satisfied (unless waived by Lender in
accordance with Section 8.4) on or before the Closing Date:
(A) Loan Documents.
(i) Loan Agreement. Borrower shall have executed and
delivered this Agreement to Lender.
(ii) Note. Borrower shall have executed and delivered to
Lender the Note.
(iii) Mortgage. Borrower shall have executed and delivered
to Lender the Mortgage and such Mortgage shall have been filed of
record in the appropriate filing offices in the jurisdiction in which
the Facility is located or irrevocably delivered to an authorized
title agent for the Title Insurer for such recordation.
(iv) Supplemental Mortgage Affidavits. The Liens to be
created by the Mortgage are intended to encumber the Facility
described therein to the full extent of Borrower's obligations under
the Loan Documents. As of the Closing Date, Borrower shall have paid
all state, county and municipal recording and all other taxes imposed
upon the execution and recordation of the Mortgage.
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62
(v) Assignment of Leases. Borrower shall have executed and
delivered to Lender the Assignment of Leases and the Assignment of
Leases shall have been filed of record in the appropriate filing
offices in the jurisdiction in which the Facility is located or
irrevocably delivered to an authorized title agent for the Title
Insurer for such recordation.
(vi) Assignment of Agreements. Borrower shall have
executed and delivered to Lender the Assignment of Agreements and the
Assignment of Agreements shall, to the extent prudent pursuant to local
practice, have been filed of record in the appropriate filing offices
in the jurisdiction in which the Facility is located or irrevocably
delivered to an authorized title agent for the Title Insurer for such
recordation.
(vii) Financing Statements. Borrower shall have executed and
delivered to Lender all financing statements required by Lender and
such financing statements shall have been filed of record in the
appropriate filing offices in each of the appropriate jurisdictions
or irrevocably delivered to an authorized title agent for the Title
Insurer for such recordation.
(viii) Manager's Subordination. Manager and Borrower
shall have executed and delivered to Lender the Manager's
Subordination.
(ix) Collection Account Agreement. Borrower and the
Collection Account Bank shall have executed and delivered the
Collection Account Agreement and shall have delivered an executed copy
of such Agreement to Lender.
(B) Opinions of Counsel. Lender shall have received from counsel
satisfactory to Lender, legal opinions in form and substance
satisfactory to Lender in Lender's discretion (including, without
limitation, a bankruptcy opinion). All such legal opinions will be
addressed to Lender and the Rating Agencies, dated as of the
Closing Date, and in form and substance satisfactory to Lender, the
Rating Agencies and their counsel. Borrower hereby instructs any of
the foregoing
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63
counsel, to the extent that such counsel represents Borrower, to
deliver to Lender such opinions addressed to Lender and the Rating
Agencies.
(C) Secretary's Certificates and SPE Equity Owner's Certificate.
Lender shall have received a Secretary's Certificate with respect to
Borrower's general partner's managing member and Manager and an SPE
Equity Owner's Certificate with respect to Borrower and Borrower's
general partner.
(D) Insurance. Lender shall have received certificates of
insurance demonstrating insurance coverage in respect of the Facility
as required by and in accordance with the Mortgage.
(E) Lien Search Reports. Lender shall have received
satisfactory reports of UCC (collectively, the "UCC Searches"), federal
tax lien, bankruptcy, state tax lien, judgment and pending litigation
searches conducted by a search firm reasonably acceptable to Lender.
Such searches shall have been received in relation to Borrower and each
equity owner in Borrower and Manager. Such searches shall have been
conducted in each of the locations designated by Lender in Lender's
reasonable discretion and shall have been dated not more than fifteen
(15) days prior to the Closing Date.
(F) Title Insurance Policy. Lender shall have received (i) a
Title Insurance Policy or a pro forma Title Insurance Policy (in form
and substance satisfactory to Lender) from Title Insurer to issue the
Title Insurance Policy and (ii) a fully executed copy of the Title
Instruction Letter from the Title Insurer.
(G) Environmental Matters. Lender shall have received the
Environmental Report with respect to the Facility.
(H) Consents, Licenses, Approvals. Lender shall have received
copies of all consents, licenses and approvals, if any, required in
connection with the execution, delivery and performance by Borrower
under, and the validity and enforceability of, the Loan Documents, and
such consents, licenses and approvals shall be in full force and
effect.
(I) Additional Matters. Lender shall have received such other
Permits, certificates (including certificates of occupancy reflecting
the permitted uses of the
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Facility as of the Closing Date), opinions, documents and instruments
(including, without limitation, written proof from the appropriate
Governmental Authority regarding the zoning of the Facility in form
and substance reasonably satisfactory to Lender in Lender's reasonable
discretion) relating to the Loan as may be required by Lender and all
other documents and all legal matters in connection with the Loan
shall be reasonably satisfactory in form and substance to Lender.
Borrower shall provide Lender with information reasonably satisfactory
to Lender regarding the Basic Carrying Costs on or before the Closing
Date.
(J) Representations and Warranties. The representations and
warranties herein and in the other Loan Documents shall be true and
correct.
(K) No Injunction. No law or regulation shall have been
adopted, no order, judgment or decree of any Governmental Authority
shall have been issued or entered, and no litigation shall be pending
or threatened, which in the judgment of Lender would enjoin, prohibit
or restrain, or impose or result in an adverse effect upon the making
or repayment of the Loan or the consummation of the Transactions.
(L) Survey. Lender shall have received the Survey.
(M) Engineering Report. Lender shall have received the
Engineering Report.
(N) Appraisal. Lender shall have received an Appraisal
satisfactory to Lender with respect to the Facility which shall be (i)
prepared by an Appraiser approved by Lender in Lender's discretion,
(ii) prepared based on a scope of work determined by Lender in Lender's
discretion and (iii) in form and content acceptable to Lender in
Lender's discretion.
(O) Security Deposits. All security deposits with respect to
the Facility shall be held in compliance with all applicable Legal
Requirements relating to such security deposits.
(P) Service Contracts and Permits. Borrower shall have
delivered to Lender true, correct and complete copies of all material
contracts and Permits relating to the Facility.
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65
(Q) Site Inspection. Unless waived by Lender in accordance
with Section 8.4, Lender shall have performed, or caused to be
performed on its behalf, an on-site due diligence review of the
Facility to be acquired or refinanced with the Loan, the results of
which shall be satisfactory to Lender in Lender's discretion.
(R) Use. The Facility shall be operating and operated only as
a commercial business park.
(S) Financial Information. Lender shall have received all
financial information (which financial information shall be
satisfactory to Lender in Lender's reasonable discretion) relating to
the Facility including, without limitation, financial statements of
Borrower and other financial reports requested by Lender in Lender's
reasonable discretion. Such financial information shall be (i) prepared
by an accounting firm approved by Lender in Lender's reasonable
discretion, (ii) prepared based on a scope of work determined by Lender
in Lender's reasonable discretion and (iii) in form and content
acceptable to Lender in Lender's reasonable discretion.
(T) Management Agreement. Lender shall have received the
Management Agreement.
(U) Leases; Tenant Estoppels; Subordination, Nondisturbance
and Attornment Agreements. With respect to the Facility, Borrower shall
have delivered a true, complete and correct rent roll and a copy of
each of the Leases identified in such rent roll, and each Lease shall
be satisfactory to Lender in Lender's reasonable discretion. Borrower
shall provide originally executed tenant estoppel certificates and
subordination, nondisturbance and attornment agreements from a number
of tenants satisfactory to Lender in form and substance satisfactory to
Lender in Lender's reasonable discretion.
(V) Subdivision. Evidence satisfactory to Lender (including
title endorsements) that each Parcel constitutes a separate lot for
conveyance and real estate tax assessment purposes.
(W) Transaction Costs. Borrower shall have paid, caused to be
paid or provided for the payment of all Transaction Costs.
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66
(X) Amoco Environmental Indemnity. Borrower shall have
delivered an environmental indemnity agreement from Amoco Oil Company,
a Maryland corporation in form and substance satisfactory to Lender in
Lender's reasonable discretion.
(b) Lender shall not make the Loan unless and until each of the
applicable conditions precedent set forth in this Section 3.1 is satisfied and
until Borrower provides any other information reasonably required by Lender.
(c) In connection with the Loan, Borrower shall execute and/or
deliver to Lender all additions, amendments, modifications and supplements to
the items set forth in this Article III, including, without limitation,
amendments, modifications and supplements to the Note, Mortgage, Assignment of
Leases, Assignment of Agreements, and Manager's Subordination, if reasonably
requested by Lender to effectuate the provisions hereof, and to provide Lender
with the full benefit of the security intended to be provided under the Loan
Documents; provided such additions, amendments, modifications and supplements do
not increase the obligations of Borrower beyond those contemplated hereby.
Without in any way limiting the foregoing, such additions, modifications and
supplements shall include those deemed reasonably desirable by Lender's counsel
in the jurisdiction in which the Facility is located.
(d) The making of the Loan shall constitute, without the necessity
of specifically containing a written statement to such effect, a confirmation,
representation and warranty by Borrower to Lender that all of the applicable
conditions to be satisfied in connection with the making of the Loan have been
satisfied (unless waived by Lender in accordance with Section 8.4,) and that all
of the representations and warranties of Borrower set forth in the Loan
Documents are true and correct as of the date of the making of the Loan.
Section 3.2. Form of Loan Documents and Related Matters. The Loan
Documents and all of the certificates, agreements, legal opinions and other
documents and papers referred to in this Article III, unless otherwise
specified, shall be delivered to Lender, and shall be in form and substance
reasonably satisfactory to Lender.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES
Section 4.1. Representations and Warranties of Borrower.
(A) Organization. Borrower (i) is a duly organized and
validly existing Entity in good standing under the laws of the
State of its formation, (ii) is duly qualified as a foreign Entity
in each jurisdiction in which the nature of its business, the
Facility or any of the Collateral makes such qualification
necessary or desirable, (iii) has the requisite Entity power and
authority to carry on its business as now being conducted, and (iv)
has the requisite Entity power to execute and deliver, and perform
its obligations under, the Loan Documents.
(B) Authorization. The execution and delivery by
Borrower of the Loan Documents, Borrower's performance of its
obligations thereunder and the creation of the security interests
and Liens provided for in the Loan Documents (i) have been duly
authorized by all requisite Entity action on the part of Borrower,
(ii) will not violate any provision of any applicable Legal
Requirements, any order, writ, decree, injunction or demand of any
court or other Governmental Authority, any organizational document
of Borrower or any indenture or agreement or other instrument to
which Borrower is a party or by which Borrower is bound, (iii) will
not be in conflict with, result in a breach of, or constitute (with
due notice or lapse of time or both) a default under, or result in
the creation or imposition of any Lien of any nature whatsoever
upon any of the property or assets of Borrower pursuant to, any
indenture or agreement or instrument, and (iv) have been duly
executed and delivered by Borrower. Except for those obtained or
filed on or prior to the Closing Date, Borrower is not required to
obtain any consent, approval or authorization from, or to file any
declaration or statement with, any Governmental Authority or other
agency in connection with or as a condition to the execution,
delivery or performance of the Loan Documents. The Loan Documents
to which Borrower or Manager is a party have been duly authorized,
executed and delivered by such parties.
(C) Single-Purpose Entity.
(i) Borrower has been, and will continue to be, a
duly formed and existing Entity, and a Single-Purpose Entity.
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(ii) Each SPE Equity Owner at all times since its
formation has been, and will continue to be, a duly formed and
existing limited liability company or corporation in good standing
under the laws of the jurisdiction of its formation and a
Single-Purpose Entity, is duly qualified as a foreign entity in
each other jurisdiction in which the nature of its business, the
Facility or any of the Collateral makes such qualification
necessary or desirable, and Borrower will take no action to cause
any SPE Equity Owner not to be a duly formed and existing limited
liability company or corporation in good standing under the laws
of the jurisdiction of its formation and a Single-Purpose Entity.
(iii) Borrower at all times since its formation has
complied, and will continue to comply, with the provisions of all
of its organizational documents, and the laws of the state in which
Borrower was formed relating to the Entity.
(D) Litigation. Except as otherwise disclosed in
writing to Lender, there are no actions, suits or proceedings at
law or in equity by or before any Governmental Authority or other
agency now pending and served or, to the knowledge of Borrower,
threatened against Borrower, any SPE Equity Owner or the Facility.
(E) Agreements. Borrower is not a party to any agreement
or instrument or subject to any restriction which is likely to
have a Material Adverse Effect. Borrower is not in default in any
respect in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any
indenture, agreement or instrument to which it is a party or by
which Borrower or the Facility is bound.
(F) No Bankruptcy Filing. Borrower is not contemplating
either the filing of a petition by Borrower under any state or
federal bankruptcy or insolvency laws or the liquidation of all or
a major portion of Borrower's assets or property, and Borrower has
no knowledge of any Person contemplating the filing of any such
petition against Borrower.
(G) Full and Accurate Disclosure. No statement of fact
made by or on behalf of Borrower in the Loan Documents or in any
other document or certificate delivered to Lender by Borrower
contains any untrue statement of a material fact or omits to state
any material fact necessary to make statements
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69
contained herein or therein not misleading. There is no fact
presently known to Borrower which has not been disclosed to Lender
which materially adversely affects, nor as far as Borrower can
foresee, might materially adversely affect the business, operations
or condition (financial or otherwise) of Borrower.
(H) Location of Chief Executive Offices. The location
of Borrower's principal place of business and the location of
Borrower's chief executive office is 3710 Rawlins, Suite 1500,
Dallas, Texas 75219, and Borrower has no other places of business.
