UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998
Commission File Number 1-11478
KRANZCO REALTY TRUST
(Exact Name of Registrant as Specified in Charter)
Maryland
(State of Other Jurisdiction of
Incorporation or Organization)
23-2691327
(IRS Employer Identification No.)
128 Fayette Street, Conshohocken, Pennsylvania 19428
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code
(610) 941-9292
N/A
Former Name, Former Address and Former Fiscal Year, if Changes Since
Last Report.
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 [ ]
As of November 6, 1998, there were 10,537,134 Common Shares of Beneficial
Interest, par value $0.01 per share, outstanding.
<PAGE>
<PAGE>
KRANZCO REALTY TRUST
QUARTERLY REPORT FOR THE PERIOD ENDED
SEPTEMBER 30, 1998
INDEX
PART I. PAGE
Item 1. Financial Statements 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Diclosures About Market Risks 15
PART II. Other Information
Item 1. Legal Proceedings 16
Item 2. Changes in Securities and Use of Proceeds 16
Item 3. Defaults upon Senior Securities 16
Item 4. Submission of Matters to a Vote of Security Holders 16
Item 5. Other Information 16
Item 6. Exhibits and Reports on Form 8-K 16
SIGNATURES 18
<PAGE>
<PAGE>
<TABLE>
Kranzco Realty Trust and Subsidiaries
Consolidated Balance Sheets
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited)
------------ ------------
<S> <C> <C>
ASSETS:
Shopping center properties owned, at cost
Buildings and improvements $435,435,000 $369,969,000
Land 147,437,000 114,772,000
------------ ------------
582,872,000 484,741,000
Less-accumulated depreciation 56,320,000 46,811,000
------------ ------------
526,552,000 437,930,000
Cash and cash equivalents 6,940,000 11,423,000
Restricted cash 1,208,000 883,000
Rents and other receivables, net of allowance of
$1,337,000 and $1,152,000, September 30, 1998 and December 31,1997 9,968,000 9,210,000
Prepaid expenses 3,626,000 1,870,000
Deferred financing costs, net of accumulated amortization of $1,069,000
and $778,000, September 30, 1998 and December 31,1997 2,235,000 1,975,000
Deferred costs, net of accumulated amortization of $863,000
and $1,043,000, September 30, 1998 and December 31,1997 2,625,000 2,119,000
Other assets 1,019,000 810,000
------------ ------------
Total assets $554,173,000 $466,220,000
============ ============
LIABILITIES:
Mortgages and notes payable $350,531,000 $255,124,000
Tenant security deposits 1,446,000 1,318,000
Accounts payable and accrued expenses 2,758,000 2,831,000
Other liabilities 1,332,000 597,000
Distributions payable 6,670,000 6,010,000
------------ ------------
Total liabilities 362,737,000 265,880,000
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED SHARES, SERIES C, $0.01 PAR VALUE; 89,100 SHARES,
AND 222,750 SHARES, SEPTEMBER 30, 1998 AND DECEMBER 31, 1997 891,000 2,228,000
BENEFICIARIES' EQUITY:
Preferred shares of beneficial interest, Series A-1,
$0.01 par value; 11,155 shares,
September 30, 1998 and December 31, 1997 1,000 1,000
Preferred shares of beneficial interest, Series B-1 and B-2,
$0.01 par value; 1,183,277 and
1,183,331 shares, September 30, 1998 and December 31, 1997 12,000 12,000
Preferred shares of beneficial interest, Series D, $0.01 par value;
1,800,000 shares,
September 30, 1998 and December 31, 1997 18,000 18,000
Common shares of beneficial interest, $0.01 par value; authorized
100,000,000 shares; issued and
outstanding, 10,535,906 and 10,415,427 as of September 30, 1998
and December 31, 1997, respectively 105,000 104,000
Capital in excess of par value 263,345,000 261,097,000
Cumulative net income available for common shareholders 39,205,000 33,806,000
Cumulative distributions on common shares of beneficial interest (111,856,000) (96,771,000)
------------ ------------
190,830,000 198,267,000
Unearned compensation on restricted shares of beneficial interest (285,000) (155,000)
------------ ------------
Total beneficiaries' equity 190,545,000 198,112,000
Total liabilities and beneficiaries' equity $554,173,000 $466,220,000
============ ============
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Kranzco Realty Trust and Subsidiaries
Consolidated Statements of Operations
<CAPTION>
For the three For the three For the nine For the nine
months ended months ended months ended months ended
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Minimum rent $13,708,000 $12,142,000 $40,820,000 $35,185,000
Percentage rent 151,000 282,000 710,000 831,000
Expense reimbursements 3,348,000 2,798,000 9,115,000 8,253,000
Interest income 70,000 64,000 277,000 180,000
Other 19,000 19,000 63,000 94,000
----------- ----------- ----------- -----------
Total revenues 17,296,000 15,305,000 50,985,000 44,543,000
----------- ----------- ----------- -----------
EXPENSES:
Interest 5,110,000 4,816,000 15,014,000 14,070,000
Depreciation and amortization 3,478,000 3,257,000 10,401,000 9,247,000
Real estate taxes 1,839,000 1,668,000 5,199,000 4,891,000
Operations and maintenance 2,249,000 2,023,000 6,508,000 6,062,000
General and administrative 796,000 768,000 2,556,000 2,190,000
----------- ----------- ----------- -----------
Total expenses 13,472,000 12,532,000 39,678,000 36,460,000
----------- ----------- ----------- -----------
INCOME BEFORE GAIN ON SALE OF REAL ESTATE 3,824,000 2,773,000 11,307,000 8,083,000
GAIN ON SALE OF REAL ESTATE 109,000 0 109,000 0
----------- ----------- ----------- -----------
NET INCOME 3,933,000 2,773,000 11,416,000 8,083,000
PREFERRED SHARE DISTRIBUTIONS 1,987,000 955,000 6,016,000 2,379,000
----------- ----------- ----------- -----------
NET INCOME FOR COMMON SHAREHOLDERS $1,946,000 $1,818,000 $5,400,000 $5,704,000
=========== =========== =========== ===========
NET INCOME BEFORE GAIN ON
SALE OF REAL ESTATE PER COMMON SHARE
OF BENEFICIAL INTEREST $0.18 $0.18 $0.51 $0.55
GAIN ON SALE OF REAL ESTATE PER COMMON
SHARE OF BENEFICIAL INTEREST $0.01 $0.00 $0.01 $0.00
----------- ----------- ----------- -----------
BASIC AND DILUTED EARNINGS PER COMMON SHARE
OF BENEFICIAL INTEREST $0.19 $0.18 $0.52 $0.55
=========== =========== =========== ===========
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Kranzco Realty Trust and Subsidiaries
Consolidated Statements of Cash Flows
<CAPTION>
For the nine For the nine
months ended months ended
September 30, September 30,
1998 1997
------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $11,416,000 $8,083,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 10,401,000 9,247,000
Amortization of unearned compensation 111,000 69,000
on restricted shares of beneficial interest
Gain on sale of real estate (109,000) 0
Changes in assets and liabilities:
(Increase) decrease in-
Rents and other receivables (758,000) 636,000
Prepaid expenses (1,756,000) (1,114,000)
Other assets (43,000) (150,000)
Increase (decrease) in-
Accounts payable and accrued expenses (242,000) (728,000)
Tenant security deposits 128,000 127,000
Other liabilities 735,000 729,000
------------ ------------
Net cash provided by operating activities 19,883,000 16,899,000
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in shopping center properties (95,026,000) (72,517,000)
Net proceeds from sale of real estate 440,000 0
(Increase) decrease in other assets (166,000) 2,165,000
Decrease in accrued acquisition costs 642,000 0
Increase in restricted cash (325,000) (414,000)
Increase in deferred costs (803,000) (626,000)
------------ ------------
Net cash used in investing activities (95,238,000) (71,392,000)
------------ ------------
<PAGE>
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions paid on common shares of beneficial interest (15,027,000) (14,881,000)
Distributions paid on preferred shares of beneficial interest (5,358,000) (1,673,000)
Issuance of common shares of beneficial interest, net 1,631,000 48,000
Issuance of preferred shares of beneficial interest, net 0 32,934,000
Redemption of redeemable preferred shares (1,337,000) (891,000)
Proceeds of mortgages and notes payable 94,901,000 38,630,000
Repayments of mortgages and notes payable (2,839,000) (796,000)
Decrease in accrued expenses for preferred share offering (473,000) 0
Increase in deferred financing costs (626,000) (713,000)
------------ ------------
Net cash provided by financing activities 70,872,000 52,658,000
------------ ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,483,000) (1,835,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 11,423,000 5,301,000
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $6,940,000 $3,466,000
============ ============
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Accretion of discount on increasing rate preferred shares $56,000 $73,000
============ ============
Preferred and common shares issued as part of the
purchase price for the acquisition of real estate:
Fair value of assets acquired $3,665,000 $63,347,000
Liabilities assumed 3,345,000 30,200,000
------------ ------------
Preferred shares issued $0 $33,147,000
Common shares issued $320,000 $0
============ ============
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Kranzco Realty Trust and Subsidiaries
Consolidated Statements of Beneficiaries' Equity
For the years ended December 31, 1996 and 1997
For the nine months ended September 30, 1998
<CAPTION>
Unearned
Cumulative Compensation
Preferred Cumulative Distributions on
Common Preferred Shares of Capital Net Income on Common Restricted
Shares of Shares of Beneficial In Excess Available Shares of Shares of
Beneficial Par Beneficial Interest of for Common Beneficial Beneficial
Interest Value Interest Par Value Par Value Shareholders Interest Interest
------------ -------- ---------- ---------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 1, 1996 10,322,858 $103,000 11,155 $1,000 $186,914,000 $30,029,000 ($57,061,000) ($104,000)
Issuance of common shares 9,949 - - - 145,000 - - (93,000)
Forfeiture of common shares (23) - - - - - - -
Accretion
of
discount
on preferred shares
of beneficial interest - - - - 118,000 (118,000) - -
Accretion
of
unearned compensation on
restricted
shares
of beneficial interest - - - - - - - 66,000
Net loss - - - - - (2,580,000) - -
Distributions
on preferred shares - - - - - (577,000) - -
Distributions
on common shares
of
beneficial
interest($1.92 per share) - - - - - - (19,830,000) -
BALANCE, DECEMBER 31, 1996 10,332,784 $103,000 11,155 $1,000 $187,177,000 $26,754,000 ($76,891,000) ($131,000)
Issuance of common shares 82,697 1,000 - - 1,545,000 - - (125,000)
Forfeiture of common shares (54) - - - (1,000) - - -
Issuance
of
preferred
shares-Series B-1, B-2 - - 1,183,331 12,000 29,354,000 - - -
Issuance
of
preferred shares-Series D - - 1,800,000 18,000 42,927,000 - - -
Accretion
of
discount
on preferred shares
of beneficial interest - - - - 95,000 (95,000) - -
Accretion
of
unearned compensation on
restricted
shares
of beneficial interest - - - - - - - 101,000
Net income - - - - - 10,617,000 - -
Distributions
on preferred shares - - - - - (3,470,000) - -
Distributions
on common shares
of
beneficial
interest($1.92 per share) - - - - - - (19,880,000) -
BALANCE, DECEMBER 31, 1997 10,415,427 $104,000 2,994,486 $31,000 $261,097,000 $33,806,000 ($96,771,000) ($155,000)
Issuance of common shares 121,520 1,000 - - 2,210,000 - - (241,000)
Forfeiture of common shares (1,041) - - - (18,000) - - -
Conversion
of
Series B-1 to common shares - - (54) - (1,000) - - -
Accretion
of
discount
on preferred shares
of beneficial interest - - - - 57,000 (57,000) - -
Accretion
of
unearned compensation on
restricted
shares
of beneficial interest - - - - - - - 111,000
Net income - - - - - 11,416,000 - -
Distributions
on preferred shares - - - - - (5,960,000) - -
Distributions
on common shares
of
beneficial
interest($1.44 per share) - - - - - - (15,085,000) -
BALANCE,
SEPTEMBER
30, 1998 (Unaudited) 10,535,906 $105,000 2,994,432 $31,000 $263,345,000 $39,205,000 ($111,856,000) ($285,000)
<FN>
The accompanying notes are an integral part of these statements.
</FN>
</TABLE>
<PAGE>
ii.
KRANZCO REALTY TRUST AND SUBSIDIARIES
SELECTED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1998
1. BASIS OF PRESENTATION:
The financial statements are unaudited but reflect all adjustments which are
necessary, in the opinion of management, to present fairly the results for the
interim periods presented. These financial statements should be read in
conjunction with the financial statements and related notes contained in
Kranzco Realty Trust and its subsidiaries' Annual Report on Form 10-K for the
year ended December 31, 1997. Results from any interim period are not
necessarily indicative of the results for a full year.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business and Nature of Operations
Kranzco Realty Trust (a Maryland real estate investment trust) and its
subsidiaries ("KRT" or the "Company") are engaged in the ownership,
management, leasing, operation, acquisition, development, investment and
disposition of neighborhood and community shopping centers and free-standing
properties. In addition to its own properties, the Company may provide
management services for shopping centers owned by third parties. As of
September 30, 1998, the Company owned 67 properties in nineteen states.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities as of the date of the financial statements
and reported amounts of revenues and expenses during the reporting periods.
The ultimate results could differ from those estimates.
Earnings Per Share Data
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128 establishes standards
for computing and presenting earnings per share ("EPS") and applies to
entities with publicly held common stock or potential common stock.
Basic Earnings Per Share ("Basic EPS") is based on the weighted average
number of common shares of beneficial interest outstanding. The weighted
average number of shares outstanding used in the Basic EPS computations was
10,459,132 and 10,337,404 as of September 30, 1998 and 1997, respectively.
The Diluted Earnings Per Share ("Diluted EPS") computations have been adjusted
to give effect to common share equivalents; specifically, common share options
outstanding. The weighted average number of shares outstanding used in the
Diluted EPS computations was 10,463,855 and 10,340,731 as of September 30,
1998 and 1997, respectively. The Company's Series A-1 and B Preferred Shares
and the majority of the Company's stock options were not included in the
Diluted EPS calculation because their impact would be anti-dilutive based on
current market prices.
Statements of Cash Flows
Cash and cash equivalents include all cash and liquid investments with
original maturities of three months or less, primarily consisting of money
market accounts and government investments. Cash paid for interest was
$15,544,000 and $14,594,000 for the nine months ended September 30, 1998 and
1997, respectively.
3. INDEBTEDNESS:
At September 30, 1998 and December 31, 1997, the Company had mortgages and
notes payable outstanding of $350,531,000 and $255,124,000, respectively.
In September 1998, the Company obtained a $65.9 million fixed rate mortgage
from Salomon Brothers Realty Corp. This mortgage is secured by nine
properties acquired in September, 1998. The mortgage bears a fixed interest
rate of 7% per annum and requires monthly payments of interest and principal
based on a 30-year amortization. The mortgage matures on October 1, 2008.
Pursuant to the mortgage, the Company is required to make monthly escrow
payments for the payment of real estate taxes, insurance and tenant
improvements and repair reserves. The balance of the tenant improvement and
repair reserve account as of September 30, 1998 was $300,000.
In 1996, the Company completed a refinancing of substantially all of its
variable rate debt and a portion of its fixed rate debt with a new fixed rate
secured financing. The Company entered into a seven year, secured, fixed rate
real estate mortgage loan in the principal amount of $181,700,000 (the
"Mortgage Loan"), at a weighted average interest rate of 7.96% per annum,
which is inclusive of trustee and servicer fees. The Mortgage Loan is secured
by twenty seven shopping center properties (the "Mortgaged Properties"). The
entire outstanding principal balance of the Mortgage Loan is due in June 2003.
Interest expense for the nine months ending September 30, 1998 and 1997 in
the accompanying statements of operations is shown net of capitalized interest
of $640,000 and $632,000, respectively.
As a condition of the Mortgage Loan, the Company was required to establish a
Sinking Fund Account and a Capital and TI Reserve Account. The balance in
the Sinking Fund Account as of September 30, 1998 was $313,000. All funds in
the Capital and TI Reserve Account may be used by the Company to fund capital
improvements, repairs, alterations, tenant improvements and leasing
commissions at the Mortgaged Properties. The balance in the Capital and TI
Reserve Account was $331,000 as of September 30, 1998.
In addition, the Company has eleven mortgages outstanding as of September 30,
1998 which were assumed in connection with the acquisition of certain shopping
centers. These mortgages have maturity dates ranging from 1999 through 2009.
Nine of the eleven mortgages assumed have fixed interest rates ranging from
7.50% to 10.50% per annum. The outstanding principal balance on these
mortgages at September 30, 1998 was approximately $53,764,000. The Company is
required to make principal payments of $235,000 in 1998, $7,419,000 in 1999,
$7,209,000 in 2000, $4,329,000 in 2001, $3,338,000 in 2002, and $5,311,000 in
2003 related to these mortgages. The other two mortgages have interest rates
payable at a rate adjusted each year to equal the sum of Moody's A Corporate
Bond Index Daily Rate minus 0.125% per annum. The outstanding principal
balance on these mortgages at September 30, 1998 was approximately
$7,167,000. The Company is required to make principal payments of $41,000 in
1998, $218,000 in 1999, $231,000 in 2000, $247,000 in 2001, $262,000 in 2002,
and $6,168,000 in 2003 related to these two mortgages.
In 1998, the Company increased its secured line of credit from Salomon
Brothers Realty Corp. to $100 million from $50 million. Amounts borrowed
under the line bear interest at the one month London Interbank Offering Rate
("LIBOR") plus 175 basis points, which interest rate was 7.39% at September
30, 1998. As of September 30, 1998, there was $42,000,000 outstanding under
this facility and an additional $9,000,000 available for future borrowing.
The facility is secured by eighteen properties and the due date was extended
to July 2000. The Company has an option to extend the facility for an
additional year. As a condition of the facility, the Company was required to
establish a Repair Reserve Account for immediate and ongoing capital
expenditure reserves and replacement reserves. The balance in the Repair
Reserve Account was $410,000 as of September 30, 1998.
The Company has a $3.0 million secured line of credit from Bank Leumi Trust
Company of New York. Amounts borrowed under the line bear interest at 50
basis points above that bank's reference rate, which interest rate was 8.50%
as of September 30, 1998. There was no outstanding borrowings under this
facility as of September 30, 1998. The line has been extended to June 30,
1999.
The Company has a $1.0 million unsecured line of credit from Corestates Bank,
N.A. Amounts borrowed under the line will bear interest at that bank's prime
rate which was 8.5% as of September 30, 1998. There were no outstanding
borrowings under this facility as of September 30, 1998 and the facility's
expiration date was extended to December 31, 1998.
4. PROPERTY:
The Company acquired ten shopping centers in 1998 for approximately
$93,000,000 which were accounted for by the purchase method. One of the
shopping centers was under contract at December 31, 1997. This center was
part of a package of five centers located in Georgia (the "Georgia
Properties"), of which four of the centers were acquired prior to December 31,
1997. Nine of the shopping centers were purchased in September 1998 for
approximately $88 million. The centers have a total of 1.4 million square
feet of gross leasable area and an overall leased rate of approximately 99%.
The pro forma information for September 30, 1997 also includes the acquisition
of the twenty centers as described below. The results of operations of each
center were included from the respective purchase date. The pro forma
financial information presented below may not be indicative of results that
would have been reported if the acquisitions had occurred on January 1, 1998.
For the nine months ended September 30, 1998
Pro forma total revenues $57,767,000
Pro forma net income for common shareholders $4,999,000
Pro forma net income per common share $0.48
For the nine months ended September 30, 1997
Pro forma total revenues $56,889,000
Pro forma net income for common shareholders $4,684,000
Pro forma net income per common share $0.45
The Company acquired twenty shopping centers during the year ended December
31, 1997 for approximately $104,000,000 which were accounted for by the
purchase method. The results of operations of each center were included from
the respective purchase date. The pro forma financial information presented
below may not be indicative of results that would have been reported if the
acquisitions had occurred on January 1, 1997.
For the nine months ended September 30, 1997
Pro forma total revenues $49,947,000
Pro forma net income for common shareholders $4,883,000
Pro forma net income per common share $0.47
In August 1998, the Company sold one of its free-standing properties located
in Richmond, Virginia, for a sale price of $420,000. The Company recorded a
gain on sale of the property of $89,000. In July 1998, the Company sold a
parcel of land of approximately 8,500 square feet at one of its properties to
a third party buyer. The sales price of the land parcel was $40,000 and the
Company recorded a gain on the sale of approximately $20,000.
On August 12, 1998, the Company commenced an Exchange Offer pursuant to which
the Company is offering to exchange an aggregate of $8,000,000 of Callable
Convertible Subordinated Notes Due 2008, for an aggregate of 10,379,531 shares
of common stock, par value $.01 per share (the "NAI Shares") of New America
Network, Inc., a Delaware corporation which conducts business under the name
New America International ("NAI"), or approximately 80% of the outstanding
NAI Shares. NAI is the nation's largest privately held affiliation of
commercial real estate brokerage and related services firms. Pursuant to the
terms of the proposed transactions, NAI would become a public company which
would be approximately 9.8% owned by the Company and would provide for a
long-term cooperative agreement under which the two companies will collaborate
in developing new opportunities and revenue streams for each other from real
estate brokerage and related services, but will otherwise remain independent.
In September 1998, the Company extended the expiration date of its offer until
December 31, 1998 in light of recent material disruptions to the securities
markets.
5. PREFERRED SHARES OF BENEFICIAL INTEREST:
In connection with the purchase of five shopping centers in April 1995, the
Company issued 11,155 shares of non-voting Series A-1 Increasing Rate
Cumulative Convertible Preferred Shares of Beneficial Interest, $0.01 par
value per share, of Kranzco Realty Trust (the "Series A-1 Preferred Shares")
at a face amount of $11,155,000. The Preferred Shares have an initial
distribution rate of 5.0% per annum with increases of 0.25% per annum up to a
maximum rate of 6.5% per annum. As of September 30, 1998, the distribution
rate on the Preferred Shares is 5.75%. The Preferred Shares are redeemable
by the Company at any time at their liquidation preference and are convertible
into the Company's Common Shares of Beneficial Interest (the "Common Shares"),
at a rate of 16.67% annually commencing in the fifth year, with a maximum of
50% convertible in any one year. The Preferred Shares are convertible into
that number of Common Shares as would result in the holder receiving the same
amount of distributions from the Common Shares at the applicable conversion
dates as they received as a holder of the Preferred Shares, up to a maximum of
the greater of 500,000 Common Shares or 5% of the then outstanding Common
Shares.
In connection with the UPI acquisition, the Company issued 1,183,331 shares of
Series B-1 and Series B-2 Cumulative Convertible Preferred Shares of
Beneficial Interest (the "Series B Preferred Shares"), par value $0.01 per
share, each with a $25.00 per share liquidation preference. The Series B
Preferred Shares have a distribution rate of 9.75% per annum and distributions
are paid quarterly on the 20th of January, April, July and October of each
year. The Series B-1 Preferred Shares are convertible into Common Shares
after February 1998 with the following conversion prices: $19.175 in the
first year, $18.69 in the second year, $18.20 in the third year, $17.71 in the
fourth year and thereafter. In the second quarter of 1998, 54 shares of the
Series B Preferred Shares were converted into 70 Common Shares. The Series
B-2 Preferred Shares automatically convert into Series B-1 Preferred Shares
after the third anniversary date and follow the conversion rates of the Series
B-1 Preferred Shares thereafter. The Company also issued 356,400 shares of
Series C Cumulative Redeemable Preferred Shares of Beneficial Interest (the
"Series C Preferred Shares"), par value $0.01 per share, each with a $10.00
liquidation preference. The Series C Preferred Shares have a distribution
rate of 8% per annum and distributions are payable quarterly on the last day
of January, April, July and October of each year with respect to the
immediately preceding calendar quarter. The Company was required to redeem,
commencing April 1997, in eight equal quarterly installments all of the
outstanding Series C Preferred Shares at a redemption price equal to the
$10.00 liquidation price plus an amount equal to the accrued and unpaid
distributions, if any, allocable to the Series C Preferred Shares.
In December 1997, the Company issued 1,800,000 shares of 9 1/2% Series D
Cumulative Redeemable Preferred Shares of Beneficial Interest (the "Series D
Preferred Shares"), par value $0.01 per share, each with a $25.00 per share
liquidation preference. The proceeds of the issuance were used in connection
with the acquisition of four shopping centers in December 1997 and one
shopping center in 1998 (approximately $15,774,000 and $225,000,
respectively), to repay approximately $19,810,000 of indebtedness and for
general corporate purposes. The distributions are paid quarterly on the 20th
of each January, April, July and October of each year. The Series D Preferred
Shares are not redeemable prior to December 11, 2002. On or after December
11, 2002, the Series D Preferred Shares may be redeemed for cash at the option
of the Company at a redemption price of $25.00 per share, plus accrued and
unpaid distributions, if any, thereon to the redemption date.
Other than the 54 Series B Preferred Shares discussed above, there was no
conversion of preferred shares into common shares of beneficial interest
during 1997 or during the nine months ending September 30, 1998.