(I) Compliance. Borrower, the Facility and Borrower's
use thereof and operations thereat comply in all material respects
with all applicable Legal Requirements and all Insurance
Requirements. Borrower is not in default or violation of any order,
writ, injunction, decree or demand of any Governmental Authority,
the violation of which is reasonably likely to have a Material
Adverse Effect.
(J) Other Debt and Obligations. Borrower has no financial
obligation under any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which Borrower
is a party, or by which Borrower or its Facility is bound, other
than unsecured trade payables incurred in the ordinary course of
business relating to the ownership and operation of its Facility
which do not exceed a maximum amount of three percent (3%) of the
Loan Amount and are paid within thirty (30) days of the date
invoiced (except for leasing commissions which shall be paid within
thirty (30) days of the date due), and other than obligations under
the Mortgage and the other Loan Documents. Borrower has not
borrowed or received other debt financing that has not been
heretofore repaid in full and Borrower has no known material
contingent liabilities.
(K) ERISA. Each Plan and, to the knowledge of Borrower,
each Multiemployer Plan, is in compliance in all material respects
with, and has been administered in all material respects in
compliance with, its terms and the applicable provisions of
ERISA, the Code and any other federal or state law, and no event or
condition has occurred as to which Borrower would be under an
obligation to furnish a report to Lender under Section 5.1(S).
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70
(L) Solvency. Borrower (i) has not entered into this Loan
Agreement or any Loan Document with the actual intent to hinder,
delay, or defraud any creditor, and (ii) has received reasonably
equivalent value in exchange for its obligations under the Loan
Documents. Giving effect to the transactions contemplated hereby,
the fair saleable value of Borrower's assets exceeds and will,
immediately following the execution and delivery of this Agreement,
exceed Borrower's total liabilities, including, without limitation,
subordinated, unliquidated, or disputed liabilities or Contingent
Obligations. The fair saleable value of Borrower's assets is and
will, immediately following the execution and delivery of this
Agreement, be greater than Borrower's probable liabilities,
including the maximum amount of its Contingent Obligations or its
debts as such debts become absolute and matured. Borrower's
assets do not and, immediately following the execution and
delivery of this Agreement, will not, constitute unreasonably
small capital to carry out its business as conducted or as
proposed to be conducted. Borrower does not intend to, and does
not believe that it will, incur debts and liabilities (including,
without limitation, Contingent Obligations and other commitments)
beyond its ability to pay such debts as they mature (taking into
account the timing and amounts to be payable on or in respect of
obligations of Borrower).
(M) Not Foreign Person. Borrower is not a "foreign person"
within the meaning of Section 1445(f)(3) of the Code.
(N) Investment Company Act; Public Utility Holding
Company Act. Borrower is not (i) an "investment company" or a
company "controlled" by an "investment company," within the meaning
of the Investment Company Act of 1940, as amended, (ii) a "holding
company" or a "subsidiary company" of a "holding company" or an
"affiliate" of either a "holding company" or a "subsidiary company"
within the meaning of the Public Utility Holding Company Act of
1935, as amended, or (iii) subject to any other federal or state
law or regulation which purports to restrict or regulate its
ability to borrow money.
(O) No Defaults. No Default or Event of Default exists
under or with respect to any Loan Document.
(P) Labor Matters. Borrower is not a party to any
collective bargaining agreements.
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(Q) Title to the Mortgaged Property. Borrower owns
good, indefeasible and insurable fee simple title to the Facility,
free and clear of all Liens, other than the Permitted Encumbrances
applicable to the Facility. There are no outstanding options to
purchase or rights of first refusal to purchase affecting the
Facility. The Permitted Encumbrances do not and will not materially
and adversely affect (i) the ability of Borrower to pay in full all
sums due under the Note or any of its other obligations in a timely
manner or (ii) the use of Borrower's Facility for the use currently
being made thereof, the operation of the Facility as currently
being operated or the value of the Facility.
(R) Use of Proceeds; Margin Regulations. Borrower will
use the proceeds of the Loan for the purposes described in Section
2.2. No part of the proceeds of the Loan will be used for the
purpose of purchasing or acquiring any "margin stock" within the
meaning of Regulation U of the Board of Governors of the Federal
Reserve System or for any other purpose which would be inconsistent
with such Regulation U or any other Regulations of such Board of
Governors, or for any purposes prohibited by applicable Legal
Requirements.
(S) Financial Information. All historical financial
data concerning Borrower and its Facility that has been delivered
by Borrower to Lender is true, complete and correct in all material
respects. Since the delivery of such data, except as otherwise
disclosed in writing to Lender, there has been no material adverse
change in the financial position of Borrower or the Facility, or in
the results of operations of Borrower. Borrower has not incurred
any obligation or liability, contingent or otherwise, not reflected
in such financial data which might materially adversely affect its
business operations or the Facility.
(T) Condemnation. No Taking has been commenced or, to
Borrower's knowledge, is contemplated with respect to all or any
portion of the Facility or for the relocation of roadways providing
access to the Facility.
(U) Utilities and Public Access. The Facility has
adequate rights of access to public ways and is served by adequate
water, sewer, sanitary sewer and storm drain facilities as are
adequate for full utilization of the Facility for its current
purpose. Except as otherwise disclosed by the Surveys, all public
utilities necessary to the continued use and enjoyment of the
Facility as presently used and enjoyed are located in the public
right-of-way abutting the premises, and all such
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utilities are connected so as to serve the Facility either (i)
without passing over other property or, (ii) if such utilities pass
over other property, pursuant to valid easements. All roads
necessary for access to the Facility for its current purpose have
been completed and dedicated to public use and accepted by all
Governmental Authorities or are the subject of access easements for
the benefit of the Facility.
(V) Environmental Compliance. Except for matters set forth
in the Environmental Reports delivered to Lender in connection
with the Loan (true, correct and complete copies of which have
been provided to Lender by Borrower):
(i) Borrower and the Facility are in compliance with
all applicable Environmental Laws, which compliance includes,
without limitation, the possession by Borrower of and compliance
with all environmental, health and safety Permits, licenses and
other governmental authorizations required in connection with the
ownership and operation of the Facility under all Environmental
Laws, except where the failure to comply with such laws is not
reasonably likely to result in a Material Adverse Effect.
(ii) There is no Environmental Claim pending or, to
Borrower's knowledge, threatened, and no penalties arising under
Environmental Laws have been assessed, against Borrower, the
Facility or against any Person whose liability for any
Environmental Claim Borrower has or may have retained or assumed
either contractually or by operation of law, and no investigation
or review is pending or, to the knowledge of Borrower, threatened
by any Governmental Authority, citizens group, employee or other
Person with respect to any alleged failure by Borrower, or the
Facility to have any environmental, health or safety permit,
license or other authorization required under, or to otherwise
comply with, any Environmental Law or with respect to any alleged
liability of Borrower for any Use or Release of any Hazardous
Substances or the presence, Use, or Release of any Hazardous
Substances at, on, in, under, or from any Facility.
(iii) To the knowledge of Borrower after due inquiry,
there have been and are no past or present Releases or threats of
Release of any Hazardous Substance that are likely to form the
basis of any Environmental Claim against Borrower, the Facility or,
to Borrower's knowledge, against any Person whose
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73
liability for any Environmental Claim Borrower has or may have
retained or assumed either contractually or by operation of law.
(iv) To the knowledge of Borrower after due inquiry
and except as disclosed in the Environmental Reports, without
limiting the generality of the foregoing, there is not present at,
on, in or under the Facility, PCB-containing equipment, asbestos or
asbestos containing materials, underground or aboveground storage
tanks or surface impoundments for Hazardous Substances, lead in
drinking water (except in concentrations that comply with all
Environmental Laws), or lead-based paint (nor have there been any
underground storage tanks present at, on, in, or under the
Facility).
(v) No Liens are presently recorded with the
appropriate land records under or pursuant to any Environmental Law
with respect to Borrower's Facility and, to Borrower's knowledge,
no Governmental Authority has been taking or is in the process of
taking any action that could subject the Facility to Liens under
any Environmental Law.
(vi) There have been no environmental investigations,
studies, audits, reviews or other analyses conducted by or on
behalf of Borrower that are in the possession or control of
Borrower in relation to the Facility which have not been provided
to Lender.
(vii) No conditions exist which would require Borrower
under any Environmental Laws to place a notice on any deed to the
Facility with respect to the presence, Use or Release of Hazardous
Substances at, on, in, under or from the Facility and the Facility
has no such notice in its deed.
(W) No Joint Assessment; Separate Lots. Borrower has not
and shall not suffer, permit or initiate the joint assessment
of the Facility (i) with any other real property constituting a
separate tax lot, and (ii) with any portion of the Facility which
may be deemed to constitute personal property, or any other
procedure whereby the lien of any taxes which may be levied against
such personal property shall be assessed or levied or charged to
the Facility as a single lien. The Facility is comprised of one or
more Parcels, each of which constitutes a separate tax lot and none
of which constitutes a portion of any other tax lot.
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(X) Assessments. Except as disclosed in the Title Insurance
Policy, there are no pending or, to the knowledge of Borrower,
proposed special or other assessments for public improvements or
otherwise affecting the Facility, nor, to the knowledge of
Borrower, are there any contemplated improvements to the Facility
that may result in such special or other assessments.
(Y) Mortgage and Other Liens. The Mortgage creates a
valid and enforceable first mortgage Lien on the Facility as
security for the repayment of the Indebtedness, subject only to the
Permitted Encumbrances. Each Collateral Security Instrument
establishes and creates a valid, effective, and enforceable Lien on
and a security interest in, or claim to, the rights and property
described therein. All property covered by such Collateral Security
Instrument is subject to a UCC financing statement filed and/or
recorded, as appropriate, or irrevocably delivered to an authorized
agent of the Title Insurer for such recordation or filing in all
places necessary to perfect a valid first priority Lien with
respect to the rights and property that are the subject of such
Collateral Security Instrument to the extent governed by the UCC.
All continuations and any assignments of any such financing
statements have been or will be timely filed or refiled, as
appropriate, in the appropriate recording offices.
(Z) Enforceability. The Loan Documents executed by Borrower
in connection with the Loan, including, without limitation, any
Collateral Security Instrument, are the legal, valid and binding
obligations of Borrower, enforceable against Borrower in accordance
with their terms, subject only to bankruptcy, insolvency and other
limitations on creditors' rights generally and to equitable
principles. Such Loan Documents are, as of the Closing Date, not
subject to any right of rescission, set-off, counterclaim or
defense by Borrower, including the defense of usury, nor will the
operation of any of the terms of the Note, the Mortgage, or such
other Loan Documents, or the exercise of any right thereunder,
render the Mortgage unenforceable against Borrower, in whole or in
part, or subject to any right of rescission, set-off, counterclaim
or defense by Borrower, including the defense of usury, and
Borrower has not asserted any right of rescission, set-off,
counterclaim or defense with respect thereto.
(AA) No Liabilities. Borrower has no liabilities or
obligations including, without limitation, Contingent Obligations
(and including, without limitation, liabilities or obligations in
tort, in contract, at law, in equity, pursuant to a statute
<PAGE> 80
75
or regulation, or otherwise) other than those liabilities and
obligations expressly permitted by this Agreement.
(AB) No Prior Assignment. As of the Closing Date, (i)
Lender is the assignee of Borrower's interest under the Leases, and
(ii) there are no prior assignments of the Leases or any portion of
the Rents due and payable or to become due and payable which are
presently outstanding.
(AC) Certificate of Occupancy. Borrower has obtained
(in its own name) all Permits necessary to use and operate the
Facility for the use described in Section 3.1(R), and all such
Permits are in full force and effect. The use being made of the
Facility is in conformity in all respects with the certificate of
occupancy and/or Permits for the Facility and any other
restrictions, covenants or conditions affecting the Facility. The
Facility contains all Equipment necessary to use and operate the
Facility in a manner consistent with comparable properties in the
same geographic area.
(AD) Flood Zone. Except as shown on the Survey, the
Facility is not located in a flood hazard area as designated by
the Federal Emergency Management Agency.
(AE) Physical Condition. Except as disclosed in the
Engineering Reports, the Facility is free of material structural
defects and all building systems contained therein are in good
working order in all material respects subject to ordinary wear
and tear.
(AF) Intellectual Property. All trademarks, trade names and
service marks that Borrower owns or has pending, or under which
Borrower is licensed, are in good standing and uncontested. There
is no right under any trademark, trade name or service mark
necessary to the business of Borrower as presently conducted or as
Borrower contemplates conducting its business. Borrower has not
infringed, is not infringing, and has not received notice of
infringement with respect to asserted trademarks, trade names and
service marks of others. To Borrower's knowledge, there is no
infringement by others of trademarks, trade names and service marks
of Borrower.
<PAGE> 81
76
(AG) Security Deposits. All security deposits with
respect to the Facility on the Closing Date are held in compliance
with all applicable Legal Requirements relating to such security
deposits.
(AH) Conduct of Business. Borrower does not conduct its
business "also known as," "doing business as" or under any name
other than "Executive Park."
(AI) Title Insurance. The Facility is covered by either an
American Land Title Association (ALTA) mortgagee's title
insurance policy, or a commitment to issue such a title insurance
policy, insuring a valid first lien on the Facility, which is in
full force and effect and inures to the benefit of Lender and any
successor or assignee of Lender, including but not limited to the
trustee in a Securitization, subject only to the Permitted
Encumbrances.
(AJ) Tax Fair Market Value. The Loan Amount with respect to
the Facility does not exceed the Tax Fair Market Value of the
Facility. If a Note with respect to the Facility is significantly
modified prior to the closing date of a Securitization so as to
result in a taxable exchange under Code Section 1001, Borrower
will, if requested by Lender, represent that the amount of such
Note does not exceed the Tax Fair Market Value of the Facility as
of the date of such significant modification.
(AK) Leases. (a) Borrower is the sole owner of the entire
lessor's interest in the Leases; (b) the Leases are the valid,
binding and enforceable obligations of Borrower and the applicable
tenant or lessee thereunder; (c) the terms of the Leases reflected
in the certified rent roll statement delivered to and approved by
Lender are right, accurate and complete; (d) none of the Rents
reserved in the Leases have been assigned or otherwise pledged or
hypothecated; (e) none of the Rents have been collected for more
than one (1) month in advance; (f) there exists no material offset
or defense to the payment of any portion of the Rents; (g) no Lease
contains an option to purchase, right of first refusal to purchase,
or any other similar provision; (h) no Person has any possessory
interest in, or right to occupy, the Facility except under and
pursuant to a Lease; and (i) except for any Leases executed by
Governmental Authorities, each Lease is subordinate to the Loan
Documents, either pursuant to its terms or a recorded subordination
agreement.
<PAGE> 82
77
Section 4.2. Survival of Representations and Warranties.
Borrower agrees that (i) all of the representations and warranties of Borrower
set forth in this Agreement and in the other Loan Documents delivered on the
Closing Date are made as of the Closing Date (except as expressly otherwise
provided) and (ii) all representations and warranties made by Borrower shall
survive the delivery of the Note and continue for so long as any amount remains
owing to Lender under this Agreement, the Note or any of the other Loan
Documents; provided, however, that the representations, warranties and covenants
set forth in Section 4.1(V) and Sections 5.1(D) through 5.1(I), inclusive, shall
survive in perpetuity subject to any specific limitations contained therein and
shall not be subject to the exculpation provisions of Section 8.14. Borrower
further agrees and acknowledges that its obligations under Section 4.1(V) and
Sections 5.1(D) through 5.1(I) shall survive in perpetuity notwithstanding the
fact that Borrower's indemnification obligations set forth in Section 2.8(f) of
the Mortgage may or may not survive any release, reconveyance, discharge or
foreclosure of the Mortgage. All representations, warranties, covenants and
agreements made in this Agreement or in the other Loan Documents shall be deemed
to have been relied upon by Lender notwithstanding any investigation heretofore
or hereafter made by Lender or on its behalf.
ARTICLE V
AFFIRMATIVE COVENANTS
Section 5.1. Borrower Covenants. Borrower covenants and agrees
that, from the date hereof and until payment in full of the Indebtedness:
(A) Existence; Compliance with Legal Requirements; Insurance.
Borrower shall do or cause to be done all things necessary to
preserve, renew and keep in full force and effect its Entity
existence, rights, licenses, Permits and franchises necessary for
the conduct of its business and comply in all respects with all
applicable Legal Requirements and Insurance Requirements applicable
to it and the Facility. Borrower shall notify Lender promptly of
any written notice or order that Borrower receives from any
Governmental Authority relating to Borrower's failure to comply
with such applicable Legal Requirements relating to Borrower's
Facility and promptly take any and all actions necessary to bring
its operations at the Facility into compliance with such applicable
Legal Requirements (and shall fully comply with the requirements of
such Legal
<PAGE> 83
78
Requirements that at any time are applicable to its operations at
the Facility) provided, that Borrower at its expense may, after
prior notice to the Lender, contest by appropriate legal,
administrative or other proceedings conducted in good faith and
with due diligence, the validity or application, in whole or in
part, of any such applicable Legal Requirements as long as (i)
neither the applicable Collateral nor any part thereof or any
interest therein, will be sold, forfeited or lost if Borrower pays
the amount or satisfies the condition being contested, and Borrower
would have the opportunity to do so, in the event of Borrower's
failure to prevail in the contest, (ii) Lender would not, by virtue
of such permitted contest, be exposed to any risk of any civil
liability for which Borrower has not furnished additional security
as provided in clause (iii) below, or to any risk of criminal
liability, and neither the applicable Collateral nor any interest
therein would be subject to the imposition of any Lien as a result
of the failure to comply with such Legal Requirement or of such
proceeding and (iii) Borrower shall have furnished to the Lender
additional security in respect of the claim being contested or the
loss or damage that may result from Borrower's failure to prevail
in such contest in such amount as may be reasonably requested by
Lender but in no event less than one hundred twenty-five percent
(125%) of the amount of such claim. Borrower shall at all times
maintain, preserve and protect all franchises and trade names and
preserve all the remainder of its property necessary for the
continued conduct of its business and keep the Facility in good
repair, working order and condition, except for reasonable wear and
use, and from time to time make, or cause to be made, all necessary
repairs, renewals, replacements, betterments and improvements
thereto, all as more fully provided in the Mortgage. Borrower shall
keep the Facility insured at all times, as provided in the
Mortgage.
(B) Impositions and Other Claims. Borrower shall pay
and discharge or cause to be paid and discharged all Impositions,
as well as all lawful claims for labor, materials and supplies or
otherwise, which could become a Lien, all as more fully provided
in, and subject to any rights to contest contained in, the
Mortgage.
(C) Litigation. Borrower shall give prompt written
notice to Lender of any litigation or governmental proceedings
pending or threatened against Borrower which is reasonably likely
to have a Material Adverse Effect.
<PAGE> 84
79
(D) Environmental Remediation.
(i) If any investigation, site monitoring, cleanup,
removal, abatement, restoration, remedial work or other response
action of any kind or nature is required pursuant to an order,
directive, decree or settlement agreement of or with any
Governmental Authority or under any applicable Environmental Law
(collectively, the "Remedial Work"), because of or in connection
with the (x) past, present or future presence, suspected presence,
Release or threatened Release of a Hazardous Substance at, on, in,
under or from the Facility or any portion thereof or (y) violation
of or compliance with applicable Environmental Laws, Borrower shall
promptly commence and diligently prosecute to completion all such
Remedial Work or cause such Remedial Work to be prosecuted to
completion. In all events, such Remedial Work shall be commenced
within the time period ordered or directed by such Governmental
Authority or such shorter period as may be required under any
applicable Environmental Law; provided, however, that Borrower
shall not be required to commence such Remedial Work within the
above specified time periods: (x) if prevented from doing so by any
Governmental Authority, (y) if commencing such Remedial Work within
such time periods would result in Borrower or such Remedial Work
violating any Environmental Law, or (z) if Borrower, at its expense
and after prior notice to Lender, is contesting by appropriate
legal, administrative or other proceedings, conducted in good faith
and with due diligence, the need to perform Remedial Work, as long
as (1) Borrower is permitted by the applicable Environmental Laws
to delay performance of the Remedial Work pending such proceedings,
(2) neither Borrower's Facility nor any part thereof or interest
therein will be sold, forfeited or lost if Borrower performs the
Remedial Work being contested, and if Borrower fails to prevail in
contest, Borrower would thereafter have the opportunity to perform
such Remedial Work, (3) Lender would not, by virtue of such
permitted contest, be exposed to any risk of any civil liability
for which Borrower has not furnished additional security as
provided in clause (4) below, or to any risk of criminal liability,
and neither the Facility nor any interest therein would be subject
to the imposition of any Lien for which Borrower has not furnished
additional security as provided in clause (4) below, as a result of
the failure to perform such Remedial Work and (4) Borrower shall
have furnished to Lender additional security in respect of the
Remedial Work being contested and the loss or damage that may
result from Borrower's failure to prevail in such contest in such
amount as may be reasonably requested by Lender but in no event
<PAGE> 85
80
less than one hundred twenty-five percent (125%) of the cost of
such Remedial Work and any loss or damage that may result from
Borrower's failure to prevail in such contest.
(ii) All Remedial Work under clause (i) above shall be
performed by contractors, and under the supervision of a consulting
environmental Engineer, each approved in advance by Lender which
approval will not be unreasonably withheld or delayed. All costs
and expenses incurred in connection with such Remedial Work shall
be paid by Borrower. If Borrower does not timely commence and
diligently prosecute to completion the Remedial Work, Lender may
(but shall not be obligated to), upon sixty (60) days prior written
notice to Borrower of its intention to do so, cause such Remedial
Work to be performed. Borrower shall pay or reimburse Lender on
demand for all advances and expenses (including reasonable
attorneys' fees and disbursements) relating to or incurred by
Lender in connection with monitoring, reviewing or performing any
Remedial Work in accordance herewith.
(iii) Unless otherwise required by law, Environmental
Laws or any Governmental Authority, Borrower shall not commence any
Remedial Work under clause (i) above, nor enter into any settlement
agreement, consent decree or other compromise relating to any
Hazardous Substances or Environmental Laws which is reasonably
likely to have a Material Adverse Effect. Notwithstanding the
foregoing, if the presence or threatened presence or Release of
Hazardous Substances at, on, in, under, from or about Borrower's
Facility poses an immediate threat to the health, safety or welfare
of any Person or the environment, or is of such a nature that an
immediate response is necessary, Borrower may complete all
necessary Remedial Work. In such events, Borrower shall notify
Lender as soon as practicable and, in any event, within three (3)
Business Days, of any action taken.
(E) Environmental Matters; Inspection.
(i) Borrower shall not cause, allow or authorize a
Hazardous Substance to be present at, on, in, under or to emanate
from the Facility, or migrate from adjoining property onto or into
the Facility, except under conditions permitted by applicable
Environmental Laws and, in the event that such Hazardous Substances
are present at, on, in, under or emanate from the Facility, or
<PAGE> 86
81
migrate onto or into the Facility, Borrower shall cause the
performance of Remedial Work, removal or remediation of such
Hazardous Substances, in accordance with this Agreement and
Environmental Laws. Borrower shall use best efforts to prevent, and
to seek the remediation of, any migration of Hazardous Substances
onto or into Borrower's Facility from any adjoining property. The
foregoing covenants shall not be applicable to Hazardous Substances
disclosed in the Environmental Reports delivered to Lender in
connection with the Loan; provided, however, that this exclusion
shall be only applicable as long as such Hazardous Substances
remain in substantially the same condition as described in the
Environmental Reports and do not violate any Environmental Laws or
order or directive of any Governmental Authority and if the
condition of such Hazardous Substances so changes such Hazardous
Substances shall not be excluded from this Section and Borrower
shall be required to comply with this Section with respect to such
Hazardous Substances.
(ii) Upon prior written notice to Borrower, Lender
shall have the right at all reasonable times to enter upon and
inspect all or any portion of the Facility. If Lender has
reasonable grounds to suspect that Remedial Work may be required,
Lender may select or may require Borrower to select a consulting
environmental Engineer reasonably satisfactory to Lender to conduct
and prepare environmental reports assessing the environmental
condition of the Facility. Lender shall be given a reasonable
opportunity to review any reports, data and other documents or
materials reviewed or prepared by the environmental Engineer. The
inspection rights granted to Lender in this Section 5.1(E) shall be
in addition to, and not in limitation of, any other inspection
rights granted to Lender in the Loan Documents, and shall expressly
include the right (if Lender suspects that Remedial Work may be
required) to conduct or require Borrower to conduct soil borings,
establish ground water monitoring wells and conduct other customary
environmental tests, assessments and audits.
(iii) Borrower agrees to bear and shall pay or
reimburse Lender, on demand, for all sums advanced and expenses
incurred (including reasonable attorneys' fees and disbursements,
but excluding internal overhead, administrative and similar costs
of Lender) relating to, or incurred by Lender in connection with,
the inspections and reports described in this Section 5.1(E) in the
following situations:
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82
(x) If Lender has reasonable grounds to believe, at
the time any such inspection is ordered, that there exists an
occurrence or condition that could lead to an Environmental
Claim;
(y) If any such inspection reveals an occurrence
or condition that could lead to an Environmental Claim; or
(z) If an Event of Default with respect to the
Facility exists at the time any such inspection is ordered,
and such Event of Default relates to any representation,
covenant or other obligation pertaining to Hazardous
Substances, Environmental Laws or any other environmental
matter.
(F) Environmental Notices. Borrower shall promptly provide
notice to Lender of:
(i) any Environmental Claim asserted or threatened, in
writing, by any Governmental Authority or other Person with respect
to any Hazardous Substance at, on, in, under or emanating from the
Facility, which could reasonably be expected to impair the value of
Lender's security or have a Material Adverse Effect;
(ii) any Environmental Claim or proceeding,
investigation or inquiry commenced or threatened, in writing, by
any Governmental Authority or Person, against Borrower, with
respect to the presence, suspected presence, Release or threatened
Release of Hazardous Substances from or onto, in or under any
property not owned by Borrower, including, without limitation,
proceedings under the Comprehensive Environmental Response,
Compensation, and Liability Act, as amended, 42 U.S.C. ss. 9601, et
seq., which could reasonably be expected to impair the value of
Lender's security interests or have a Material Adverse Effect;
(iii) all Environmental Claims asserted or threatened
against Borrower, against any other party occupying any Facility or
any portion thereof which become known to Borrower, or against the
Facility, which could reasonably be expected to impair the value
of Lender's security interests or have a Material Adverse Effect;
<PAGE> 88
83
(iv) the discovery by Borrower of any occurrence or
condition on any Facility or on any real property adjoining or in
the vicinity of the Facility which could reasonably be expected to
lead to an Environmental Claim against Borrower or Lender which
such Environmental Claim is reasonably likely to have a Material
Adverse Effect; and
(v) the commencement or completion of any Remedial
Work.