6. DISTRIBUTIONS ON COMMON AND PREFERRED SHARES OF BENEFICIAL INTEREST:
On September 16, 1998, the Trustees declared a cash distribution of $0.48 per
common share, payable to shareholders of record on September 28, 1998. The
distribution of $5,057,000 was paid on October 21, 1998. On September 3,
1997, the Trustees declared a cash distribution of $0.48 per common share,
payable to shareholders of record as of September 26, 1997. The distribution
of $4,965,000 was paid on October 22, 1997.
The Company recorded the quarterly distribution on the Series A-1 Preferred
Shares of $160,000 and $153,000 as of September 30, 1998 and 1997,
respectively. These distributions were paid on October 1, 1998 and 1997,
respectively.
The Company recorded $577,000 and $571,000 of the distribution on the Series
B Preferred Shares as of September 30, 1998 and 1997, respectively. The
entire distribution of $721,000 and $722,000 was paid on October 20, 1998 and
1997, respectively.
The Company recorded $21,000 and $53,000 of the distribution on the Series C
Preferred Shares as of September 30, 1998 and 1997, respectively. The entire
distribution of $21,000 and $53,000 was paid on October 30, 1998 and October
31, 1997, respectively.
The Company recorded $855,000 of the distribution on the Series D Preferred
Shares as of September 30, 1998. The entire distribution of $1,069,000 was
paid on October 30, 1998 and October 31, 1997, respectively.
7. NEW ACCOUNTING PRONOUNCEMENTS:
In May 1998, the FASB issued Emerging Issues Task Force No. 98-9 "Accounting
for Contingent Rent in Interim Financial Periods" ("EITF 98-9"). EITF 98-9
discusses when contingent rent should be recognized. The consensus was that a
lessor should defer recognition of contingent rental income in interim periods
until the specified target that triggers the contingent rental income is
achieved. Due to the adoption of this accounting method, the Company
recognized approximately $140,000 less of percentage rent revenue through
September 30, 1998.
Management's Discussion and Analysis of Financial
Condition and Results of Operations
This Form 10-Q, together with other statements and information publicly
disseminated by the Company, contains certain statements that may be deemed to
be "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of
the Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included in this Form 10-Q that address
activities, events or developments that the Company expects, believes or
anticipates will or may occur in the future, including such matters as future
capital expenditures, distributions and acquisitions (including the amount and
nature thereof), the use of proceeds of offerings, expansion and other
development trends of the real estate industry, business strategies, expansion
and growth of the Company's operations and other such matters are
forward-looking statements. Such statements are based on assumptions and
expectations which may not be realized and are inherently subject to risks and
uncertainties, many of which cannot be predicted with accuracy and some of
which might not even be anticipated. Prospective investors are cautioned that
any such statements are not guarantees of future performance and that actual
results or developments may differ materially from those anticipated in the
forward-looking statements. Risks and other factors that might cause such
differences, some of which could be material, include, but are not limited
to: the burden of the Company's substantial debt obligations; the necessity of
future financings to repay the "balloon" payments required at the maturity of
certain of the Company's debt obligations; the highly competitive nature of
the real estate leasing market; adverse changes in the real estate markets
including, among other things, competition with other companies; general
economic and business conditions, which will, among other things, affect
demand for retail space or retail goods, availability and creditworthiness of
prospective tenants and lease rents; financial condition and bankruptcy of
tenants, including disaffirmance of leases by bankrupt tenants; the
availability and terms of debt and equity financing; risks of real estate
acquisition, expansion and renovation; governmental actions and initiatives;
environmental/safety requirements; and other changes and factors listed in the
Company's Annual Report on Form 10-K for the year ended December 31, 1997
under Item 1. Business and from time to time in the Company's other reports
filed with the Securities and Exchange Commission or otherwise publicly
disseminated by the Company.
Liquidity and Capital Resources
At September 30, 1998 the Company had $6,940,000 of cash on hand. In addition
to its cash reserve, unused capacity under credit facilities totaled
$13,000,000 at September 30, 1998.
In September 1998, the Company acquired nine community shopping centers in
five midwestern and southern states for approximately $89,000,000. The
Company funded the purchase of the property through a 10-year 7% fixed rate
$65,900,000 mortgage with Salomon Brothers Realty Corp. and the draw down of
$26,000,000 from the secured line of credit with Salomon Brothers Realty Corp.
The centers, seven of which are anchored by Wal-Mart, have a total of
approximately 1.4 million square feet of gross leasable area and are
approximately 99% leased. The acquisition resulted in an increase of
approximately 15% in gross leasable area.
In March 1998, the Company acquired one shopping center in Georgia for
approximately $4,000,000. This shopping center was under contract as of
December 31, 1997 and was the last of a package of five Georgia properties to
be acquired. The other four properties were acquired prior to December 31,
1997. The Company funded the purchase of the property through the assumption
of approximately $3.3 million of debt, the issuance of approximately $320,000
of Kranzco Common Shares of Beneficial Interest and the payment of
approximately $225,000 of cash.
On August 12, 1998, the Company commenced an Exchange Offer pursuant to which
the Company is offering to exchange (the "Exchange Offer") an aggregate of
$8,000,000 of Callable Convertible Subordinated Notes Due 2008, for an
aggregate of 10,379,531 shares of common stock, par value $.01 per share (the
"NAI Shares") of New America Network, Inc., a Delaware corporation which
conducts business under the name New America International ("NAI"), or
approximately 80% of the outstanding NAI Shares. Immediately following the
consummation of the Exchange Offer, NAI and Kranzco will, among other things,
enter into an Intercompany Agreement which will provide for the companies to
grant each other certain rights of first opportunity and first notification
with respect to certain business opportunities and will also provide for the
provision of certain consulting services by Kranzco to NAI. Immediately
following the consummation of the Exchange Offer, pursuant to a Registration
Statement, Kranzco intends to distribute (the "Distribution") approximately
70.2% of the outstanding NAI Shares to holders of Common Shares and holders of
the outstanding Series B-1 Preferred Shares and Series B-2 Preferred Shares of
Beneficial Interest, each par value $.01 per share, (together, the "Series B
Preferred Shares") of Kranzco, on the basis of one NAI Share for each Common
Share and one NAI share for each Common Share into which the Series B
Preferred Shares are convertible. Upon the consummation of the Distribution,
Kranzco will own approximately 9.8% of the outstanding NAI Shares, Kranzco
shareholders will own approximately 70.2% of the outstanding NAI shares, and
the persons who owned NAI Shares prior to the Exchange Offer will own an
aggregate of approximately 20% of the NAI Shares. In September 1998, the
Company extended the expiration date of the Exchange Offer until December 31,
1998 due to the recent material disruptions to the securities markets.
As of September 30, 1998, the Company had total mortgages and notes payable of
$350,531,000 of which $301,364,000 bears interest at fixed annual rates
ranging from 7.00% to 10.5%. The weighted average interest rate of all of the
Company's mortgages and notes payable as of September 30, 1998 was 7.84% per
annum. As of September 30, 1998, the Company is required to make aggregate
principal payments on all of its outstanding borrowings of $371,000 in 1998,
$8,248,000 in 1999, $50,082,000 in 2000, $5,279,000 in 2001, $4,354,000 in
2002 and $193,988,000 in 2003.
In September 1998, the Company obtained a $65.9 million fixed rate mortgage
from Salomon Brothers Realty Corp. This mortgage is secured by nine
properties acquired in September, 1998. The mortgage bears a fixed interest
rate of 7% per annum and requires monthly payments of interest and principal
based on a 30-year amortization. The mortgage matures on October 1, 2008. As
a condition of the mortgage, the Company is required to pay monthly escrows
for the payment of real estate taxes, insurance and tenant improvements and
repair reserves. The balance of the tenant improvement and repair reserve
account was $300,000 as of September 30, 1998.
In September 1998, the Company increased its secured first mortgage loan
facility from Salomon Brothers Realty Corp. (the "Salomon Facility") to $100
million from $50 million. Amounts borrowed under the Salomon Facility bear
interest at an annual rate equal to the one-month London Interbank Offering
Rate ("LIBOR") plus 175 basis points, which interest rate was 7.39% as of
September 30, 1998. As of September 30, 1998, there was $42,000,000
outstanding under this facility with $9,000,000 available for future
borrowings. The facility is secured by 18 properties and the maturity of the
facility was extended for two years to July 2000. The Company has an option to
extend the facility for an additional year. The proceeds of the Salomon
Facility will be used by the Company for funding property acquisitions,
general corporate purposes and capital needs. As a condition of the Salomon
Facility, the Company was required to establish a Repair Reserve Account for
immediate and ongoing capital expenditure reserves and replacement reserves.
The balance in the Repair Reserve Account was $410,000 as of September 30,
1998.
In June 1996, the Company successfully completed the refinancing of
substantially all of its variable rate debt and a portion of its fixed rate
debt. The Company entered into a seven year, secured, fixed rate real estate
mortgage loan in the principal amount of $181,700,000 (the "Mortgage Loan") at
a weighted average interest rate of 7.96% per annum, which is inclusive of
trustee and servicer fees. The entire principal balance of the Mortgage Loan
is due in June 2003. As a condition of the Mortgage Loan, the Company was
required to establish a Sinking Fund Account and a Capital and TI Reserve
Account. The balance in the Sinking Fund Account was $313,000 as of September
30, 1998. The balance in the Capital and TI Reserve Account was $331,000 as
of September 30, 1998.
As of September 30, 1998, the Company had two floating rate mortgages with
principal outstanding of $7,167,000. The interest rate on both of the
mortgages is equal to the sum of Moody's A Corporate Bond Index Daily Rate
minus 0.125% per annum, rounded up the the next highest 1/8 percentage rate.
The rates are reset once a year. As of September 30, 1998, the rates of the
two mortgages were 6.875% and 7.00% per annum.
In 1996, the Company obtained a $3.0 million secured line of credit from Bank
Leumi Trust Company of New York. This line is secured by a property in
Orange, Connecticut. Amounts borrowed under the line bear interest at an
annual rate equal to 50 basis points above that bank's reference rate, which
interest rate was 8.5% as of September 30, 1998. There were no outstanding
borrowings under this facility as of September 30, 1998. The line has been
extended until June 30, 1999.
In 1995 the Company obtained a $1.0 million unsecured line of credit from
CoreStates Bank, N.A. Amounts borrowed under the line will bear interest at an
annual rate equal to the bank's prime rate which was 8.5% as of September 30,
1998. The facility was extended through December 31, 1998 and there were no
borrowings outstanding under this facility as of September 30, 1998.
The National Association of Real Estate Investment Trusts ("NAREIT") defines
funds from operations as income before depreciation and amortization of real
estate assets and significant non-recurring events, less gains on sale of real
estate. Funds from operations does not represent cash flows from operations as
defined by generally accepted accounting principles and is not necessarily
indicative as a measure of liquidity of the Company. Funds from operations
should not be construed as an alternative to net income as defined by
generally accepted accounting principles as an indicator of the Company's
operating performance. Funds from operations for common shareholders increased
$315,000 or 6% from $4,892,000 for the third quarter of 1997 to $5,207,000 for
the third quarter of 1998, and increased $865,000 or 6% from $14,460,000 for
the first nine months of 1997 to $15,325,000 for the first nine months of
1998.
In May 1998, the Financial Accounting Standards Board issued Emerging Issues
Task Force No. 98-9 "Accounting for Contingent Rent in Interim Financial
Periods"("EITF 98-9"). EITF 98-9 reached a consensus that lessors should
defer the accounting recognition during interim reporting periods of
contingent rent, such as percentage rent, until the specific tenant sales
breakpoint is achieved. The Company's prior accounting method for such
percentage rents was on the accrual method, the method required under
generally accepted accounting principles, in which percentage rent was
recognized when a tenant's achievement of its sales breakpoint was probable.
The Company implemented the change is accounting method in the third quarter
and recognized approximately $140,000 less of percentage rent revenue through
September 30, 1998. Annualized percentage rents are not expected to be
effected by the interim change.
The Company has several tenants which are operating under Chapter 11 of the
United States Bankruptcy Code. Among these tenants are Bradlees (one store
representing approximately $623,000 or 1.0% of the Company's annualized
revenues) and Caldor (three stores representing approximately $2.5 million or
4.1% of the Company's annualized revenues). The Bradlees store in Bethlehem,
Pennsylvania is open and operating and rents are being paid on a timely basis.
To date Caldor has not taken any action to reject their leases and continues
to pay current rent and operate their stores located in the Company's centers.
Effective November 1, 1996, the Company entered into an agreement to reduce
common area maintenance and real estate tax reimbursements at one of the
Caldor locations for a five year period. Rickel's affirmed the lease for The
Mall at Cross County. The rental for this store amounts to approximately $1.1
million per year including reimbursements for operating expenses. In May
1998, this lease was assigned to National Wholesale Liquidators, Inc. Other
tenants in the Company's portfolio that continue to pay current rent and
operate their stores under Chapter 11 are individually and in the aggregate
less than 1% of annual revenues. The Company believes that it is adequately
reserved for these tenants.