(G) Copies of Notices. Borrower shall immediately transmit
to Lender copies of any citations, orders, notices or other written
communications received from any Person or any Governmental
Authority and any notices, reports or other written communications
submitted to any Governmental Authority with respect to the matters
described in Section 5.1(F).
(H) Environmental Claims. Lender and/or, to the extent
authorized by Lender if applicable, the Deed of Trust Trustee may
join and participate in, as a party if Lender so determines, any
legal or administrative proceeding or action concerning the
Facility or any portion thereof under any Environmental Law, if, in
Lender's reasonable judgment, the interests of Lender or the Deed
of Trust Trustee, will not be adequately protected by Borrower.
Borrower agrees to bear and shall pay or reimburse Lender and the
Deed of Trust Trustee on demand for all reasonable sums advanced
and reasonable expenses incurred (including reasonable attorneys'
fees and disbursements) and the Deed of Trust Trustee, incurred by
Lender and the Deed of Trust Trustee in connection with any such
action or proceeding.
(I) Indemnification. Borrower agrees to indemnify,
reimburse, defend (with counsel satisfactory to Lender, at Lender's
election) and hold harmless any Indemnified Party and any Deed of
Trust Trustee, for, from, and against all demands, claims, actions
or causes of action, assessments, losses, damages, liabilities,
costs and expenses, including, without limitation, interest,
penalties, consequential damages, reasonable attorneys' fees,
disbursements and expenses, and reasonable consultants' fees,
disbursements and expenses, including costs of Remedial Work (but
excluding internal overhead, administrative and similar costs of
any Indemnified Party and any Deed of Trust Trustee) (collectively,
"Losses") asserted against, resulting to, imposed on, or incurred
by Lender or any Deed of Trust Trustee, directly or indirectly, in
connection with any of the following
<PAGE> 89
84
(except and only to the extent the same are caused (a) by third
parties not affiliated with Borrower subsequent to the foreclosure
of the Mortgage or (b) prior to the foreclosure of the Mortgage by
Lender's and any Deed of Trust Trustee's gross negligence or
willful misconduct (provided that the exceptions in clause (b)
shall reduce the foregoing obligations of Borrower only to the
extent, if any, that Lender's or any Deed of Trust Trustee's gross
negligence or wilful misconduct contributed to the foregoing
demands, claims, etc.)):
(i) events, circumstances, or conditions which are
alleged to, or do, form the basis for an Environmental Claim;
(ii) the presence, Use or Release of Hazardous
Substances at, on, in, under or from the Facility, which presence,
Use or Release requires or could require Remedial Work;
(iii) any Environmental Claim against Borrower,
Lender, Deed of Trust Trustee or any Person whose liability for
such Environmental Claim Borrower has or may have assumed or
retained either contractually or by operation of law; or
(iv) the breach of any representation, warranty or
covenant set forth in Section 4.1(V) and Sections 5.1(D) through
5.1(I), inclusive.
The indemnity provided in this Loan Agreement is not and shall
not be included in any exculpation of Borrower from personal
liability provided in this Loan Agreement or in any other Loan
Document. Nothing in this Section 5.1(I) shall be deemed to deprive
Lender of any rights or remedies provided to it elsewhere in this
Agreement or the other Loan Documents or otherwise available to it
under law except to the extent restricted by this Agreement or the
other Loan Documents. Borrower waives and releases Lender and any
Deed of Trust Trustee from any rights or defenses Borrower may have
under common law or Environmental Laws for liability arising from
or resulting from the presence, Use or Release of Hazardous
Substances except to the extent caused by the gross negligence,
fraud or willful misconduct of Lender or Deed of Trust Trustee or
their agents.
<PAGE> 90
85
In the event that Lender or any Deed of Trust Trustee or their
respective agents becomes involved in any action, proceeding or investigation in
connection with the foregoing, Borrower shall have the right to assume the
defense of Lender or any Deed of Trust Trustee therein with counsel reasonably
satisfactory to such party and Borrower shall periodically reimburse any such
party upon demand therefor in an amount equal to its reasonable expenses
(including the reasonable costs of any investigation and preparation and
reasonable fees of outside counsel and disbursements of such counsel in the
event Borrower does not elect to assume such party's defense in any matter
subject to indemnification hereunder) incurred in connection therewith to the
extent such legal or other expenses are the subject of indemnification
hereunder, subject to the foregoing limitations; provided, however, that if any
such action or proceeding shall be settled by Lender or any Deed of Trust
Trustee, Borrower shall be obligated to indemnify and hold Lender or any Deed of
Trust Trustee harmless only if such action or proceeding shall have been settled
on terms approved by Borrower, in writing, which approval shall not be
unreasonably withheld.
(J) Access to Facility. Borrower shall permit agents,
representatives and employees of Lender to inspect the Facility or any
part thereof at such reasonable times as may be requested by Lender
upon advance notice, subject, however, to the rights of the tenants of
the Facility.
(K) Notice of Default. Borrower shall promptly advise Lender
of any material adverse change in Borrower's condition, financial or
otherwise, or of the occurrence of any Default or Event of Default.
(L) Cooperate in Legal Proceedings. Except with respect to
any claim by Borrower against Lender, Borrower shall cooperate with
Lender with respect to any proceedings before any Governmental
Authority which may in any way affect the rights of Lender
hereunder or any rights obtained by Lender under any of the Loan
Documents and, in connection therewith, not prohibit Lender, at its
election, from participating in any such proceedings.
(M) Perform Loan Documents. Borrower shall observe, perform
and satisfy all the terms, provisions, covenants and conditions
required to be observed, performed or satisfied by it, and shall pay
when due all costs, fees and expenses required to be paid by it, under
the Loan Documents executed and delivered by Borrower.
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(N) Insurance Benefits; Condemnation Claims. Borrower shall
cooperate with Lender in settling any insurance or condemnation claim
and/or obtaining for Lender the benefits of any Insurance Proceeds
and/or Condemnation Proceeds lawfully or equitably payable to Lender in
connection with the Facility (including, without limitation, the
applicable Casualty Prepayment Amount, Casualty Return-of-Fee Amount,
Condemnation Prepayment Amount and/or Condemnation Return-of-Fee
Amount), and Lender shall be reimbursed for any expenses incurred in
connection therewith (including reasonable attorneys' fees and
disbursements) and the payment by Borrower of the expense of an
Appraisal on behalf of Lender in case of a fire or other casualty
affecting the Facility or any part thereof out of such Insurance
Proceeds and/or Condemnation Proceeds, all as more specifically
provided in the Mortgage.
(O) Further Assurances. Borrower shall, at Borrower's sole
cost and expense:
(i) upon Lender's request therefor given from time to
time after the occurrence of any Default or Event of Default pay
for (a) reports of UCC, federal tax lien, state tax lien, judgment
and pending litigation searches with respect to Borrower and (b)
searches of title to the Facility, each such search to be conducted
by search firms reasonably designated by Lender in each of the
locations reasonably designated by Lender.
(ii) furnish to Lender all instruments, documents,
boundary surveys, footing or foundation surveys, certificates,
plans and specifications, Appraisals, title and other insurance
reports and agreements, and each and every other document,
certificate, agreement and instrument required to be furnished
pursuant to the terms of the Loan Documents;
(iii) execute and deliver to Lender such documents,
instruments, certificates, assignments and other writings, and do
such other acts reasonably necessary, to evidence, preserve and/or
protect the Collateral at any time securing or intended to secure
the Note, as Lender may reasonably require in Lender's discretion;
and
(iv) do and execute all and such further lawful acts,
conveyances and assurances for the better and more effective
carrying out of the intents and purposes of this Agreement and the
other Loan Documents, as Lender shall reasonably require from time
to time in its discretion.
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(P) Management of Mortgaged Property. The Facility will be
managed at all times by a Manager pursuant to a Management Agreement
unless terminated as herein provided. The Management Agreement shall be
terminated by Borrower, at Lender's request, upon thirty (30) days
prior written notice to Borrower and Manager (i) upon the occurrence
and continuation of an Event of Default, (ii) if Manager commits any
act which would permit termination by Borrower under the Management
Agreement or (iii) in the event that, as of the last day of a calendar
quarter, the Debt Service Coverage Ratio for the Facility, computed on
the basis of the prior twelve (12) calendar months, is less than 1.10:1
or (iv) in the event that, as of the last day of a calendar quarter,
the Net Operating Income computed on the basis of the prior twelve (12)
calendar months is less than 85% of Base Adjusted NOI. During the time
period beginning two years after the Start-Up Day and ending on the
Optional Prepayment Date, if on the first Payment Date after Lender
made the determination that Lender had the right to terminate Manager
pursuant to clause (iii) above, Borrower defeases the Loan in
accordance with the terms of Section 2.10 in an amount sufficient to
cause the Debt Service Coverage Ratio (calculated as if such amount was
actually applied to reduce the Principal Indebtedness upon which Debt
Service was paid and calculated as if the Principal Indebtedness was
reamortized on a straight-line basis (as if the reduction had occurred)
over the remaining number of months until the Maturity Date) computed
on the basis of the prior twelve (12) calendar months, to be at least
equal to 1.20:1, then Borrower is not obligated to terminate Manager
pursuant to clause (iii) above. If a manager is terminated pursuant
hereto, Borrower shall immediately seek to appoint a replacement
manager acceptable to Lender in Lender's reasonable discretion, and
Borrower's failure to appoint an acceptable manager within thirty (30)
days after Lender's request of Borrower to terminate the Management
Agreement shall constitute an immediate Event of Default. Borrower may
from time to time appoint a successor manager to manage the Facility,
which successor manager shall be approved in writing by Lender in
Lender's reasonable discretion. Notwithstanding the foregoing, any
successor manager selected hereunder by Lender or Borrower to serve as
Manager (i) shall be a reputable management company having at least
seven (7) years' experience in the management of commercial properties
with similar uses as the Facility and in the jurisdiction in which the
Facility is located and (ii) shall not be paid management fees in
excess of fees which are market fees for comparable managers of
comparable properties in the same geographic area.
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(Q) Financial Reporting.
(i) Borrower shall keep and maintain or shall cause to
be kept and maintained, on a Fiscal Year basis, in accordance with
GAAP, books, records and accounts reflecting in reasonable detail
all of the financial affairs of Borrower and all items of income
and expense in connection with the operation of the Facility and in
connection with any services, equipment or furnishings provided in
connection with the operation of the Facility. Lender, at Lender's
cost and expense, shall have the right from time to time and at all
times during normal business hours upon reasonable prior written
notice to Borrower to examine such books, records and accounts at
the office of Borrower or other Person maintaining such books,
records and accounts and to make such copies or extracts thereof as
Lender shall desire. After the occurrence and continuation of an
Event of Default, with respect to the Facility, Borrower shall pay
any costs and expenses incurred by Lender to examine any and all of
Borrower's books, records and accounts as Lender shall determine in
Lender's reasonable discretion to be necessary or appropriate in
the protection of Lender's security.
(ii) Borrower shall furnish to Lender annually within
one hundred and five (105) days following the end of each Fiscal
Year, a true, complete, correct and accurate copy of the financial
statement for Hallwood Realty Partners, L.P. audited by a "Big Six"
accounting firm or other firm acceptable to Lender in Lender's
reasonable discretion which shall (a) be prepared in accordance
with GAAP, (b) be accompanied by an unqualified opinion from an
Independent certified public accountant acceptable to Lender in
Lender's reasonable discretion, and (c) break out information
separately with respect to Borrower which break out information is
accompanied by an Officer's Certificate from a senior executive of
Borrower certifying as of the date thereof (x) that such statement
is true, correct, complete and accurate, and fairly reflects the
results of operations and financial condition of Borrower for the
relevant period, and (y) notice of whether there exists an Event of
Default or Default, and if such Event of Default or Default exists,
the nature thereof, the period of time it has existed and the
action then being taken to remedy same.
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(iii) Borrower shall furnish to Lender within twenty
(20) days following the end of each calendar month, a true,
correct, complete and accurate monthly unaudited financial
statement which shall (a) be in form and substance acceptable to
Lender in Lender's reasonable discretion, (b) be prepared in
accordance with GAAP, (c) include, without limitation, a statement
of operations (profit and loss), a statement of cash flows, a
calculation of Net Operating Income, a balance sheet, an aged
accounts receivable report, a rent roll, occupancy report and rate
statistics of the Facility and such other information or reports as
shall be requested by Lender or any applicable Rating Agency and
(d) be accompanied by an Officer's Certificate from a senior
executive of Borrower certifying as of the date thereof (x) that
such statement is true, correct, complete and accurate and fairly
reflects the results of operations and financial condition of
Borrower for the relevant period, and (y) notice of whether there
exists an Event of Default or Default, and if such Event of Default
or Default exists, the nature thereof, the period of time it has
existed and the action then being taken to remedy same.
(iv) Borrower shall furnish to Lender, within ten (10)
Business Days after request, such further information with respect
to the operation of the Facility and the financial affairs of
Borrower as may be reasonably requested by Lender including,
without limitation, all business plans prepared for Borrower and
for the operation of the Facility.