During the nine months ended September 30, 1998, the Company invested
approximately $5,797,000 in the expansion and improvement of existing shopping
center properties, exclusive of the acquisitions of the fifth Georgia property
in the first quarter of 1998 and the nine midwestern and southern properties
in the third quarter of 1998. The Company expects to meet its short-term
liquidity requirements through net cash flow provided from operations,
existing cash, long-term or short-term borrowings and the various debt-related
capital, tenant improvement and repair reserve accounts. These accounts may
be utilized by the Company for the funding of costs related to capital
improvements, repairs, alterations, tenant improvements and leasing
commissions in the centers secured by the respective mortgage loans. To meet
its long-term liquidity requirements, such as refinancing its balloon
mortgages, financing acquisitions and major capital improvements, the Company
intends to either utilize long-term borrowings, issue debt securities and/or
offer additional equity securities.
Management believes it has adequate access to capital to continue to meet its
short-term and long-term requirements and objectives.
The Company has substantially completed a review of its Information Technology
("IT") Systems and non-IT Systems regarding Year 2000 compliance. All required
changes to mission critical systems found thus far have been completed and
successfully tested. All desktop computer systems and network systems are
believed to be Year 2000 compliant. At this time, we do not believe that the
Company is responsible for any computer controlled systems that are vulnerable
to the Year 2000 problem such as HVAC, elevators or alarms at any of its
properties. The Company is still in the process of completing this review. All
of the Company's tenants have been notified of the issues regarding the Year
2000. The Company expects to have completed identification, remediation and
testing of all of its systems by March of 1999.
Costs for modifications to current IT systems have not been separated from
ongoing IT expenses due to their limited nature. Similarly, no budget has been
allocated for future costs due to their minor contribution to ongoing IT
operations.
There can be no guarantee that the Company will identify all IT and non-IT
systems that may be vulnerable to Year 2000 issues prior to January 1, 2000 or
February 29, 2000. To the extent that systems are overlooked or remediation
measures are themselves subject to error, the Company may experience loss of
normal operation which could adversely effect the Company's operating results
and financial condition.
Tenants of the Company's properties may own or maintain IT and non-IT systems
which are not Year 2000 compliant. To the extent that such tenants are unable
to process payments or otherwise perform business as usual, the Company's
operating results and financial condition could be adversely effected.
However, all leases will remain in full effect and tenants will remain liable
for all amounts due to the Company after the change to the Year 2000.
Requiring tenants' representations of Year 2000 compliance would have little
if any effect on the situation and the Company does not intend to pursue this
course.
Vendors of the Company may own or maintain IT and non-IT systems which are not
Year 2000 compliant. To the extent that such vendors are unable to render
critical services, the Company's operating results and financial condition
could be adversely effected. In particular, outages of utilities such as gas,
electric and phone service could have a severely negative impact on the
Company's ongoing operations at any of its locations. The Company does intend
to communicate with certain vendors regarding the Year 2000, but requiring all
vendors' representations of Year 2000 compliance would have little if any
effect on the situation and the Company does not intend to pursue this course.
Due to the widely varying potential impacts of the Year 2000 problem, the
Company does not believe it is reasonable to assign dollar amounts attendant
to the various risks and outcomes at this time.
Based on current information, the Company does not consider it necessary to
develop a formal contingency plan. Ad-hoc contingency plans regarding some of
the Company's IT systems are being assembled, and a formal plan will be
considered as a part of our ongoing Year 2000 planning.
Results of Operations
Net income for common shareholders increased $128,000 from $1,818,000 or $0.18
per common share in the third quarter of 1997 to $1,946,000 or $0.19 per
common share in the third quarter of 1998. Net income for common shareholders
decreased $304,000 from $5,704,000, or $0.55 per common share, for the first
nine months of 1997 to $5,400,000, or $0.52 per common share, for the
corresponding period in 1998. This decrease was due to a combination of
factors as described in further detail below.
Minimum rent increased $1,566,000 or 13% from $12,142,000 in the third quarter
of 1997 to $13,708,000 in the third quarter of 1998 and increased $5,635,000
or 16% from $35,185,000 for the first nine months of 1997 to $40,820,000 for
the corresponding period in 1998. The increase was primarily due to the
additional rents from the twenty shopping centers acquired in 1997 of
approximately $4,741,000, an increase in the minimum rents of approximately
$849,000 from the other thirty-eight shopping centers, as well as an increase
from the nine centers purchased in the third quarter of 1998 of approximately
$45,000.
Percentage rent decreased $131,000 or 46% from $282,000 in the third quarter
of 1997 to $151,000 in the third quarter of 1998 and decreased $121,000 or 15%
from $831,000 for the first nine months of 1997 to $710,000 for the
corresponding period in 1998. The decrease was primarily attributable to the
change in reporting method for percentage rent as promulgated by EITF 98-9 as
previously discussed. As a result of adopting the accounting method, the
Company recognized approximately $140,000 less of percentage rent revenue
through September 30, 1998.
Expense reimbursements increased $550,000 or 20% from $2,798,000 in the third
quarter of 1997 to $3,348,000 in the third quarter of 1998 and increased
$862,000 or 10% from $8,253,000 for the first nine months of 1997 to
$9,115,000 for the corresponding period in 1998. The increase was primarily
due to an increase in the recovery percentage of reimbursable expenses due to
an increase in the overall occupancy rate from the prior year as well as the
high recovery percentage at the centers acquired in 1997.
Interest income increased $6,000 or 9% from $64,000 in the third quarter of
1997 to $70,000 in the third quarter of 1998 and increased $97,000 or 54% from
$180,000 for the first nine months of 1997 to $277,000 for the corresponding
period in 1998. The increase was primarily due to the additional cash
available for investment during the first quarter of 1998. The additional
cash primarily consisted of the remaining proceeds of the issuance of the
Company's 9 1/2% Series D Cumulative Redeemable Preferred Shares.
Interest expense increased $294,000 or 6% from $4,816,000 in the third quarter
of 1997 to $5,110,000 in the third quarter of 1998 and $944,000 or 7% from
$14,070,000 for the first nine months of 1997 to $15,014,000 for the
corresponding period in 1998. The increase is primarily due to the interest
expense incurred in connection with the additional twenty shopping centers
acquired in 1997. In addition, interest expense was reduced by capitalized
interest on projects under construction and land under development in the
amount of $300,000 and $171,000 for the third quarter of 1997 and 1998,
respectively, and $632,000 and $640,000 for the first nine months of 1997 and
1998, respectively.
Depreciation and amortization increased $221,000 or 7% from $3,257,000 in the
third quarter of 1997 to $3,478,000 in the third quarter of 1998 and increased
$1,154,000 or 12% from $9,247,000 for the first nine months of 1997 to
$10,401,000 for the corresponding period in 1998. The increase is due to the
additional depreciation expense on buildings and improvements due to the
twenty shopping centers acquired in 1997 as well as three full quarters of
depreciation taken on improvements made prior to 1998.
Real estate taxes increased $171,000 or 10% from $1,668,000 in the third
quarter of 1997 to $1,839,000 in the third quarter of 1998, and increased
$308,000 or 6% from $4,891,000 for the first nine months of 1997 to $5,199,000
for the corresponding period in 1998. The increase in the third quarter and
for the nine months is due to the increase in taxes from the additional
centers acquired in 1997which was offset by real estate tax refunds of
approximately $235,000 received from tax appeals in the second quarter of
1998. The increase was offset by the capitalization of real estate taxes on
projects under construction and land under development in the amount of
$55,000 and $27,000 for the third quarter of 1997 and 1998, respectively, and
$132,000 and $104,000 for the first nine months of 1997 and 1998,
respectively.
Operations and maintenance expenses increased $226,000 or 11% from $2,023,000
in the third quarter of 1997 to $2,249,000 in the third quarter of 1998 and
increased $446,000 or 7% from $6,062,000 for the first nine months of 1997 to
$6,508,000 for the corresponding period in 1998. The increase was primarily
due to the additional costs incurred in operating and maintaining twenty
additional shopping centers acquired in 1997. This increase was offset by a
decrease in snow removal of approximately $186,000 as a result of the mild
winter experienced at the Company's centers in 1998.
General and administrative expenses increased $28,000 or 4% from $768,000 in
the third quarter of 1997 to $796,000 in the third quarter of 1998 and
increased $366,000 or 17% from $2,190,000 for the first nine months of 1997 to
$2,556,000 for the corresponding period in 1998. The increase is primarily
due to capitalization of certain direct labor costs in 1997 related to
identifiable projects such as the merger of the Company with UPI and certain
leasing projects.
Inflation
Most of the retail tenant leases at the shopping center properties contain
provisions which will entitle the Company to receive percentage rents based on
the tenants' gross sales. Such percentage rents minimize the risk to the
Company of the adverse effects of inflation. Most of the leases at the
shopping center properties require the tenants to pay a substantial share of
operating expenses, such as real estate taxes, insurance and common area
maintenance costs, and thereby reduce the Company's exposure to increased
costs. In addition, many of the leases at the shopping center properties are
for terms of less than ten years, which may enable the Company to seek
increased rents upon renewal of existing leases.
Quantitative and Qualitative Disclosures About Market Risks
Not applicable.
Part II
OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
Not Applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.4 Amended and Restated Bylaws of Kranzco Realty Trust (incorporated by
reference to Exhibit 3.4 of the Company's Registration Statement on Form S-4
(Reg. No. 333-52743)).
10.7 Form of Exemplar Open End Fee and Leasehold Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Filing made by the Borrowers
for the benefit of Salomon Brothers Realty Corp., and filed in Pennsylvania,
New York, Connecticut, Rhode Island, Mississippi, North Carolina, Kentucky,
Massachusetts, Minnesota, Arizona, Georgia, and Michigan with respect to
Bradford Mall, Bradford, PA; Barn Plaza, Doylestown, Pennsylvania; Circuit
City at Mall at Cross County, Yonkers, New York; Parkway Plaza I, Hamden,
Connecticut; Valley Forge Mall, Phoenixville, Pennsylvania; Wampanoag Plaza,
East Providence, Rhode Island;Brookway Village, Brookhaven, Mississippi;
Magnolia Plaza, Morganton, North Carolina; Harrodsburg Marketplace,
Harrodsburg, Kentucky; Franklin Center, Chambersburg, Pennsylvania; Ames
Center, Raynham, Massachusetts; Baker's Square, Minnetonka, Minnesota; Baker's
Square, Roseville, Minnesota; Sinclair Paints, Tucson, Arizona; 30000 Plymouth
Road, Livonia, Michigan; Tower Plaza, Georgia; 1615 E. Shotweell Street,
Bainbridge Town Center, Georgia; and Filene's Basement at Valley Fair, 260
West Swedesford Road, Devon, Pennsylvania (Incorporated by reference to
Exhibit 10.4 of the Company's Current Report on Form 8-K Filed March 14,
1997).
10.38 Fixed Rate Note, dated September 29, 1998, made by the Borrowers named
therein in favor of Salomon Brothers Realty Corp.
10.39 Guaranty, dated as of September 29, 1998, made by and among Kranzco
Realty Trust, for the benefit of Salomon Brothers Realty Corp.
10.40 Form of Mortgage/Deed of Trust/Deed to secure Debt and Security
Agreement, dated September 29, 1998, made by the Borrowers named therein for
the benefit of Salomon Brothers Realty Corp. and filed in Florida, Georgia,
Ohio, Tennessee, and Virginia with respect to Village Oaks, Pensacola,
Florida; Vidalia Wal-Mart Center, Vidalia, Georgia; Summerville Wal-Mart
Center, Summerville, Georgia; Tifton Corners, Tifton, Georgia; Douglasville
Crossing, Douglasville, Georgia; Snellville Oaks, Snellville, Georgia;
Pickaway Crossing, Circleville, Ohio; Meeting Square, Jefferson City,
Tennessee; and Statler Crossing, Staunton, Virginia.
27.0 Financial Data Schedule.
(b) During the quarter, the Company filed the following current reports on
Form 8-K:
(i) Current Report on Form 8-K, dated July 16, 1998, relating to the
acquisition of nine community shopping centers.
(ii) Current Report on Form 8-K, dated September 11, 1998, relating to the
extension of the Company's exchange offer for New America Network, Inc.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KRANZCO REALTY TRUST
Date: November 9, 1998 /s/ Norman M. Kranzdorf
-----------------------
Chief Executive Officer and President
Date: November 9, 1998 /s/Robert H. Dennis
-----------------------
Chief Financial Officer and Treasurer
<PAGE>
EXHIBIT INDEX
3.4 Amended and Restated Bylaws of Kranzco Realty Trust (incorporated by
reference to Exhibit 3.4 of the Company's Registration Statement on Form
S-4 (Reg. No. 333-52743)).