(v) Borrower shall furnish to Lender, within ten (10)
Business Days after request, such further information regarding any
Plan or Multiemployer Plan and any reports or other information
required to be filed under ERISA as may be reasonably requested by
Lender.
(vi) Borrower shall, concurrently with Borrower's
delivery to Lender, provide a copy of the items required to be
delivered to Lender under this Section 5.1(Q) to the Rating
Agencies, the trustee, and any servicer and/or special servicer
that may be retained in conjunction with the Loan or any
Securitization. Borrower shall furnish to Lender written notice,
within two (2) Business Days after receipt by Borrower, of any
Rents, Money or other items of Gross Revenue that Borrower is not
required by this Agreement to deposit in the Collection Account or
the Cash Collateral Account, together with such other documents and
materials relating to such Rents, Money or other items of Gross
Revenue as Lender requests in Lender's reasonable discretion.
<PAGE> 95
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(vii) Borrower shall provide Lender with updated
information (satisfactory to Lender in Lender's reasonable
discretion) concerning the Basic Carrying Costs for the next
succeeding Fiscal Year prior to the termination of each Fiscal
Year.
(viii) Borrower shall furnish to Lender such other
financial information with respect to Borrower or Manager as Lender
may, from time to time reasonably request (including, without
limitation, in the case of a defeasance pursuant to Section 2.10, a
review by a third party acceptable to Lender, of the calculations
required to be made pursuant to Section 2.10).
(R) Conduct of Business. Borrower shall cause the
operation of the Facility to be conducted at all times in a manner
consistent with the following:
(i) to maintain or cause to be maintained the standard
of operations at the Facility at all times at a level necessary to
insure a level of quality for the Facility consistent with similar
facilities in the same competitive market;
(ii) to operate or cause to be operated the Facility
in a prudent manner in compliance in all respects with applicable
Legal Requirements and Insurance Requirements relating thereto and
cause all licenses, Permits, and any other agreements necessary for
the continued use and operation of the Facility to remain in
effect; and
(iii) to maintain or cause to be maintained sufficient
Inventory and Equipment of types and quantities at the Facility to
enable Borrower or Manager to operate the Facility.
(S) ERISA. Borrower shall deliver to Lender as soon as
possible, and in any event within ten (10) days after Borrower
knows or has reason to believe that any of the events or conditions
specified below with respect to any Plan or Multiemployer Plan has
occurred or exists, a statement signed by a senior financial
officer of Borrower setting forth details respecting such event or
condition and the
<PAGE> 96
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action, if any, that Borrower or its ERISA Affiliate proposes to
take with respect thereto (and a copy of any report or notice
required to be filed with or given to PBGC by Borrower or an ERISA
Affiliate with respect to such event or condition):
(i) any reportable event, as defined in Section
4043(b) of ERISA and the regulations issued thereunder, with
respect to a Plan, as to which PBGC has not by regulation waived
the requirement of Section 4043(a) of ERISA that it be notified
within 30 days of the occurrence of such event (provided that a
failure to meet the minimum funding standard of Section 412 of the
Code or Section 302 of ERISA, including, without limitation, the
failure to make on or before its due date a required installment
under Section 412(m) of the Code or Section 302(e) of ERISA, shall
be a reportable event regardless of the issuance of any waivers in
accordance with Section 412(d) of the Code); and any request for
a waiver under Section 412(d) of the Code for any Plan;
(ii) the distribution under Section 4041 of ERISA of
a notice of intent to terminate any Plan or any action taken by
Borrower or an ERISA Affiliate to terminate any Plan;
(iii) the institution by PBGC of proceedings under
Section 4042 of ERISA for the termination of, or the appointment of
a trustee to administer, any Plan, or the receipt by Borrower or
any ERISA Affiliate of a notice from a Multiemployer Plan that such
action has been taken by PBGC with respect to such Multiemployer
Plan;
(iv) the complete or partial withdrawal from a
Multiemployer Plan by Borrower or any ERISA Affiliate that results
in liability under Section 4201 or 4204 of ERISA (including the
obligation to satisfy secondary liability as a result of a
purchaser default) or the receipt by Borrower or any ERISA
Affiliate of notice from a Multiemployer Plan that it is in
reorganization or insolvency pursuant to Section 4241 or 4245 of
ERISA or that it intends to terminate or has terminated under
Section 4041A of ERISA;
(v) the institution of a proceeding by a fiduciary of
any Multiemployer Plan against Borrower or any ERISA Affiliate to
enforce Section 515 of ERISA, which proceeding is not dismissed
within thirty (30) days;
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(vi) the adoption of an amendment to any Plan that,
pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA,
would result in the loss of tax-exempt status of the trust of which
such Plan is a part if Borrower or an ERISA Affiliate fails to
timely provide security to the Plan in accordance with the
provisions of said Sections; and
(vii) the imposition of a lien or a security interest
in connection with a Plan.
(T) Single Purpose Entity. Borrower shall at all times
be a Single-Purpose Entity.
(U) Trade Indebtedness. Borrower will pay its trade
payables within thirty (30) days of the date invoiced (except for
leasing commissions which shall be paid within thirty (30) days of
the date due), unless Borrower is in good faith contesting
Borrower's obligation to pay such trade payables in a manner
satisfactory to Lender (which may include Lender's requirement that
Borrower post security with respect to the contested trade
payable).
(V) Capital Improvements and Environmental
Remediation. Borrower shall, within twelve (12) months of the date
hereof, perform the repairs and environmental remediation to the
Facility itemized on Exhibit C hereto.
(W) Annual Operating Budgets. Borrower shall submit to
Lender Annual Operating Budgets at those times and in such form and
substance as set forth in the definition of "Annual Operating
Budget" in this Agreement.
(X) Borrower shall deliver to Lender, within thirty
(30) days after the Closing Date, evidence reasonably satisfactory
to Lender that Borrower has fully complied with the Assignment of
Claims Act with respect to all government Leases in so far as it
relates to the Transactions. Any failure to do any of the above
shall constitute an immediate Event of Default.
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ARTICLE VI
NEGATIVE COVENANTS
Section 6.1. Borrower Negative Covenants. Borrower covenants
and agrees that, until payment in full of the Indebtedness, it will not do,
directly or indirectly, any of the following unless Lender consents thereto in
writing:
(A) Liens on the Mortgaged Property. Incur, create, assume,
become or be liable in any manner with respect to, or permit to exist,
any Lien with respect to the Facility or any portion thereof, except:
(i) Liens in favor of Lender, and (ii) the Permitted Encumbrances.
(B) Transfer. Except as expressly permitted by or pursuant
to this Agreement or the Mortgage, or except as otherwise approved by
Lender in writing in Lender's discretion, allow any Transfer to occur,
terminate or materially amend the Management Agreement, or enter into a
Management Agreement with respect to the Facility.
(C) Other Borrowings. Incur, except for unsecured trade
payables incurred in the ordinary course of business relating to the
ownership and operation of Borrower's Facility which do not exceed, at
any time, a maximum amount of three percent (3%) of the Loan Amount and
are paid within thirty (30) days of the date invoiced (except for
leasing commissions which are due within thirty (30) days of the date
due), create, assume, become or be liable in any manner with respect to
Other Borrowings.
(D) Change In Business. Cease to be a Single-Purpose Entity
or make any material change in the scope or nature of its business
objectives, purposes or operations, or undertake or participate in
activities other than the continuance of its present business.
(E) Debt Cancellation. Cancel or otherwise forgive or
release any material claim or debt owed to Borrower by any Person,
except for adequate consideration or in the ordinary course of
Borrower's business.
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(F) Affiliate Transactions. Enter into, or be a party to,
any transaction with an Affiliate of Borrower, except in the
ordinary course of business and on terms which are no less
favorable to Borrower or such Affiliate than would be obtained in a
comparable arm's length transaction with an unrelated third party,
and, if the amount to be paid to the Affiliate pursuant to the
transaction or series of related transactions is greater than Fifty
Thousand Dollars ($50,000.00) (determined annually on an aggregate
basis) fully disclosed to Lender in advance; provided, however,
that each of (i) the fees payable to the Manager pursuant to the
Management Agreement and (ii) the asset management fee payable to
Hallwood Realty Partners, L.P. or Hallwood Realty Corporation or
their successors or assigns shall not be subject to the aforesaid
$50,000 limitation.
(G) Creation of Easements. Create, or permit the Facility
or any part thereof to become subject to, any easement, license or
restrictive covenant, other than a Permitted Encumbrance. Without
limiting the generality of the immediately preceding sentence, Borrower
shall not enter into, consent to, grant, amend, modify, restate or
supplement any document, instrument or agreement affecting, related to
or impacting upon the Facility, the title thereto or any portion or
aspect thereof, including, without limitation, any easement, reciprocal
easement agreement, or any declaration of easements or covenants, other
than a Permitted Encumbrance.
(H) Misapplication of Funds. Distribute any Rents or Money
received from Accounts in violation of the provisions of Section 2.11.
(I) Certain Restrictions. Enter into any agreement which
expressly restricts the ability of Borrower to enter into amendments,
modifications or waivers of any of the Loan Documents.
(J) Issuance of Equity Interests. Issue or allow to be
created any stocks or shares or shareholder, partnership or membership
interests, as applicable, or other ownership interests other than the
stocks, shares, shareholder, partnership or membership interests and
other ownership interests which are outstanding or exist on the Closing
Date or any security or other instrument which by its terms is
convertible into or exercisable or exchangeable for stock, shares,
shareholder, partnership or membership interests or other ownership
interests in Borrower. Borrower shall not allow to be issued or created
any stock in Borrower's general
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partner or managing member, as applicable, other than the stock which
is outstanding or existing on the Closing Date or any security or
other instrument which by its terms is convertible into or exercisable
or exchangeable for any stock in Borrower's general partner or managing
member, as applicable.
(K) Assignment of Licenses and Permits. Assign or transfer
any of its interest in any Permits pertaining to Borrower's Facility,
or assign, transfer or remove or permit any other Person to assign,
transfer or remove any records pertaining to the Facility without
Lender's prior written consent which consent shall not be unreasonably
withheld or delayed.
(L) Place of Business. Change its chief executive office or
its principal place of business or place where its books and records
are kept without giving Lender at least thirty (30) days' prior written
notice thereof and promptly providing Lender such information as Lender
may reasonably request in connection therewith.
ARTICLE VII
DEFAULTS
Section 7.1. Event of Default. The occurrence of one or more
of the following shall be an "Event of Default" hereunder:
(i) if on any Payment Date the funds in the Debt
Service Payment Sub-Account are insufficient to pay the Required Debt
Service Payment due on such Payment Date; provided, however, that if a
Cash Management Event has not occurred, such failure shall not
constitute an Event of Default if Borrower shall cure such failure
within five (5) days after such Payment Date;
(ii) if on any Payment Date Borrower fails to pay the
Required Debt Service Payment due on such Payment Date; provided,
however, that if a Cash Management Event has not occurred, such failure
shall not constitute an Event of Default if Borrower shall cure such
failure within five (5) days after such Payment Date;
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(iii) if Borrower fails to pay the outstanding
Indebtedness on the Maturity Date;
(iv) if on any Payment Date Borrower fails to pay the
Basic Carrying Costs Monthly Installment or the Capital Reserve Monthly
Installment due on such Payment Date; provided, however, that if a Cash
Management Event has not occurred, such failure shall not constitute an
Event of Default if Borrower shall cure such failure within five (5)
days after such Payment Date;
(v) if on the date any payment of a Basic Carrying
Cost would become delinquent, the funds in the Basic Carrying Costs
Sub-Account are insufficient to make such payment;
(vi) the occurrence of the events identified
elsewhere in the Loan Documents as constituting an "Event of Default"
hereunder or thereunder;
(vii) a Transfer, unless the prior written consent of
Lender is obtained (which consent may be withheld in Lender's
discretion);
(viii) if Borrower fails to pay any other amount
payable pursuant to this Agreement or any other Loan Document when due
and payable in accordance with the provisions hereof or thereof, as the
case may be;
(ix) if any representation or warranty by Borrower
made herein or in any other Loan Document, or in any report,
certificate, financial statement or other Instrument, agreement or
document furnished by Borrower in connection with this Agreement, the
Note or any other Loan Document executed and delivered by Borrower,
shall be false in any material respect as of the date such
representation or warranty was made or remade;
(x) if Borrower, any of Borrower's partners or any
SPE Equity Owner makes an assignment for the benefit of creditors;
(xi) if a receiver, liquidator or trustee shall be
appointed for Borrower, any of Borrower's partners, or any SPE Equity
Owner or if Borrower, any of Borrower's partners or any SPE Equity
Owner shall be adjudicated as bankrupt or insolvent, or if any petition
for bankruptcy, reorganization or
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arrangement pursuant to federal bankruptcy law, or any similar federal
or state law, shall be filed by or against, consented to, or acquiesced
in by Borrower, any of Borrower's partners, or any SPE Equity Owner or
if any proceeding for the dissolution or liquidation of Borrower, any
of Borrower's partners, or any SPE Equity Owner shall be instituted;
provided, however, that if such appointment, adjudication, petition or
proceeding was involuntary and not consented to by Borrower, any of
Borrower's partners, or any SPE Equity Owner as the case may be, upon
the same not being discharged, stayed or dismissed within ninety (90)
days; or if Borrower, any of Borrower's partners or any SPE Equity
Owner shall generally not be paying its debts as they become due;
(xii) if Borrower attempts to delegate its
obligations or assign its rights under this Agreement, any of the other
Loan Documents or any interest herein or therein;
(xiii) if any provision of any organizational
document of Borrower or any SPE Equity Owner is amended or modified in
any respect, or if Borrower, any SPE Equity Owner or any of their
respective partners, members or shareholders, as applicable, fails to
perform or enforce the provisions of such organizational documents or
attempts to dissolve Borrower or any SPE Equity Owner; or if Borrower
or any SPE Equity Owner or any of their respective partners, members
or shareholders, as applicable, breaches any of the covenants set
forth in Sections 5.1(T), or 6.1(D);
(xiv) if Borrower fails to (A) notify Lender of the
occurrence of a Default under any of the Loan Documents within ten (10)
Business Days of the day on which Borrower first has knowledge of such
Default or (B) give any notice due to any Person under any Loan
Document (a) within five (5) Business Days after such notice was due or
(b) in accordance with the applicable procedural requirements set forth
in the Loan Documents;
(xv) if an event or condition specified in Section
5.1(S) shall occur or exist with respect to any Plan or Multiemployer
Plan and, as a result of such event or condition, together with all
other such events or conditions, Borrower or any ERISA Affiliate shall
incur or in the opinion of Lender shall be reasonably likely to incur a
liability to a Plan, a Multiemployer Plan or PBGC (or any combination
of the foregoing) which would constitute, in the reasonable
determination of Lender, a Material Adverse Effect;
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98
(xvi) if without Lender's prior written consent (A)
the Manager is removed or (B) there is any material change in or
termination of the Management Agreement for the Facility;
(xvii) if Borrower shall be in default under any of
the other obligations, agreements, undertakings, terms, covenants,
provisions or conditions of this Agreement, the Note, the Mortgage or
the other Loan Documents, not otherwise referred to in this Section
7.1, for ten (10) Business Days after written notice to Borrower from
Lender or its successors or assigns, in the case of any default which
can be cured by the payment of a sum of money or for thirty (30) days
after written notice from Lender or its successors or assigns, in the
case of any other default (unless otherwise provided herein or in such
other Loan Document); provided, however, that if such non-monetary
default under this subparagraph is susceptible of cure but cannot
reasonably be cured within such thirty (30) day period and provided
further that Borrower shall have commenced to cure such default within
such thirty (30) day period and thereafter diligently and expeditiously
proceeds to cure the same, such thirty (30) day period shall be
extended for such time as is reasonably necessary for Borrower in the
exercise of due diligence to cure such default, but in no event shall
such period exceed ninety (90) days after the original notice from
Lender; and
(xviii) if any of the assumptions relied upon by
Borrower's counsel in the non-consolidation opinion delivered in connection with
this Agreement are or become untrue, or if any of the statements and covenants
of Borrower's affiliates contained in those certain certificates attached to the
aforementioned non-consolidation opinion are or become untrue.
Section 7.2. Remedies. Upon the occurrence of an Event of
Default, all or any one or more of the rights, powers and other remedies
available to Lender against Borrower under this Agreement, the Note, the
Mortgage or any of the other Loan Documents, or at law or in equity may be
exercised by Lender at any time and from time to time (including, without
limitation, the right to accelerate and declare the outstanding principal
amount, unpaid interest, Default Rate interest, Late Charges, Yield
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Maintenance Premium, the Event of Default Return-of-Fee Amount and any other
amounts owing by Borrower to be immediately due and payable), without notice or
demand, whether or not all or any portion of the Indebtedness shall be declared
due and payable, and whether or not Lender shall have commenced any foreclosure
proceeding or other action for the enforcement of its rights and remedies under
any of the Loan Documents with respect to the Facility or all or any portion of
the Collateral. Any such actions taken by Lender shall be cumulative and
concurrent and may be pursued independently, singly, successively, together or
otherwise, at such time and in such order as Lender may determine in its
discretion, to the fullest extent permitted by law, without impairing or
otherwise affecting the other rights and remedies of Lender permitted by law,
equity or contract or as set forth herein or in the other Loan Documents.
Notwithstanding anything contained to the contrary herein, the outstanding
principal amount, unpaid interest, Default Rate interest, Late Charges, Yield
Maintenance Premium, the Event of Default Return-of-Fee Amount and any other
amounts owing by Borrower shall be accelerated and immediately due and payable,
without any election by Lender upon the occurrence of an Event of Default
described in Section 7.1(x) or Section 7.1(xi). Notwithstanding that this
Agreement may refer to a continuing Event of Default, and without limiting
Borrower's right to cure a Default which may, with the passage of time, become
an Event of Default, Borrower shall have no right pursuant to this Agreement to
cure any Event of Default unless this Agreement is amended by Borrower and
Lender in writing.
Section 7.3. Remedies Cumulative. The rights, powers and
remedies of Lender under this Agreement shall be cumulative and not exclusive of
any other right, power or remedy which Lender may have against Borrower pursuant
to this Agreement or the other Loan Documents executed by or with respect to
Borrower, or existing at law or in equity or otherwise. Lender's rights, powers
and remedies may be pursued singly, concurrently or otherwise, at such time and
in such order as Lender may determine in Lender's discretion. No delay or
omission to exercise any remedy, right or power accruing upon an Event of
Default shall impair any such remedy, right or power or shall be construed as a
waiver thereof, but any such remedy, right or power may be exercised from time
to time and as often as may be deemed expedient. A waiver of any Default or
Event of Default shall not be construed to be a waiver of any subsequent Default
or Event of Default or to impair any remedy, right or power consequent thereon.
Any and all of Lender's rights with respect to the Collateral shall continue
unimpaired, and Borrower shall be and remain obligated in accordance with the
terms hereof,
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100
notwithstanding (i) the release or substitution of Collateral at any time, or of
any rights or interest therein or (ii) any delay, extension of time, renewal,
compromise or other indulgence granted by Lender in the event of any Default or
Event of Default with respect to the Collateral or otherwise hereunder.
Notwithstanding any other provision of this Agreement, Lender reserves the right
to seek a deficiency judgment or preserve a deficiency claim, in connection with
the foreclosure of the Mortgage on the Facility, to the extent necessary to
foreclose on other parts of the Mortgaged Property.
Section 7.4. Lender's Right to Perform. If Borrower fails to
perform any covenant or obligation contained herein and such failure shall
continue for a period of (5) five Business Days after Borrower's receipt of
written notice thereof from Lender, without in any way limiting Section 7.1
hereof, Lender may, but shall have no obligation to, itself perform, or cause
performance of, such covenant or obligation, and the reasonable expenses of
Lender incurred in connection therewith shall be payable by Borrower to Lender
upon demand. Notwithstanding the foregoing, Lender shall have no obligation to
send notice to Borrower of any such failure.
ARTICLE VIII
MISCELLANEOUS
Section 8.1. Survival. Subject to Section 4.2, this Agreement
and all covenants, agreements, representations and warranties made herein and in
the certificates delivered pursuant hereto shall survive the execution and
delivery of this Agreement and the execution and delivery by Borrower to Lender
of the Note, and shall continue in full force and effect so long as any portion
of the Indebtedness is outstanding and unpaid. Whenever in this Agreement any of
the parties hereto is referred to, such reference shall be deemed to include the
successors and assigns of such party. All covenants, promises and agreements in
this Agreement contained, by or on behalf of Borrower, shall inure to the
benefit of the respective successors and assigns of Lender. Nothing in this
Agreement or in any other Loan Document, express or implied, shall give to any
Person other than the parties and the holder(s) of the Note, the Mortgage and
the other Loan Documents, and their legal representatives, successors and
assigns, any benefit or any legal or equitable right, remedy or claim hereunder.
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Section 8.2. Lender's Discretion. Whenever pursuant to this
Agreement or any other Loan Document, Lender exercises any right, option or
election given to Lender to approve or disapprove, or consent or withhold
consent, or any arrangement or term is to be satisfactory to Lender or is to be
in Lender's discretion, the decision of Lender to approve or disapprove, consent
or withhold consent, or to decide whether arrangements or terms are satisfactory
or not satisfactory or acceptable or not acceptable to Lender in Lender's
discretion, shall (except as is otherwise specifically herein provided) be in
the sole and absolute discretion of Lender.
Section 8.3. Governing Law. (a) The proceeds of the Note
delivered pursuant hereto were disbursed from New York, which State the parties
agree has a substantial relationship to the parties and to the underlying
transaction embodied hereby, and in all respects, including, without limitation,
matters of construction, validity and performance, this Agreement and the
obligations arising hereunder shall be governed by, and construed in accordance
with, the laws of the State of New York applicable to contracts made and
performed in such State and any applicable law of the United States of America.
To the fullest extent permitted by law, Borrower hereby unconditionally and
irrevocably waives any claim to assert that the law of any other jurisdiction
governs this Agreement and the Note, and this Agreement and the Note shall be
governed by and construed in accordance with the laws of the State of New York
pursuant to Section 5-1401 of the New York General Obligations Law.
(b) ANY LEGAL SUIT, ACTION OR PROCEEDING AGAINST BORROWER
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE INSTITUTED IN ANY FEDERAL
OR STATE COURT IN NEW YORK, NEW YORK, PURSUANT TO SECTION 5-1402 OF THE NEW
YORK GENERAL OBLIGATIONS LAW OR IN ANY FEDERAL OR STATE COURT IN THE
JURISDICTION IN WHICH THE COLLATERAL IS LOCATED, AND BORROWER WAIVES ANY
OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUCH
SUIT, ACTION OR PROCEEDING, AND BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUIT, ACTION OR PROCEEDING. BORROWER DOES
HEREBY DESIGNATE AND APPOINT CT CORPORATION SYSTEM, 1633 BROADWAY, NEW YORK, NEW
YORK 10019, AS ITS AUTHORIZED AGENT TO ACCEPT AND ACKNOWLEDGE ON ITS BEHALF
SERVICE OF ANY AND ALL PROCESS WHICH MAY BE SERVED IN ANY SUCH SUIT, ACTION OR
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PROCEEDING IN ANY FEDERAL OR STATE COURT AND AGREES THAT SERVICE OF PROCESS UPON
SAID AGENT AT SAID ADDRESS (OR AT SUCH OTHER OFFICE AS MAY BE DESIGNATED BY
BORROWER FROM TIME TO TIME IN ACCORDANCE WITH THE TERMS HEREOF) WITH A COPY TO
BORROWER AT ITS PRINCIPAL EXECUTIVE OFFICES, ATTENTION: WILLIAM L. GUZZETTI AND
AN ADDITIONAL COPY TO THOMAS L. BLOODWORTH AT JENKENS & GILCHRIST, 1445 ROSS
AVENUE, SUITE 3200, DALLAS, TEXAS 75202 AND WRITTEN NOTICE OF SAID SERVICE OF
BORROWER MAILED OR DELIVERED TO BORROWER IN THE MANNER PROVIDED HEREIN SHALL BE
DEEMED IN EVERY RESPECT EFFECTIVE SERVICE OF PROCESS UPON BORROWER, IN ANY SUCH
SUIT, ACTION OR PROCEEDING. BORROWER (I) SHALL GIVE PROMPT NOTICE TO LENDER OF
ANY CHANGED ADDRESS OF ITS AUTHORIZED AGENT HEREUNDER, (II) MAY AT ANY TIME AND
FROM TIME TO TIME DESIGNATE A SUBSTITUTE AUTHORIZED AGENT (WHICH OFFICE SHALL BE
DESIGNATED AS THE ADDRESS FOR SERVICE OF PROCESS), AND (III) SHALL PROMPTLY
DESIGNATE SUCH A SUBSTITUTE IF ITS AUTHORIZED AGENT CEASES TO HAVE AN OFFICE OR
IS DISSOLVED WITHOUT LEAVING A SUCCESSOR.
Section 8.4. Modification, Waiver in Writing. No modification,
amendment, extension, discharge, termination or waiver of any provision of this
Agreement, the Note or any other Loan Document, or consent to any departure by
Borrower therefrom, shall in any event be effective unless the same shall be in
a writing signed by the party against whom enforcement is sought, and then such
waiver or consent shall be effective only in the specific instance, and for the
purpose, for which given. Except as otherwise expressly provided herein, no
notice to or demand on Borrower shall entitle Borrower to any other or future
notice or demand in the same, similar or other circumstances.
Section 8.5. Delay Not a Waiver. Neither any failure nor any
delay on the part of Lender in insisting upon strict performance of any term,
condition, covenant or agreement, or exercising any right, power, remedy or
privilege hereunder, or under the Note, or of any other Loan Document, or any
other instrument given as security therefor, shall operate as or constitute a
waiver thereof, nor shall a single or partial exercise thereof preclude any
other future exercise, or the exercise of any other right, power,
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remedy or privilege. In particular, and not by way of limitation, by accepting
payment after the due date of any amount payable under this Agreement, the Note
or any other Loan Document, Lender shall not be deemed to have waived any right
either to require prompt payment when due of all other amounts due under this
Agreement, the Note or the other Loan Documents, or to declare a default for
failure to effect prompt payment of any such other amount.