10.7 Form of Exemplar Open End Fee and Leasehold Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Filing made by the
Borrowers for the benefit of Salomon Brothers Realty Corp., and filed in
Pennsylvania, New York, Connecticut, Rhode Island, Mississippi, North
Carolina, Kentucky, Massachusetts, Minnesota, Arizona, Georgia, and
Michigan with respect to Bradford Mall, Bradford, PA; Barn Plaza,
Doylestown, Pennsylvania; Circuit City at Mall at Cross County, Yonkers,
New York; Parkway Plaza I, Hamden, Connecticut; Valley Forge Mall,
Phoenixville, Pennsylvania; Wampanoag Plaza, East Providence, Rhode
Island;Brookway Village, Brookhaven, Mississippi; Magnolia Plaza,
Morganton, North Carolina; Harrodsburg Marketplace, Harrodsburg,
Kentucky; Franklin Center, Chambersburg, Pennsylvania; Ames Center,
Raynham, Massachusetts; Baker's Square, Minnetonka, Minnesota; Baker's
Square, Roseville, Minnesota; Sinclair Paints, Tucson, Arizona; 30000
Plymouth Road, Livonia, Michigan; Tower Plaza, Georgia; 1615 E.
Shotweell Street, Bainbridge Town Center, Georgia; and Filene's Basement
at Valley Fair, 260 West Swedesford Road, Devon, Pennsylvania
(Incorporated by reference to Exhibit 10.4 of the Company's Current
Report on Form 8-K Filed March 14, 1997).
10.38 Fixed Rate Note, dated September 29, 1998, made by the Borrowers named
therein in favor of Salomon Brothers Realty Corp.
10.39 Guaranty, dated as of September 29, 1998, made by and among Kranzco
Realty Trust, for the benefit of Salomon Brothers Realty Corp.
10.40 Form of Mortgage/Deed of Trust/Deed to secure Debt and Security
Agreement, dated September 29, 1998, made by the Borrowers named therein
for the benefit of Salomon Brothers Realty Corp. and filed in Florida,
Georgia, Ohio, Tennessee, and Virginia with respect to Village Oaks,
Pensacola, Florida; Vidalia Wal-Mart Center, Vidalia, Georgia;
Summerville Wal-Mart Center, Summerville, Georgia; Tifton Corners,
Tifton, Georgia; Douglasville Crossing, Douglasville, Georgia;
Snellville Oaks, Snellville, Georgia; Pickaway Crossing, Circleville,
Ohio; Meeting Square, Jefferson City, Tennessee; and Statler Crossing,
Staunton, Virginia.
27.0 Financial Data Schedule.
FIXED RATE NOTE
$65,900,000 September 29, 1998
FOR VALUE RECEIVED, KR Vidalia, Inc., a Georgia corporation, KR
Staunton, Inc., a Virginia corporation, KR Summerville, Inc., a Georgia
corporation, KR Tifton, Inc., a Georgia corporation, KR Douglasville, Inc., a
Georgia corporation, KR Circleville, Inc., an Ohio corporation, KR Snellville,
Inc., a Georgia corporation, KR Pensacola, Inc., a Florida corporation and KR
Jefferson City, L.P., a Tennessee limited partnership (collectively, "Maker"),
each having its principal place of business at 128 Fayette Street,
Conshohocken, Pennsylvania 19428, promises to pay to the order of Salomon
Brothers Realty Corp., a New York corporation, its successors or assigns
("Payee") at the office of Payee or its agent, designee or assignee at Seven
World Trade Center, New York, New York 10048, or at such place as the holder
hereof may from time to time designate in writing, the principal sum of SIXTY-
FIVE MILLION NINE HUNDRED THOUSAND AND NO/100 DOLLARS ($65,900,000) in lawful
money of the United States of America with interest thereon to be computed on
the unpaid principal balance from time to time outstanding from the date of
this Note (herein so called) at the Applicable Interest Rate (hereinafter
defined), and to be paid in installments as follows:
1. Payment Terms.
(a) A payment of interest only on the date hereof for the
period from the date hereof through September 30, 1998, both inclusive;
(b) A constant payment of $438,434.34, on November 2, 1998 and
on the first day of each calendar month thereafter, unless such day is not a
Business Day, in which event the first Business Day following such date (such
date for any particular month, a "Payment Date") up to and including the
Payment Date in October, 2008 (such date, the "Expected Repayment Date"); each
of such payments to be applied to the payment of interest computed at the
Applicable Interest Rate, and the balance applied toward the reduction of the
principal sum;
(c) A varying payment on the Payment Date in November, 2008 and
on the Payment Date in each calendar month thereafter up to and including the
Payment Date in October, 2028 in an amount equal to the sum of (x) the constant
payment amount sufficient to amortize fully on the Maturity Date (as defined
below) the initial principal balance of this Note on a level monthly payment of
principal and interest basis and a three hundred sixty (360) month amortization
schedule from the date of this Note, each of such payments to be applied to the
payment of interest computed at the Applicable Interest Rate and the balance
applied toward the reduction of the principal sum and (y) the entire amount of
Remaining Available Funds for such date as determined in accordance with the
Cash Management, Collateral and Security Agreement, dated as of the date hereof
by and among Maker, Payee and LaSalle National Bank, as collateral agent, such
amount applied toward the reduction of the principal sum; and the balance of
said principal sum, if any, and all interest thereon shall be due and payable
on the Payment Date in October, 2028 (the "Maturity Date"). Interest on the
principal sum of this Note shall be calculated by multiplying the actual number
of days elapsed in each accrual period by a daily rate based on a three hundred
sixty (360) day year. In computing the number of days during which such
interest accrues, the day on which funds are initially advanced shall be
included regardless of the time of day such advance is made, and the day on
which funds are repaid shall be included unless repayment is credited or
received prior to close of business. The constant payment required hereunder
is based on an amortization schedule of three hundred sixty (360) months.
2. Interest Rate. The term "Applicable Interest Rate" as used in
this Note shall mean (i) from the date of this Note through and including the
Expected Repayment Date, a rate of seven percent (7.00%) per annum and (ii)
thereafter, a rate of nine percent (9.00%) per annum.
3. Default and Acceleration. The whole of the principal sum of
this Note, together with all interest accrued and unpaid thereon and all other
sums due under the Mortgage (hereinafter defined), the Loan Documents
(hereinafter defined) and this Note (all such sums hereinafter collectively
referred to as the "Debt") shall without notice become immediately due and
payable at the option of Payee if any payment required in this Note is not paid
on or before the tenth (10th) day after the date when due or on the happening
of any other default, after the expiration of any applicable notice and grace
periods, herein or under the terms of the Mortgage or other Loan Documents
(hereinafter collectively an "Event of Default"). All of the terms, covenants
and conditions contained in the Mortgage and the other Loan Documents are
hereby made part of this Note to the same extent and with the same force as if
they were fully set forth herein. In the event that it should become necessary
to employ counsel to collect the Debt or to protect or foreclose the security
hereof, Maker also agrees to pay reasonable attorneys' fees for the services of
such counsel whether or not suit be brought.
4. Default Interest. Maker does hereby agree that upon the
occurrence of an Event of Default or upon the failure of Maker to pay the Debt
in full on the Maturity Date, Payee shall be entitled to receive and Maker
shall pay interest on the entire unpaid principal sum at the rate of the
greater of (i) 5% above the Applicable Interest Rate or (ii) 5% above the Base
Rate (hereinafter defined), in effect at the time of the occurrence of the
Event of Default (the "Default Rate"). The term "Base Rate" shall mean the
annual rate announced by Citibank, N.A., in New York City, New York as its base
rate in effect at the time of the occurrence of the Event of Default. The
Default Rate shall be computed from the occurrence of the Event of Default
until the actual receipt and collection of the Debt. This charge shall be
added to the Debt, and shall be deemed secured by the Mortgage. This section,
however, shall not be construed as an agreement or privilege to extend the date
of the payment of the Debt, nor as a waiver of any other right or remedy
accruing to Payee by reason of the occurrence of any Event of Default. In the
event the Default Rate is above the maximum rate permitted by applicable law,
the Default Rate shall be the maximum rate permitted by applicable law.
5. Prepayment
(a) The principal balance of this Note may not be prepaid in
whole or in part prior to the first day of the fifth (5th) Loan Year. During
the fifth (5th) Loan Year or any time thereafter, provided no Event of Default
exists, the principal balance of this Note may be prepaid in whole, but not in
part, upon but not less than fifteen (15) days nor more than sixty (60) days
prior written notice to Payee specifying the date on which prepayment is to be
made (the "Prepayment Date") and upon payment of (i) accrued interest to and
including the Prepayment Date together with a payment of all interest which
would have accrued on the principal balance of this Note to and including the
first day of the calendar month immediately following the Prepayment Date, if
such prepayment occurs on a date which is not the first day of a month (the
"Interest Shortfall Payment"), (ii) all other sums due under this Note, the
Mortgage and the other Loan Documents, and (iii) the Prepayment Consideration
(defined below). Notwithstanding the foregoing, Maker shall have the
additional privilege to prepay the entire principal balance of this Note at any
time after the Expected Repayment Date or during the sixty (60) calendar days
immediately preceding the Expected Repayment Date without any fee or
consideration for such privilege provided (i) no Event of Default exists, (ii)
written notice of such prepayment is given by Maker to Payee in the manner set
forth above and (iii) Maker makes the Interest Shortfall Payment, if
applicable.
(b) The term "Prepayment Consideration" shall mean an amount
equal to the greater of (i) one percent (1%) of the amount prepaid, or (ii) the
present value of a series of payments each equal to the Payment Differential
(hereinafter defined) and payable on the first day of each month ("Monthly
Payment Date") from the date of prepayment through and including the Expected
Repayment Date discounted at the Reinvestment Yield (hereinafter defined)
(monthly compounding) for the number of months remaining from the date of
prepayment to each such Monthly Payment Date. The term "Reinvestment Yield" as
used herein shall be equal to the mortgage equivalent yield on the U.S.
Treasury issue (primary issue) with a maturity date closest to, but not earlier
than, the Expected Repayment Date with such yield being based on the bid price
for such issue as published in The Wall Street Journal in New York City, New
York on a date fourteen (14) days prior to the date of prepayment set forth in
the prepayment notice (or, if such bid price is not published on that date, the
next preceding date on which such bid price is so published) and converted to a
monthly compounded nominal yield. In the event The Wall Street Journal ceases
publication or ceases to publish the bid price for such U.S. Treasury issues,
Payee shall select a comparable publication to determine such bid price.
Absent manifest error, the determination of the Reinvestment Yield and the
calculation of the Prepayment Consideration by Payee shall be binding on Maker.
The term "Payment Differential" as used herein shall be equal to the product of
(x) a fraction, the numerator of which is the excess, if any, of a per annum
interest rate equal to the Applicable Interest Rate over the Reinvestment Yield
(expressed as a decimal percentage), and the denominator of which is 12, and
(y) the scheduled outstanding principal balances of this Note as of each
Monthly Payment Date occurring on or after the Prepayment Date through and
including the Expected Repayment Date, according to the original amortization
schedule of this Note.
(c) If any notice of prepayment is given under this Section 5,
the principal balance of this Note and the other sums required under this
prepayment section shall be due and payable on the Prepayment Date. Payee
shall not be obligated to accept any prepayment of the principal balance of
this Note unless it is accompanied by the prepayment fees and the Prepayment
Consideration due in connection therewith. Notwithstanding anything contained
in this Section 5 to the contrary, provided no Event of Default exists, no
prepayment fee shall be due in connection with a complete or partial prepayment
resulting from the application of insurance proceeds or condemnation awards
pursuant to the terms of the Mortgage, but Maker shall be required to make the
Interest Shortfall Payment, if applicable.
(d) If following the occurrence of any Event of Default, Maker
shall tender payment of an amount sufficient to satisfy the entire Debt at any
time prior to a judicial or non-judicial foreclosure sale or sale pursuant to a
power of sale of any Property and prior to the time prepayment of the principal
balance of this Note is permitted hereunder, Maker shall, in addition to the
entire Debt, also pay to Payee an amount equal to the sum of (i) interest
calculated as set forth in Subsection 5(a)(i) including the Interest Shortfall
Payment, (ii) prepayment fees equal to the present value of all interest
payments which would have accrued on the principal balance of this Note
outstanding as of the date of such tender at the Applicable Interest Rate from
the date of such tender to the first day prepayment is permitted pursuant to
this Note discounted at a rate equal to the Treasury Rate based on U.S.