Section 8.6. Notices. All notices, consents, approvals and
requests required or permitted hereunder or under any other Loan Document shall
be given in writing and shall be effective for all purposes if sent by (a) hand
delivery, with proof of attempted delivery, (b) certified or registered United
States mail, postage prepaid, (c) expedited prepaid delivery service, either
commercial or United States Postal Service, with proof of attempted delivery, or
(d) by telecopier (with answerback acknowledged) provided that such telecopied
notice must also be promptly delivered by one of the means set forth in (a), (b)
or (c) above, addressed if to Lender at its address set forth on the first page
hereof, and if to Borrower at its designated address set forth on the first page
hereof, with a copy to Jenkens & Gilchrist, 1445 Ross Avenue, Suite 3200,
Dallas, TX 75202, Attention: Thomas L. Bloodworth, Telefax Number (214)
855-4300 or at such other address and Person as shall be designated from time to
time by any party hereto, as the case may be, in a written notice to the other
parties hereto in the manner provided for in this Section 8.6. A copy of all
notices, consents, approvals and requests directed to Lender shall be delivered
concurrently to each of the following: Dechert Price & Rhoads, 1717 Arch Street,
4000 Bell Atlantic Tower, Philadelphia, PA 19103, Attention: Joseph B. Heil,
Esquire, Telefax Number 215/994-2222; Two World Financial Center, Building B,
New York, NY 10281-1198, Attention: Sheryl McAfee, Telefax Number (212)
667-1022; and Two World Financial Center, Building B, New York, NY 10281-1198,
Attention: Legal Counsel, Telefax Number (212) 667-1022; provided however, with
respect to notices, consents, approvals or requests for payments to be made from
the Cash Collateral Account or for approval of a Material Lease, Borrower shall
be required to only provide same to Lender without copies to any other party. A
notice shall be deemed to have been given: (a) in the case of hand delivery, at
the time of delivery; (b) in the case of registered or certified mail, when
delivered or the first attempted delivery on a Business Day; (c) in the case of
expedited prepaid delivery upon the first attempted delivery on a Business Day;
or (d) in the case of telecopier, upon receipt of answerback confirmation,
provided that such telecopied notice was also delivered as required in this
Section 8.6. A party receiving a notice which does not comply with the technical
requirements for notice under this Section 8.6 may elect to waive any
deficiencies and treat the notice as having been properly given.
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SECTION 8.7. TRIAL BY JURY. BORROWER AND LENDER, TO THE
FULLEST EXTENT THAT THEY MAY LAWFULLY DO SO, HEREBY WAIVE TRIAL BY JURY IN ANY
ACTION OR PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY TORT ACTION, BROUGHT BY
ANY PARTY HERETO WITH RESPECT TO THIS AGREEMENT, THE NOTE OR THE OTHER LOAN
DOCUMENTS.
Section 8.8. Headings. The Article and Section headings in
this Agreement are herein for convenience of reference only and shall not
constitute a part of this for any other purpose.
Section 8.9. Assignment. Lender shall have the right to assign
in whole or in part this Agreement and/or any of the other Loan Documents and
the obligations hereunder or thereunder to any Person and to participate all or
any portion of the Loan evidenced hereby, including without limitation, any
servicer or trustee in connection with a Securitization. Lender shall provide
Borrower with written notice of any such assignment; provided, however, that
such notice shall not be a condition of Lender's right to assign this Agreement
and/or any of the Loan Documents and the failure to deliver such notice shall
not constitute a default under this Loan Agreement.
Section 8.10. Severability. Wherever possible, each provision
of this Agreement shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Agreement.
Section 8.11. Preferences. Lender shall have no obligation to
marshal any assets in favor of Borrower or any other party or against or in
payment of any or all of the obligations of Borrower pursuant to this Agreement,
the Note or any other Loan Document. To the extent Borrower makes a payment or
payments to Lender for Borrower's benefit, which payment or proceeds or any part
thereof are subsequently invalidated, declared to be fraudulent or preferential,
set aside or required to be repaid
<PAGE> 110
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to a trustee, receiver or any other party under any bankruptcy law, state or
federal law, common law or equitable cause, then, to the extent of such payment
or proceeds received, the obligations hereunder or part thereof intended to be
satisfied shall be revived and continue in full force and effect, as if such
payment or proceeds had not been received by Lender.
Section 8.12. Waiver of Notice. Borrower shall not be entitled
to any notices of any nature whatsoever from Lender except with respect to
matters for which this Agreement or the other Loan Documents specifically and
expressly provide for the giving of notice by Lender to Borrower and except with
respect to matters for which Borrower is not, pursuant to applicable Legal
Requirements, permitted to waive the giving of notice. Borrower hereby expressly
waives the right to receive any notice from Lender with respect to any matter
for which this Agreement or the other Loan Documents does not specifically and
expressly provide for the giving of notice by Lender to Borrower.
Section 8.13. Remedies of Borrower. In the event that a claim
or adjudication is made that Lender or its agents, has acted unreasonably or
unreasonably delayed acting in any case where by law or under this Agreement,
the Note, the Mortgage or the other Loan Documents, Lender or such agent, as the
case may be, has an obligation to act reasonably or promptly, Borrower agrees
that neither Lender nor its agents, shall be liable for any monetary damages,
and Borrower's sole remedies shall be limited to commencing an action seeking
injunctive relief or declaratory judgment. The parties hereto agree that any
action or proceeding to determine whether Lender has acted reasonably shall be
determined by an action seeking declaratory judgment.
Section 8.14. Exculpation. Except as otherwise set forth in
this Section 8.14 and Section 4.2 to the contrary, Lender shall not enforce the
liability and obligation of Borrower to perform and observe the obligations
contained in this Agreement, the Note, the Mortgage or any of the other Loan
Documents executed and delivered by Borrower except that Lender may pursue any
power of sale, bring a foreclosure action, action for specific performance,
action for money judgment, or other appropriate action or proceeding (including,
without limitation, to obtain a deficiency judgment) against Borrower or any
other Person solely for the purpose of enabling Lender to realize upon (a) the
Collateral, and (b) the Rents and Accounts arising from the Facility to the
extent (x) received by Borrower or the Manager (or any of their affiliates),
after the occurrence
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106
of an Event of Default or (y) distributed to Borrower or the Manager, or their
respective shareholders, or partners or members, as applicable, or affiliates
during or with respect to any period for which Lender did not receive the full
amounts it was entitled to receive as prepayments of the Loan pursuant to
Section 2.6, 2.11 (all Rents and Accounts covered by clauses (x) and (y) being
hereinafter referred to as the "Recourse Distributions") and (c)) any other
collateral given to Lender under the Loan Documents ((a), (b), and (c)
collectively, the "Default Collateral"); provided, however, that any judgment in
any such action or proceeding shall be enforceable only to the extent of any
such Default Collateral. The provisions of this Section 8.14 shall not, however,
(a) impair the validity of the Indebtedness evidenced by the Loan Documents or
in any way affect or impair the Liens of the Mortgage or any of the other Loan
Documents or the right of Lender to foreclose the Mortgage following an Event of
Default and the continuance thereof; (b) impair the right of Lender to name any
Person as a party defendant in any action or suit for judicial foreclosure and
sale under the Mortgage; (c) affect the validity or enforceability of the Note,
the Mortgage or the other Loan Documents; (d) impair the right of Lender to
obtain the appointment of a receiver; (e) impair the right of Lender to bring
suit for any damages, losses, expenses, liabilities or costs resulting from
fraud, material misrepresentation, intentional misrepresentation, physical waste
of all or any portion of the Facility, or wrongful removal or disposal of all or
any portion of the Facility by any Person in connection with this Agreement, the
Note, the Mortgage or the other Loan Documents; (f) impair the right of Lender
to obtain the Recourse Distributions received by any Person; (g) impair the
right of Lender to bring suit with respect to any misappropriation of security
deposits or Rents collected more than one (1) month in advance; (h) impair the
right of Lender to obtain Insurance Proceeds or Condemnation Proceeds due to
Lender pursuant to the Mortgage or any other Loan Document (including, without
limitation, the applicable Casualty Prepayment Amount, Casualty Return-of-Fee
Amount, Condemnation Prepayment Amount and/or Condemnation Return-of-Fee
Amount); (i) impair the right of Lender to enforce the provisions of Sections
4.1(V) or 5.1(D) through 5.1(I), inclusive of this Agreement, Section 2.8 of the
Mortgage even after repayment in full by Borrower of the Indebtedness; (j)
prevent or in any way hinder Lender from exercising, or constitute a defense, or
counterclaim, or other basis for relief in respect of the exercise of, any other
remedy against any or all of the Collateral securing the Note as provided in the
Loan Documents; (k) impair the right of Lender to bring suit with respect to any
misapplication of any funds; or (l) impair the right of Lender to sue for, seek
or demand a deficiency judgment against any Person solely for the purpose of
foreclosing the
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Mortgaged or any part thereof, or realizing upon the Default Collateral;
provided, however, that any such deficiency judgment referred to in this clause
(l) shall be enforceable only to the extent of any of the Default Collateral.
The provisions of this Section shall be inapplicable to any Person if (i) any
petition for bankruptcy, reorganization or arrangement pursuant to federal or
state law against Borrower shall be filed by or against Borrower or consented to
or acquiesced to by Borrower, (ii) if Borrower shall institute any proceeding
for the dissolution or liquidation of Borrower, (iii) if Borrower shall make an
assignment for the benefit of creditors or (iv) if Borrower shall breach the
representation and warranty in Section 4.1(AA).
Section 8.15. Exhibits Incorporated. The information set forth
on the cover, heading and recitals hereof, and the Exhibits attached hereto, are
hereby incorporated herein as a part of this Agreement with the same effect as
if set forth in the body hereof.
Section 8.16. Offsets, Counterclaims and Defenses. Any
assignee of Lender's interest in and to this Agreement, the Note, the Mortgage
and the other Loan Documents shall take the same free and clear of all offsets,
counterclaims or defenses which are unrelated to the Loan, this Agreement, the
Note, the Mortgage and the other Loan Documents which Borrower may otherwise
have against any assignor, and no such unrelated counterclaim or defense shall
be interposed or asserted by Borrower in any action or proceeding brought by any
such assignee upon this Agreement, the Note, the Mortgage and other Loan
Documents and any such right to interpose or assert any such unrelated offset,
counterclaim or defense in any such action or proceeding is hereby expressly
waived by Borrower.
Section 8.17. No Joint Venture or Partnership. Borrower and
Lender intend that the relationship created hereunder be solely that of borrower
and lender. Nothing herein is intended to create a joint venture, partnership,
tenancy-in-common, or joint tenancy relationship between Borrower and Lender nor
to grant Lender any interest in the Mortgaged Property other than that of
mortgagee or lender.
Section 8.18. Waiver of Marshalling of Assets Defense. To the
fullest extent that Borrower may legally do so, Borrower waives all rights to a
marshalling of the assets of Borrower, and others with interests in Borrower,
and of the Mortgaged Property, or to a sale in inverse order of alienation in
the event of foreclosure of the
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interests hereby created, and agrees not to assert any right under any laws
pertaining to the marshalling of assets, the sale in inverse order of
alienation, homestead exemption, the administration of estates of decedents, or
any other matters whatsoever to defeat, reduce or affect the right of Lender
under the Loan Documents to a sale of the Facility for the collection of the
Indebtedness without any prior or different resort for collection, or the right
of Lender or Deed of Trust Trustee to the payment of the Indebtedness in
preference to every other claimant whatsoever.
Section 8.19. Intentionally omitted.
Section 8.20. Conflict; Construction of Documents. In the
event of any conflict between the provisions of this Agreement and the
provisions of the Note, the Mortgage or any of the other Loan Documents, the
provisions of this Agreement shall prevail. The parties hereto acknowledge that
they were represented by counsel in connection with the negotiation and drafting
of the Loan Documents and that the Loan Documents shall not be subject to the
principle of construing their meaning against the party which drafted same.
Section 8.21. Brokers and Financial Advisors. Borrower and
Lender hereby represent that they have dealt with no financial advisors,
brokers, underwriters, placement agents, agents or finders in connection with
the transactions contemplated by this Agreement. Borrower and Lender hereby
agree to indemnify and hold the other harmless from and against any and all
claims, liabilities, costs and expenses of any kind in any way relating to or
arising from a claim by any Person, that such Person acted on behalf of Borrower
or Lender, as applicable, in connection with the transactions contemplated
herein. The provisions of this Section shall survive the expiration and
termination of this Agreement and the repayment of the Indebtedness.
Section 8.22. Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed and delivered
shall be an original, but all of which shall together constitute one and the
same instrument.
Section 8.23. Estoppel Certificates. Borrower and Lender each
hereby agree at any time and from time to time upon not less than fifteen (15)
Business Days prior written notice by Borrower or Lender to execute, acknowledge
and deliver to the party specified in such notice, a statement, in writing,
certifying that this Agreement is
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unmodified and in full force and effect (or if there have been modifications,
that the same, as modified, is in full force and effect and stating the
modifications hereto), and stating whether or not, to the knowledge of such
certifying party, any Default or Event of Default has occurred, and, if so,
specifying each such Default or Event of Default; provided, however, that it
shall be a condition precedent to Lender's obligation to deliver the statement
pursuant to this Section, that Lender shall have received, together with
Borrower's request for such statement, an Officer's Certificate stating that no
Default or Event of Default exists as of the date of such certificate (or
specifying such Default or Event of Default).