Treasury constant maturities with maturity dates (one longer and one shorter)
most nearly approximating the date upon which prepayment is first permitted
pursuant to this Note, and (iii) a prepayment consideration equal to the
Prepayment Consideration which would have been payable to Payee pursuant to
Subsection 5(a)(iii) as of the first day of the fifth (5th) Loan Year based on
the Treasury Rate in effect as of the date of such tender. If at the time of
such voluntary or involuntary prepayment of this Note, prepayment of the
principal balance of the Loan is permitted, Maker shall, in addition to the
entire Debt, also pay to Payee the Interest Shortfall Payment, and the
applicable prepayment fees and the Prepayment Consideration set forth in
Subsection 5(b) above. An involuntary prepayment shall include any prepayment
made in connection with reinstatement of the Mortgage under foreclosure
proceedings, or exercise of a power of sale, any right of redemption exercised
by Maker or any other party having a right to redeem or prevent foreclosure, or
which is made or occurs upon the consummation of any sale in foreclosure or
under exercise of a power of sale.
(e) Any permitted partial prepayment (in connection with the
application of insurance proceeds or condemnation awards or a release of the
Mortgaged Property pursuant to the terms of the Mortgage) shall be applied to
the installments of principal last due under this Note and shall not release
Maker from the obligation to pay the installments of interest and/or principal
next becoming due under this Note.
6. Security. This Note is evidence of that certain loan made by
Payee to Maker contemporaneously herewith (the "Loan"). This Note is secured
by (a) the five Mortgages, Assignments of Leases and Rents, Security Agreements
and Fixture Filings, Deeds of Trust, Assignments of Leases and Rents, Security
Agreements and Fixture Filings or Deed to Secure Debt, Assignments of Leases
and Rents, Security Agreements and Fixture Filings of even date herewith in the
amount of this Note (or another amount acceptable to Payee) given by Maker for
the use and benefit of Payee covering the fee estate of Maker in certain
premises as more particularly described therein (the "Mortgaged Property") (as
the same may be amended, restated, extended, supplemented, or otherwise
modified from time to time, collectively, the "Mortgage"), (b) the five
Assignments of Leases and Rents of even date herewith executed by Maker in
favor of Payee (as the same may be amended, restated, extended, supplemented or
otherwise modified from time to time, collectively, the "Assignment of
Leases"), and (c) the other Loan Documents (as hereinafter defined). The term
"Loan Documents" as used in this Note relates collectively to this Note, the
Mortgage, the Assignment of Leases and any and all other documents securing,
evidencing, or guaranteeing all or any portion of the Loan or otherwise
executed and/or delivered in connection with this Note and the Loan, provided,
however, that such term shall in no event be deemed to include that certain
Environmental Liabilities Agreement dated as of the date hereof in favor of
Payee.
7. Maximum Legal Interest. It is expressly stipulated and agreed
to be the intent of Maker and Payee at all times to comply with applicable
state law or applicable United States federal law (to the extent that it
permits Payee to contract for, charge, take, reserve, or receive a greater
amount of interest than under state law) and that this section shall control
every other covenant and agreement in this Note. If the applicable law (state
or federal) is ever judicially interpreted so as to render usurious any amount
called for under this Note, or contracted for, charged, taken, reserved, or
received with respect to the Debt, or if Payee's exercise of the option to
accelerate the Maturity Date or if any prepayment by Maker results in Maker
having paid any interest in excess of that permitted by applicable law, then it
is Payee's express intent that all excess amounts theretofore collected by
Payee shall be credited on the principal balance of this Note and all other
Debt and the provisions of this Note immediately be deemed reformed and the
amounts thereafter collectible hereunder and thereunder reduced, without the
necessity of the execution of any new documents, so as to comply with the
applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder or thereunder. All sums paid or agreed to be
paid to Payee for the use, forbearance, or detention of the Debt shall, to the
extent permitted by applicable law, be amortized, prorated, allocated, and
spread throughout the full stated term of the Note until payment in full of the
Debt so that the rate or amount of interest on account of the Debt does not
exceed the maximum lawful rate from time to time in effect and applicable to
the Debt for so long as the Debt is outstanding. Notwithstanding anything to
the contrary contained herein, it is not the intention of Payee to accelerate
the maturity of any interest that has not accrued at the time of such
acceleration or to collect unearned interest at the time of such acceleration.
8. Late Charges. Notwithstanding any longer period granted under
Section 3 hereof in connection with the occurrence of an Event of Default and
Payee's acceleration remedies, if any sum payable under this Note is not paid
on or before the fifth (5th) day after the date on which it is due, Maker shall
pay to Payee upon demand an amount equal to the lesser of five percent (5%) of
such unpaid sum or the maximum amount permitted by applicable law to defray the
expenses incurred by Payee in handling and processing such delinquent payment
and to compensate Payee for the loss of the use of such delinquent payment and
such amount shall be secured by the Mortgage and other Loan Documents.
9. No Oral Changes. This Note may not be modified, amended,
waived, extended, changed, discharged or terminated orally or by any act or
failure to act on the part of Maker or Payee, but only by an agreement in
writing signed by the party against whom enforcement of any modification,
amendment, waiver, extension, change, discharge or termination is sought.
10. Joint and Several Liability. If Maker consists of more than one
person or party, the obligations and liabilities of each such person or party
shall be joint and several.
11. Waivers. Except as specifically provided in the Loan Documents,
Maker and all others who may become liable for the payment of all or any part
of the Debt do hereby severally waive presentment and demand for payment,
notice of dishonor, protest, notice of protest, and non-payment, notice of
intent to accelerate the maturity hereof and notice of such acceleration. No
release of any security for the Debt or extension of time for payment of this
Note or any installment hereof, and no alteration, amendment or waiver of any
provision of this Note, the Mortgage or the other Loan Documents made by
agreement between Payee and any other person or party shall release, modify,
amend, waive, extend, change, discharge, terminate or affect the liability of
Maker, and any other who may become liable for the payment of all or any part
of the Debt, under this Note, the Mortgage or the other Loan Documents.
12. Limitations on Recourse. Notwithstanding anything in the Loan
Documents to the contrary, but subject to the qualifications below, Payee and
Maker agree that:
(a) Maker shall be liable upon the Debt and for the other
obligations arising under the Loan Documents to the full extent (but only to
the extent) of the security therefor, the same being all properties (whether
real or personal), rights, estates and interests now or at any time hereafter
securing the payment of the Debt and/or the other obligations of Maker under
the Loan Documents; provided, however, in the event of fraud or material
misrepresentation by Maker or any guarantor in connection with the Loan
Documents or the documents delivered by Maker, or the first full monthly
payment on this Note is not paid when due, the limitation on recourse set forth
in this Subsection 12(a) will be null and void and completely inapplicable, and
this Note shall be with full recourse to Maker;
(b) if a default occurs in the timely and proper payment of all
or any part of the Debt, any judicial proceedings brought by Payee against
Maker shall be limited to the preservation, enforcement and foreclosure, or any
thereof, of the liens, security titles, estates, assignments, rights and
security interests now or at any time hereafter securing the payment of the
Debt and/or the other obligations of Maker under the Loan Documents, and no
attachment, execution or other writ of process shall be sought, issued or
levied upon any assets, properties or funds of Maker other than the Mortgaged
Property, except with respect to the liability described in Subsection 12(a)
above and in Subsection 12(c) below; provided, the foregoing shall not prohibit
Payee from obtaining a personal judgment against Maker on the Debt to the
extent (but only to the extent) such judgment may be required in order to
enforce the liens, security titles, estates, assignments, rights and security
interests securing payment of the Debt; and
(c) in the event of a foreclosure of such liens, security
titles, estates, assignments, rights or security interests securing the payment
of the Debt, no judgment for any deficiency upon the Debt shall be sought or
obtained by Payee against Maker, except with respect to the liability described
in Subsection 12(a) above and below in this Subsection 12(c); provided that,
notwithstanding the foregoing provisions of this section, nothing contained
therein shall in any manner or way release, affect or impair the right of Payee
to recover, and Maker shall be fully and personally liable and subject to legal
action for any loss, cost, expense, damage, claim or other obligation
(including without limitation reasonable attorneys' fees and court costs)
incurred or suffered by Payee arising out of or in connection with the
following:
(i) any breach of the Environmental Liabilities
Agreement executed by Maker for the benefit of Payee, dated of even date
herewith, including the indemnification provisions contained therein;
(ii) Maker's failure to obtain Payee's prior written
consent to any subordinate financing or any other encumbrance on the Mortgaged
Property, or any transfer of the Mortgaged Property or majority ownership in
Maker in violation of the Mortgage;
(iii) the misapplication by Maker, its agents, affiliates,
officers or employees of any funds derived from the Mortgaged Property,
including security deposits, insurance proceeds and condemnation awards, in
violation of the Loan Documents;
(iv) Maker's failure to apply proceeds of rents or any
other payments in respect of the leases and other income from the Mortgaged
Property or any other collateral when received to the costs of maintenance and
operation of the Mortgaged Property and to the payment of taxes, lien claims,
insurance premiums, monthly payments of principal and interest or escrow
payments or other payments due under the Loan Documents to the extent the Loan
Documents require such proceeds to be then so applied;
(v) any litigation or other legal proceeding related to
the Debt filed by Maker or any guarantor or indemnitor that delays or impairs
Payee's ability to preserve, enforce or foreclose its lien on the Mortgaged
Property, including, but not limited to, the filing of a voluntary petition
concerning Maker under the U.S. Bankruptcy Code, in which action a claim,
counterclaim, or defense is asserted against Payee, other than any litigation
or other legal proceeding in which a final, non-appealable judgment for money
damages or injunctive relief is entered against Payee;
(vi) the gross negligence or willful misconduct of Maker,
its agents, affiliates, officers or employees which causes or results in a
material diminution, or material loss of value, of the Mortgaged Property that
is not reimbursed by insurance or which gross negligence or willful misconduct
exposes Payee to claims, liability or costs of defense in any litigation or
other legal proceeding;
(vii) the seizure or forfeiture of the Mortgaged Property,
or any portion thereof, or Payee's interest therein, resulting from criminal
wrongdoing by Maker, its agents, affiliates, officers or employees; and
(viii) waste to the Mortgaged Property caused by the acts
or omissions of Maker, its agents, affiliates, officers, employees or
contractors; or the removal or disposal of any portion of the Mortgaged
Property after an Event of Default to the extent such Mortgaged Property is not
replaced by Maker with like property of equivalent value, function and design.
(d) Nothing contained in the foregoing sections (a), (b) or (c)
shall (i) be deemed to be a release or impairment of the Debt or the lien of
the Loan Documents upon the Mortgaged Property, or (ii) preclude Payee from
foreclosing under the Loan Documents in case of any default or from enforcing
any of the other rights of Payee, including naming Maker as a party defendant
in any action or suit for foreclosure and sale under the Mortgage, or obtaining
the appointment of a receiver, except as stated in this section, or (iii) limit
or impair in any way whatsoever the Guaranty (the "Guaranty") of even date
executed and delivered in connection with the indebtedness evidenced by this
Note or release, relieve, reduce, waive or impair in any way whatsoever, any
obligation of any party to the Guaranty.
13. Notices. All notices or other communications required or
permitted to be given pursuant hereto shall be given in the manner and be
effective as specified in the Mortgage, directed to the parties at their
respective addresses as provided therein.
14. Transfers of Note and Loan. Payee shall have the unrestricted
right at any time or from time to time to sell this Note and the Loan or
participation interests therein. Maker shall execute, acknowledge and deliver
any and all instruments reasonably requested by Payee to satisfy such
purchasers or participants that the unpaid indebtedness evidenced by this Note
is outstanding upon the terms and provisions set out in this Note and the other
Loan Documents. To the extent, if any, specified in such assignment or
participation, such assignee(s) or participant(s) shall have the rights and
benefits with respect to this Note and the other Loan Documents as such
assignee(s) or participant(s) would have if they were the Payee hereunder.
15. WAIVER OF TRIAL BY JURY; WAIVER OF CERTAIN CLAIMS. MAKER HEREBY
AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND
WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL
NOW OR HEREAFTER EXIST WITH REGARD TO THIS NOTE OR THE OTHER LOAN DOCUMENTS, OR
ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH
INCLUDING, BUT NOT LIMITED TO THOSE RELATING TO (A) ALLEGATIONS THAT A
PARTNERSHIP EXISTS BETWEEN PAYEE AND MAKER; (B) USURY OR PENALTIES OR DAMAGES
THEREFOR; (C) ALLEGATIONS OF UNCONSCIONABLE ACTS, DECEPTIVE TRADE PRACTICE,
LACK OF GOOD FAITH OR FAIR DEALING, LACK OF COMMERCIAL REASONABLENESS, OR
SPECIAL RELATIONSHIPS (SUCH AS FIDUCIARY, TRUST OR CONFIDENTIAL RELATIONSHIP);
(D) ALLEGATIONS OF DOMINION, CONTROL, ALTER EGO, INSTRUMENTALITY, FRAUD, REAL
ESTATE FRAUD, MISREPRESENTATION, DURESS, COERCION, UNDUE INFLUENCE,
INTERFERENCE OR NEGLIGENCE; (E) ALLEGATIONS OF TORTIOUS INTERFERENCE WITH
PRESENT OR PROSPECTIVE BUSINESS RELATIONSHIPS OR OF ANTITRUST; OR (F) SLANDER,
LIBEL OR DAMAGE TO REPUTATION. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY MAKER, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY
EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD
OTHERWISE ACCRUE. PAYEE IS HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN
ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY MAKER.
16. Authority. Maker represents that Maker has full power,
authority and legal right to execute, deliver and perform its obligations
pursuant to this Note, the Mortgage and the other Loan Documents and that this
Note, the Mortgage and the other Loan Documents constitute valid and binding
obligations of Maker.
17. Governing Law; Consent to Jurisdiction. This Note shall be
governed and construed in accordance with the laws of the State of New York.
Maker hereby irrevocably submits to the jurisdiction of any court of competent
jurisdiction located in the State of New York, County of New York in connection
with any proceeding relating to this Note.
[Signature Page Follows]
<PAGE>
IN WITNESS WHEREOF, Maker has duly executed this Note the day and year
first above written.
WITNESS: KR VIDALIA, INC., a Georgia corporation
KR STAUNTON, INC., a Virginia corporation
KR SUMMERVILLE, INC., a Georgia corporation
KR TIFTON, INC., a Georgia corporation
_____________________________KR DOUGLASVILLE, INC., a Georgia corporation
KR CIRCLEVILLE, INC., an Ohio corporation
KR SNELLVILLE, INC., a Georgia corporation
KR PENSACOLA, INC., a Florida corporation
By: /s/ Robert H. Dennis
--------------------------------
Name: Robert H. Dennis
Title: Vice President
KR JEFFERSON CITY, L.P., a Tennessee limited
partnership
By: KR Jefferson City GP, Inc., its general
partner
By:/s/ Robert H. Dennis
--------------------------------
Name: Robert H. Dennis
Title: Vice President
GUARANTY
This GUARANTY ("Guaranty") is executed as of
September 29, 1998, by KRANZCO REALTY TRUST ("Guarantor"), for the benefit of
SALOMON BROTHERS REALTY CORP., a New York corporation ("Lender").
A.KR Vidalia, Inc., a Georgia corporation, KR
Staunton, Inc., a Virginia corporation, KR Summerville, Inc., a Georgia
corporation, KR Tifton, Inc., a Georgia corporation, KR Douglasville, Inc., a
Georgia corporation, KR Circleville, Inc., an Ohio corporation, KR Snellville,
Inc., a Georgia corporation, KR Pensacola, Inc., a Florida corporation and KR
Jefferson City, L.P., a Tennessee limited partnership (collectively,
"Borrower") are indebted to Lender with respect to a loan ("Loan") pursuant to
that certain Fixed Rate Note dated of even date herewith, payable to the order
of Lender in the original principal amount of $65,900,000 (together with all
renewals, modifications, increases and extensions thereof, the "Note"), which
is secured by the liens and security interests of two Mortgage, Assignment of
Leases and Rents, Security Agreement and Fixture Filings, two Deed of Trust,
Assignment of Leases and Rents, Security Agreement and Fixture Filings, and a
Deed to Secure Debt, Assignments of Leases and Rents, Security Agreements, and
Fixture Filings, of even date herewith (as the same may be amended, restated,
extended, or otherwise modified from time to time, collectively, the
"Mortgage"), and further evidenced, secured or governed by the other Loan
Documents (as defined in the Note); and
B.Lender is not willing to make the Loan, or
otherwise extend credit, to Borrower unless Guarantor unconditionally
guarantees payment and performance to Lender of the Guaranteed Obligations (as
herein defined); and
C.Guarantor is the owner of a direct or indirect
interest in Borrower, and Guarantor will directly benefit from Lender's making
the Loan to Borrower.
NOW, THEREFORE, as an inducement to Lender to
make the Loan to Borrower thereunder, and to extend such additional credit as
Lender may from time to time agree to extend under the Loan Documents, and for
other good and valuable consideration, the receipt and legal sufficiency of
which are hereby acknowledged, the parties do hereby agree as follows:
ARTICLE I.
NATURE AND SCOPE OF GUARANTY
1.1.Guaranty of Obligation. Guarantor hereby
irrevocably and unconditionally guarantees to Lender (and its successors and
assigns), the payment and performance of the Guaranteed Obligations as and when
the same shall be due and payable, whether by lapse of time, by acceleration of
maturity or otherwise. Guarantor hereby irrevocably and unconditionally
covenants and agrees that it is liable, for the Guaranteed Obligations as a
primary obligor, and that each Guarantor shall fully perform, each and every
term and provision hereof.
1.2.Definition of Guaranteed Obligations. As
used herein, the term "Guaranteed Obligations" shall mean the Debt (as defined
in the Note) in the event of (i) any fraud or material misrepresentation by
Borrower or Guarantor in connection with the Loan, or (ii) Borrower's failure
to make the first full payment of principal and interest due under the Note.
In addition, the Guaranteed Obligations shall also include and Guarantor shall
also be liable for, and shall indemnify, defend and hold Lender, its successors
and assigns, and their respective shareholders, employees, officers, directors,
and agents (each an "Indemnified Party") harmless from and against, any and all
loss, cost, expense, damage, claim or other obligation (including, without
limitation, reasonable attorney's fees and costs of defense) incurred or
suffered by Lender and arising out of or in connection with the matters listed
in subsections (a) through (g) below INCLUDING, WITHOUT LIMITATION, ANY
LIABILITY, LOSS, DAMAGE, CLAIM, OR OBLIGATION CAUSED BY OR RESULTING FROM THE
ORDINARY NEGLIGENCE OF ANY INDEMNIFIED PARTY.
(a)any breach of the Environmental Liabilities
Agreement executed by Borrower for the benefit of Lender, dated of even date
herewith, including the indemnification provisions contained therein;
(b)Borrower's failure to obtain Lender's prior
written consent to (i) any subordinate financing or any other encumbrance on
the Mortgaged Property (as defined in the Mortgage), or (ii) any transfer of
the Mortgaged Property or majority ownership in Borrower in violation of the
Mortgage;
(c)the misapplication by Borrower, its agents,
affiliates, officers or employees of any funds derived from the Mortgaged
Property, including security deposits, insurance proceeds and condemnation
awards, in violation of the Loan Documents;
(d)Borrower's failure to apply proceeds of rents
or any other payments in respect of the leases and other income from the
Mortgaged Property or any other collateral when received to the costs of
maintenance and operation of the Mortgaged Property and to the payment of
taxes, lien claims, insurance premiums, monthly payments of principal and
interest or escrow payments or other payments due under the Loan Documents to
the extent the Loan Documents require such proceeds to be then so applied;
(e)any litigation or other legal proceeding
related to the Debt filed by Borrower or any Guarantor or indemnitor that is
intended to delay or impair or otherwise results in delays or impairs Lender's
ability to preserve, enforce or foreclose its lien on the Mortgaged Property,
including, but not limited to, the filing of a voluntary petition concerning
Borrower under the U.S. Bankruptcy Code, in which action a claim, counterclaim,
or defense is asserted against Lender, other than any litigation or other legal
proceeding in which a final, non-appealable judgment for money damages or
injunctive relief is entered against Lender;
(f)the gross negligence or willful misconduct of
Borrower, its agents, affiliates, officers or employees which causes or results
in a material diminution, or material loss of value, of the Mortgaged Property
that is not reimbursed by insurance or which gross negligence or willful
misconduct expose Lender to claims, liability or costs of defense in any
litigation or other legal proceeding; and
(g)the seizure or forfeiture of the Mortgaged
Property, or any portion thereof, or Lender's interest therein, resulting from
criminal wrongdoing by Borrower, its agents, affiliates, officers or employees.
1.3.Nature of Guaranty. This Guaranty is an
irrevocable, absolute, continuing guaranty of payment and performance and is
not a guaranty of collection. This Guaranty may not be revoked by Guarantor
and shall continue to be effective with respect to any Guaranteed Obligations
arising or created after any attempted revocation by Guarantor and after (if
Guarantor is a natural person) Guarantor's death (in which event this Guaranty
shall be binding upon Guarantor's estate and Guarantor's legal representatives
and heirs). The fact that at any time or from time to time the Guaranteed
Obligations may be increased or reduced shall not release or discharge the
obligation of Guarantor to Lender with respect to Guaranteed Obligations.
This Guaranty may be enforced by Lender and any subsequent holder of the Note
and shall not be discharged by the assignment or negotiation of all or part of
the Note.
1.4.Guaranteed Obligations Not Reduced by Offset.
The Guaranteed Obligations and the liabilities and obligations of Guarantor to
Lender hereunder, shall not be reduced, discharged or released because or by
reason of any existing or future offset, claim or defense of Borrower, or any
other party, against Lender or against payment of the Guaranteed Obligations,
whether such offset, claim or defense arises in connection with the Guaranteed
Obligations (or the transactions creating the Guaranteed Obligations) or
otherwise.
1.5.Payment by Guarantor. If all or any part of
the Guaranteed Obligations, as limited by Section 1.2, shall not be punctually
paid when due, whether at maturity or earlier by acceleration or otherwise,
Guarantor shall, immediately upon demand by Lender, and without presentment,
protest, notice of protest, notice of non-payment, notice of intention to
accelerate the maturity, notice of acceleration of the maturity, or any other
notice whatsoever, pay in lawful money of the United States of America, the
amount due on the Guaranteed Obligations to Lender at Lender's address as set
forth herein. Such demand(s) may be made at any time coincident with or after
the time for payment of all or part of the Guaranteed Obligations, and may be
made from time to time with respect to the same or different items of
Guaranteed Obligations. Such demand shall be deemed made, given and received
in accordance with the notice provisions hereof.
1.6.No Duty to Pursue Others. It shall not be
necessary for Lender (and Guarantor hereby waives any rights which Guarantor
may have to require Lender), in order to enforce such payment by Guarantor,
first to (i) institute suit or exhaust its remedies against Borrower or others
liable on the Loan or the Guaranteed Obligations or any other person, (ii)
enforce Lender's rights against any collateral which shall ever have been given
to secure the Loan, (iii) enforce Lender's rights against any other guarantors
of the Guaranteed Obligations, (iv) join Borrower or any others liable on the
Guaranteed Obligations in any action seeking to enforce this Guaranty, (v)
exhaust any remedies available to Lender against any collateral which shall
ever have been given to secure the Loan, or (vi) resort to any other means of
obtaining payment of the Guaranteed Obligations. Lender shall not be required
to mitigate damages or take any other action to reduce, collect or enforce the
Guaranteed Obligations.
1.7.Waivers. Guarantor acknowledges the
provisions of the Loan Documents, and hereby waives notice of (i) any loans or
advances made by Lender to Borrower, (ii) acceptance of this Guaranty, (iii)
any amendment or extension of the Note or of any other Loan Documents, (iv) the
execution and delivery by Borrower and Lender of any other loan or credit
agreement or of Borrower's execution and delivery of any promissory notes or
other documents arising under the Loan Documents or in connection with the
Mortgaged Property, (v) the occurrence of any breach by Borrower or Event of
Default, (vi) Lender's transfer or disposition of the Guaranteed Obligations,
or any part thereof, (vii) sale or foreclosure (or posting or advertising for
sale or foreclosure) of any collateral for the Guaranteed Obligations, (viii)
protest, proof of non-payment or default by Borrower, or (ix) any other action
at any time taken or omitted by Lender, and, generally, all demands and notices
of every kind in connection with this Guaranty, the Loan Documents, any
documents or agreements evidencing, securing or relating to any of the
Guaranteed Obligations and the obligations hereby guaranteed.
1.8.Payment of Expenses. In the event that
Guarantor should breach or fail to timely perform any provisions of this
Guaranty, Guarantor shall, immediately upon demand by Lender, pay Lender all
costs and expenses (including court costs and reasonable attorneys' fees)
incurred by Lender in the enforcement hereof or the preservation of Lender's
rights hereunder. The covenant contained in this section shall survive the
payment and performance of the Guaranteed Obligations.
1.9.Effect of Bankruptcy. In the event that,
pursuant to any insolvency, bankruptcy, reorganization, receivership or other
action under any debtor relief law, or any judgment, order or decision
thereunder, Lender must rescind or restore any payment, or any part thereof,
received by Lender in satisfaction of the Guaranteed Obligations, as set forth
herein, any prior release or discharge from the terms of this Guaranty given to
Guarantor by Lender shall be without effect, and this Guaranty shall remain in
full force and effect. It is the intention of Borrower and Guarantor that
Guarantor's obligations hereunder shall not be discharged except by Guarantor's
performance of such obligations and then only to the extent of such
performance.
1.10.Deferment of Rights of Subrogation,
Reimbursement and Contribution.