Section 8.24. Payment of Expenses. Borrower shall, whether or
not the Transactions are consummated, pay all Transaction Costs, which shall
include, without limitation, reasonable out-of-pocket fees, costs, expenses, and
disbursements of Lender and its attorneys, local counsel, accountants and other
contractors in connection with (i) the negotiation, preparation, execution and
delivery of the Loan Documents and the documents and instruments referred to
therein, (ii) the creation, perfection or protection of Lender's Liens in the
Collateral (including, without limitation, fees and expenses for title and lien
searches and filing and recording fees, intangibles taxes, personal property
taxes, mortgage recording taxes, due diligence expenses, travel expenses,
accounting firm fees, costs of the Appraisals, Environmental Reports (and an
environmental consultant), Surveys and the Engineering Reports), (iii) the
negotiation, preparation, execution and delivery of any amendment, waiver or
consent relating to any of the Loan Documents, and (iv) the preservation of
rights under and enforcement of the Loan Documents and the documents and
instruments referred to therein, including any restructuring or rescheduling of
the Indebtedness. Lender shall provide Borrower with copies of each invoice in
excess of five hundred dollars ($500.00).
Section 8.25. Bankruptcy Waiver. Borrower hereby agrees that,
in consideration of the recitals and mutual covenants contained herein, and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, if Borrower (i) files with any bankruptcy court of
competent jurisdiction or be the subject of any petition under Title 11 of the
U.S. Code, as amended, (ii) is the subject of any order for relief issued under
Title 11 of the U.S. Code, as amended, (iii) files or is the subject of any
petition seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or law relating to
bankruptcy, insolvency or other relief of debtors, (iv) has sought or
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consents to or acquiesces in the appointment of any trustee, receiver,
conservator or liquidator or (v) is the subject of any order, judgment or decree
entered by any court of competent jurisdiction approving a petition filed
against such party for any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future federal or state act or law relating to bankruptcy, insolvency or other
relief for debtors, the automatic stay provided by the Federal Bankruptcy Code
shall be modified and annulled as to Lender, so as to permit Lender to exercise
any and all of its rights and remedies, upon request of Lender made on notice to
Borrower and any other party in interest but without the need of further proof
or hearing. Neither Borrower nor any Affiliate of Borrower shall contest the
enforceability of this Section.
Section 8.26 Entire Agreement. This Agreement, together with
the Exhibits hereto and the other Loan Documents constitutes the entire
agreement among the parties hereto with respect to the subject matter contained
in this Agreement, the Exhibits hereto and the other Loan Documents and
supersedes all prior agreements, understandings and negotiations between the
parties.
Section 8.27 Dissemination of Information. If Lender
determines at any time to sell, transfer or assign the Note, this Loan Agreement
and any other Loan Document and any or all servicing rights with respect
thereto, or to grant participations therein or issue mortgage pass-through
certificates or other securities evidencing a beneficial interest in a rated or
unrated public offering or private placement, Lender may forward to each
purchaser, transferee, assignee, servicer, participant or investor in such
securities (collectively, the "Investor") or any Rating Agency rating such
securities and each prospective Investor, all documents and which Lender now
has or may hereafter acquire relating to the Loan, Borrower, any guarantor, any
indemnitor and the Facility, which shall have been furnished by Borrower, any
guarantor, any indemnitor, or any party to any Loan Document, or otherwise
furnished in connection with the Loan, as Lender in its discretion determines
necessary or desirable.
Section 8.28. Limitation of Interest. It is the intention of
Borrower and Lender to conform strictly to applicable usury laws. Accordingly,
if the transactions contemplated hereby would be usurious under applicable law,
then, in that event, notwithstanding anything to the contrary in any Loan
Document, it is agreed as follows: (i) the aggregate of all consideration which
constitutes interest under applicable law that
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is taken, reserved, contracted for, charged or received under any Loan Document
or otherwise in connection with the Loan shall under no circumstances exceed the
maximum amount of interest allowed by applicable law, and any excess shall be
credited to principal by Lender (or if the Loan shall have been paid in full,
refunded to Borrower); and (ii) in the event that maturity of the Loan is
accelerated by reason of an election by Lender resulting from any default
hereunder or otherwise, or in the event of any required or permitted prepayment,
then such consideration that constitutes interest may never include more than
the maximum amount of interest allowed by applicable law, and any interest in
excess of the maximum amount of interest allowed by applicable law, if any,
provided for in the Loan Documents or otherwise shall be cancelled automatically
as of the date of such acceleration or prepayment and, if theretofore prepaid,
shall be credited to principal (or if the principal portion of the Loan and any
other amounts not constituting interest shall have been paid in full, refunded
to Borrower.)
In determining whether or not the interest paid or payable
under any specific contingency exceeds the maximum amount allowed by applicable
law, Lender shall, to the maximum extent permitted under applicable law (a)
exclude voluntary prepayments and the effects thereof, and (b) amortize,
prorate, allocate and spread, in equal parts, the total amount of interest
throughout the entire contemplated term of the Loan so that the interest rate is
uniform throughout the entire term of the Loan; provided, that if the Loan is
paid and performed in full prior to the end of the full contemplated term
hereof, and if the interest received for the actual period of existence thereof
exceeds the maximum amount allowed by applicable law, Lender shall refund to
Borrower the amount of such excess, and in such event, Lender shall not be
subject to any penalties provided by any laws for contracting for, charging or
receiving interest in excess of the maximum amount allowed by applicable law.
Section 8.29. Indemnification. Borrower shall indemnify and
hold Lender and each of its affiliates and their respective successors and
assigns (including their respective officers, directors, partners, employees,
attorneys, accountants, professionals and agents and each other person, if any,
controlling Lender or any of its affiliates within the meaning of either Section
15 of the Securities Act of 1933, as amended, or Section 20 of the Securities
Exchange Act of 1934, as amended) (each, including Lender, an "Indemnified
Party") harmless against any and all losses, claims, damages, costs, expenses
(including the fees and disbursements of outside counsel retained by any such
person) or liabilities in connection with, arising out of or as a result of the
transactions and matters
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referred to or contemplated by this Agreement, except to the extent that it is
finally judicially determined that any such loss, claim, damage, cost, expense
or liability resulted from the gross negligence or bad faith of such Indemnified
Party or any of its agents or representatives. If any Indemnified Party becomes
involved in any action, proceeding or investigation in connection with any
transaction or matter referred to or contemplated in this Agreement, Borrower
shall periodically reimburse any Indemnified Party upon demand therefor in an
amount equal to its reasonable legal and other expenses (including the
reasonable costs of any investigation and preparation) incurred in connection
therewith to the extent such legal or other expenses are the subject of
indemnification hereunder.
Section 8.30. Borrower Acknowledgments. Borrower hereby
acknowledges to and agrees with Lender that (i) the scope of Lender's business
is wide and includes, but is not limited to, financing, real estate financing,
investment in real estate and other real estate transactions which may be viewed
as adverse to or competitive with the business of Borrower or its Affiliates and
(ii) Borrower has been represented by competent legal counsel and Borrower has
consulted with such counsel prior to executing this Loan Agreement and of the
other Loan Documents.
Section 8.31. Publicity. Lender shall have the right to issue
press releases, advertisements and other promotional materials describing
Lender's participation in the origination of the Loan or the Loan's inclusion in
any Securitization effectuated or to be effectuated by Lender.
Section 8.32. Buy-Up. Notwithstanding anything in this
Agreement or any other Loan Document to the contrary, (i) Borrower and Lender
agree that no payment of any Casualty Prepayment Amount, Casualty Return-of-Fee
Amount, Condemnation Prepayment Amount, Condemnation Return-of-Fee Amount, Yield
Maintenance Premium or Event of Default Return- of-Fee Amount required to be
paid by Borrower pursuant to this Agreement or any other Loan Document is
intended to be a penalty of any nature or kind whatsoever, (ii) Borrower
acknowledges that in connection with the making of the Loan, Lender
paid Borrower a fee equal to $2,559,964, which fee Borrower and Lender both
intended that Lender would recover through the payment of interest on the Loan
by Borrower to Lender through the Optional Prepayment Date at the Initial
Interest Rate and (iii) in consideration for Lender's payment to Borrower of the
fee referred to in clause (ii) above, Borrower hereby unconditionally and
irrevocably
<PAGE> 118
113
waives any and all rights of any nature or kind whatsoever that Borrower may
have to contest the validity and/or the enforceability of any payment of any
Casualty Prepayment Amount, Casualty Return-of-Fee Amount, Condemnation
Prepayment Amount, Condemnation Return-of-Fee Amount, Event of Default
Return-of-Fee Amount or Yield Maintenance Premium.
[Signatures on the following pages]
<PAGE> 119
114
IN WITNESS WHEREOF, the parties hereto have caused this Loan
Agreement to be duly executed by their duly authorized representatives, all as
of the day and year first above written.
LENDER:
NOMURA ASSET CAPITAL CORPORATION, a
Delaware corporation
By: /s/ DAVID WALKER
-------------------------------------
David Walker
Vice President
[signatures continued on following page]
<PAGE> 120
115
BORROWER:
HALLWOOD 98, L.P., a Delaware limited partnership
By: HRP 98, L.L.C., a Delaware limited liability
company, its general partner
By: HWG 98 Advisors, Inc., a Delaware
corporation, its managing member
By: /s/ JEFFREY D. GENT
----------------------------------
Jeffrey D. Gent
Vice President
<PAGE> 121
EXHIBIT A
Operating Expense Certificate
Nomura Asset Capital Corporation
633 West Fifth Street, 68th Floor
Los Angeles, California 90071
Attention: David Walker
Re: Loan Agreement (the "Loan Agreement") dated as of March __, 1998
between Hallwood 98, L.P. ("Borrower") and Nomura Asset Capital
Corporation (together with its successors and assigns "Lender")
Ladies and Gentlemen:
This certificate is delivered in accordance with Section
2.11(f) of the Loan Agreement. All capitalized terms not defined herein shall
have the meanings ascribed to them in the Loan Agreement.
Borrower hereby certifies that the Operating Expenses for the
Interest Accrual Period from ______________, ____ to ______________, ____ are
______________________ Dollars ($_________) and that such Operating Expenses are
equal to or less than the Operating Expenses for such period set forth on the
Operating Budget.
HALLWOOD 98, L.P., a Delaware limited partnership
By: HRP 98, L.L.C., a Delaware limited liability
company, its general partner
By: HWG 98 Advisors, Inc., a Delaware
corporation, its managing member
By:
-------------------------------------
Jeffrey D. Gent
Vice President
<PAGE> 122
EXHIBIT B
Additional Definitions
Base Adjusted NOI $3,550,596.00
Base Payment $241,746.68
Capital Reserve Amount $180,000.00
Initial Basic Carrying Costs Amount $238,996.00
Initial Capital Reserve Amount $180,000.00
Initial DSCR 1.20
Initial Securitization Expense Amount $85,000.00
<PAGE> 123
EXHIBIT C
Capital Improvement and Repair and Environmental Remediation Exhibit
Repair or replace old roofs or failed sections as required in the Engineering
Report
<PAGE> 124
EXHIBIT D
Allocated Loan Amounts
<TABLE>
<CAPTION>
TAX PARCEL # BLDG. NO. LAMBS BLDG. NO. ALLOCATED LOAN AMOUNT
- ------------ --------- --------------- ---------------------
<S> <C> <C> <C>
18-153-01-005 4 C $2,611,140.36
18-153-01-008 11 H $882,086.96
18-153-01-009 14, 16, 18 J, K, M $2,251,748.65
18-153-01-010 2, 8, 20, 22, 24, 26 A, G, N, O, P, Q $3,731,779.57
18-153-01-011 12 I $438,846.60
18-153-08-004 31, 33, 35, 37 R, S, T, U $2,464,711.18
18-153-10-002 17 L $4,471,872.71
18-154-05-007 59 Z $3,026,008.61
18-154-05-017 50, 52 W, X $1,566,176.77
18-155-07-001 57 Y $4,228,814.47
18-156-03-006 3 B $621,443.65
18-156-06-005 4E D $2,108,545.90
18-156-06-010 6 F $2,618,589.76
18-156-06-013 43 V $418,270.81
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS 3-MOS 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1998 DEC-31-1997 DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1998 MAR-31-1997 JUN-30-1997 SEP-30-1997 DEC-31-1997
<CASH> 8,639 3,020 4,413 4,765 6,665
<SECURITIES> 0 0 0 0 0
<RECEIVABLES> 1,247 1,774 1,345 1,361 1,162
<ALLOWANCES> 0 0 0 0 0
<INVENTORY> 0 0 0 0 0
<CURRENT-ASSETS> 0 0 0 0 0
<PP&E> 334,431 333,863 333,068 333,568 334,395
<DEPRECIATION> 156,799 152,380 152,068 153,720 155,367
<TOTAL-ASSETS> 210,137 208,364 207,814 206,653 207,134
<CURRENT-LIABILITIES> 0 0 0 0 0
<BONDS> 0 0 0 0 0
0 0 0 0 0
0 0 0 0 0
<COMMON> 32,174 30,444 31,371 31,934 32,711
<OTHER-SE> 325 308 317 323 330
<TOTAL-LIABILITY-AND-EQUITY> 210,137 208,364 207,814 206,653 207,134
<SALES> 0 0 0 0 0
<TOTAL-REVENUES> 13,823 12,908 13,443 13,533 14,015
<CGS> 0 0 0 0 0
<TOTAL-COSTS> 9,571 9,623 9,268 9,710 9,996
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 3,183 3,217 3,239 3,254 3,235
<INCOME-PRETAX> 1,069 68 936 569 784
<INCOME-TAX> 0 0 0 0 0
<INCOME-CONTINUING> 1,069 68 936 569 784
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> (1,611) 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> (542) 68 936 569 784
<EPS-PRIMARY> (0.32) 0.04 0.55 0.34 0.46
<EPS-DILUTED> (0.31) 0.04 0.54 0.33 0.45
</TABLE>