(a)Notwithstanding any payment or payments made
by Guarantor hereunder, Guarantor will not assert or exercise any right of
Lender or of Guarantor against Borrower to recover the amount of any payment
made by Guarantor to Lender by way of subrogation, reimbursement, contribution,
indemnity, or otherwise arising by contract or operation of law, and Guarantor
shall not have any right of recourse to or any claim against assets or property
of Borrower, whether or not the obligations of Borrower have been satisfied,
all of such rights being herein expressly waived by Guarantor. If any amount
shall nevertheless be paid to Guarantor by Borrower prior to payment in full of
the Obligations (hereinafter defined), such amount shall be held in trust for
the benefit of Lender and shall forthwith be paid to Lender to be credited and
applied to the Obligations, whether matured or unmatured. The provisions of
this section shall survive the termination of this Guaranty, and any
satisfaction and discharge of Borrower by virtue of any payment, court order or
any applicable law.
(b)Notwithstanding the provisions of Section
1.10(a), Guarantor shall have and be entitled to (1) all rights of subrogation
otherwise provided by applicable law in respect of any payment it may make or
be obligated to make under this Guaranty and (2) all claims it would have
against Borrower in the absence of Section 1.10(a) and to assert and enforce
same, in each case on and after, but at no time prior to, the date (the
"Subrogation Trigger Date") which is 91 days after the date on which all sums
owed to Lender under the Loan Documents (the "Obligations") have been paid in
full, if and only if (x) no Event of Default of the type described in Section
22(e) or 22(f) of the Mortgage with respect to Lender has existed at any time
on and after the date of this Guaranty to and including the Subrogation Trigger
Date and (y) the existence of Guarantor's rights under this Section 1.10(b)
would not make Guarantor a creditor (as defined in the Code, as such term is
hereinafter defined) of Borrower in any insolvency, bankruptcy, reorganization
or similar proceeding commenced on or prior to the Subrogation Trigger Date.
1.11.Bankruptcy Code Waiver. It is the intention
of the parties that Guarantor shall not be deemed to be a "creditor" or
"creditors" (as defined in Section 101 of the United States Bankruptcy Code
[the "Bankruptcy Code"]) of Borrower, by reason of the existence of this
Guaranty, in the event that Borrower, becomes a debtor in any proceeding under
the Bankruptcy Code, and in connection herewith, Guarantor hereby waives any
such right as a "creditor" under the Bankruptcy Code. This waiver is given to
induce Lender to make the Loan evidenced by the Note to Borrower. After the
Loan is paid in full and there shall be no obligations or liabilities under
this Guaranty outstanding, this waiver shall be deemed to be terminated.
1.12.Borrower. The term "Borrower" as used
herein shall include any new or successor corporation, association, partnership
(general or limited), joint venture, trust or other individual or organization
formed as a result of any merger, reorganization, sale, transfer, devise, gift
or bequest of Borrower or any interest in Borrower.
ARTICLE II.
EVENTS AND CIRCUMSTANCES NOT REDUCING
OR DISCHARGING GUARANTOR'S OBLIGATIONS
Guarantor hereby consents and agrees to each of
the following, and agrees that Guarantor's obligations under this Guaranty
shall not be released, diminished, impaired, reduced or adversely affected by
any of the following, and waives any common law, equitable, statutory or other
rights (including without limitation rights to notice) which Guarantor might
otherwise have as a result of or in connection with any of the following:
2.1.Modifications. Any renewal, extension,
increase, modification, alteration or rearrangement of all or any part of the
Guaranteed Obligations, Note, Loan Documents, or other document, instrument,
contract or understanding between Borrower and Lender, or any other parties,
pertaining to the Guaranteed Obligations or any failure of Lender to notify
Guarantor of any such action.
2.2.Adjustment. Any adjustment, indulgence,
forbearance or compromise that might be granted or given by Lender to Borrower.
2.3.Condition of Borrower or Guarantor. The
insolvency, bankruptcy, arrangement, adjustment, composition, liquidation,
disability, dissolution or lack of power of Borrower, Guarantor or any other
party at any time liable for the payment of all or part of the Guaranteed
Obligations; or any dissolution of Borrower or Guarantor, or any sale, lease or
transfer of any or all of the assets of Borrower or Guarantor, or any changes
in the shareholders, partners or members of Borrower or Guarantor; or any
reorganization of Borrower or Guarantor.
2.4.Invalidity of Guaranteed Obligations. The
invalidity, illegality or unenforceability of all or any part of the Guaranteed
Obligations, or any document or agreement executed in connection with the
Guaranteed Obligations, for any reason whatsoever, including without limitation
the fact that (i) the Guaranteed Obligations, or any part thereof, exceeds the
amount permitted by law, (ii) the act of creating the Guaranteed Obligations
or any part thereof is ultra vires, (iii) the officers or representatives
executing the Note or the other Loan Documents or otherwise creating the
Guaranteed Obligations acted in excess of their authority, (iv) the Guaranteed
Obligations violate applicable usury laws, (v) Borrower has valid defenses,
claims or offsets (whether at law, in equity or by agreement) which render the
Guaranteed Obligations wholly or partially uncollectible from Borrower, (vi)
the creation, performance or repayment of the Guaranteed Obligations (or the
execution, delivery and performance of any document or instrument representing
part of the Guaranteed Obligations or executed in connection with the
Guaranteed Obligations, or given to secure the repayment of the Guaranteed
Obligations) is illegal, uncollectible or unenforceable, or (vii) the Note or
any of the other Loan Documents have been forged or otherwise are irregular or
not genuine or authentic, it being agreed that Guarantor shall remain liable
hereon regardless of whether Borrower or any other person be found not liable
on the Guaranteed Obligations or any part thereof for any reason.
2.5.Release of Obligors. Any full or partial
release of the liability of Borrower on the Guaranteed Obligations, or any part
thereof, or of any co-guarantors, or any other person or entity now or
hereafter liable, whether directly or indirectly, jointly, severally, or
jointly and severally, to pay, perform, guarantee or assure the payment of the
Guaranteed Obligations, or any part thereof, it being recognized, acknowledged
and agreed by Guarantor that Guarantor may be required to pay the Guaranteed
Obligations in full without assistance or support of any other party, and
Guarantor has not been induced to enter into this Guaranty on the basis of a
contemplation, belief, understanding or agreement that other parties will be
liable to pay or perform the Guaranteed Obligations, or that Lender will look
to other parties to pay or perform the Guaranteed Obligations.
2.6.Other Collateral. The taking or accepting of
any other security, collateral or guaranty, or other assurance of payment, for
all or any part of the Guaranteed Obligations.
2.7.Release of Collateral. Any release,
surrender, exchange, subordination, deterioration, waste, loss or impairment
(including without limitation negligent, willful, unreasonable or unjustifiable
impairment) of any collateral, property or security, at any time existing in
connection with, or assuring or securing payment of, all or any part of the
Guaranteed Obligations.
2.8.Care and Diligence. The failure of Lender or
any other party to exercise diligence or reasonable care in the preservation,
protection, enforcement, sale or other handling or treatment of all or any part
of such collateral, property or security, including but not limited to any
neglect, delay, omission, failure or refusal of Lender (i) to take or prosecute
any action for the collection of any of the Guaranteed Obligations, or (ii) to
foreclose, or initiate any action to foreclose, or, once commenced, prosecute
to completion any action to foreclose upon any security therefor, or (iii) to
take or prosecute any action in connection with any instrument or agreement
evidencing or securing all or any part of the Guaranteed Obligations.
2.9.Unenforceability. The fact that any
collateral, security, security interest or lien contemplated or intended to be
given, created or granted as security for the repayment of the Guaranteed
Obligations, or any part thereof, shall not be properly perfected or created,
or shall prove to be unenforceable or subordinate to any other security
interest or lien, it being recognized and agreed by Guarantor that Guarantor is
not entering into this Guaranty in reliance on, or in contemplation of the
benefits of, the validity, enforceability, collectibility or value of any of
the collateral for the Guaranteed Obligations.
2.10.Offset. The Note, the Guaranteed
Obligations and the liabilities and obligations of Guarantor to Lender
hereunder, shall not be reduced, discharged or released because of or by
reason of any existing or future right of offset, claim or defense of Borrower
against Lender, or any other party, or against payment of the Guaranteed
Obligations, whether such right of offset, claim or defense arises in
connection with the Guaranteed Obligations (or the transactions creating the
Guaranteed Obligations) or otherwise.
2.11.Merger. The reorganization, merger or
consolidation of Borrower into or with any other corporation or entity.
2.12.Preference. Any payment by Borrower to
Lender is held to constitute a preference under bankruptcy laws, or for any
reason Lender is required to refund such payment or pay such amount to Borrower
or someone else.
2.13.Other Actions Taken or Omitted. Any other
action taken or omitted to be taken with respect to the Loan Documents, the
Guaranteed Obligations, or the security and collateral therefor, whether or
not such action or omission prejudices Guarantor or increases the likelihood
that Guarantor will be required to pay the Guaranteed Obligations pursuant to
the terms hereof, it is the unambiguous and unequivocal intention of Guarantor
that Guarantor shall be obligated to pay the Guaranteed Obligations when due,
notwithstanding any occurrence, circumstance, event, action, or omission
whatsoever, whether or not contemplated, and whether or not otherwise or
particularly described herein, which obligation shall be deemed satisfied only
upon the full and final payment and satisfaction of the Guaranteed Obligations.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
To induce Lender to enter into the Loan Documents
and extend credit to Borrower, Guarantor represents and warrants to Lender as
follows:
3.1.Benefit. Guarantor is an affiliate of
Borrower, is the owner of a direct or indirect interest in Borrower, and has
received, or will receive, direct or indirect benefit from the making of this
Guaranty with respect to the Guaranteed Obligations.
3.2.Familiarity and Reliance. Guarantor is
familiar with, and has independently reviewed books and records regarding, the
financial condition of Borrower and is familiar with the value of any and all
collateral intended to be created as security for the payment of the Note or
Guaranteed Obligations; however, Guarantor is not relying on such financial
condition or the collateral as an inducement to enter into this Guaranty.
3.3.No Representation by Lender. Neither Lender
nor any other party has made any representation, warranty or statement to
Guarantor in order to induce Guarantor to execute this Guaranty.
3.4.Guarantor's Financial Condition. As of the
date hereof, and after giving effect to this Guaranty and the contingent
obligation evidenced hereby, Guarantor is, and will be, solvent, and has and
will have assets which, fairly valued, exceed its obligations, liabilities
(including contingent liabilities) and debts, and has and will have property
and assets sufficient to satisfy and repay its obligations and liabilities.
3.5.Legality. The execution, delivery and
performance by Guarantor of this Guaranty and the consummation of the
transactions contemplated hereunder do not, and will not, contravene or
conflict with any law, statute or regulation whatsoever to which Guarantor is
subject or constitute a default (or an event which with notice or lapse of time
or both would constitute a default) under, or result in the breach of, any
indenture, mortgage, deed of trust, charge, lien, or any contract, agreement or
other instrument to which Guarantor is a party or which may be applicable to
Guarantor. This Guaranty is a legal and binding obligation of Guarantor and is
enforceable in accordance with its terms, except as limited by bankruptcy,
insolvency or other laws of general application relating to the enforcement of
creditors' rights.
3.6.Survival. All representations and warranties
made by Guarantor herein shall survive the execution hereof.
3.7.Review of Documents. Guarantor has examined
the Note and all of the Loan Documents.
3.8.Litigation. Except as otherwise disclosed to
Lender, there are no proceedings pending or, so far as Guarantor knows,
threatened before any court or administrative agency which, if decided
adversely to Guarantor, would materially adversely affect the financial
condition of Guarantor or the authority of Guarantor to enter into, or the
validity or enforceability of this Guaranty.
3.9.Tax Returns. Guarantor has filed all
required federal, state and local tax returns and has paid all taxes as shown
on such returns as they have become due. No claims have been assessed and are
unpaid with respect to such taxes.
ARTICLE IV.
SUBORDINATION OF CERTAIN INDEBTEDNESS
4.1.Subordination of All Guarantor Claims. As
used herein, the term "Guarantor Claims" shall mean all debts and liabilities
of Borrower to Guarantor, whether such debts and liabilities now exist or are
hereafter incurred or arise, or whether the obligations of Borrower thereon be
direct, contingent, primary, secondary, several, joint and several, or
otherwise, and irrespective of whether such debts or liabilities be evidenced
by note, contract, open account, or otherwise, and irrespective of the person
or persons in whose favor such debts or liabilities may, at their inception,
have been, or may hereafter be created, or the manner in which they have been
or may hereafter be acquired by Guarantor. The Guarantor Claims shall include
without limitation all rights and claims of Guarantor against Borrower (arising
as a result of subrogation or otherwise) as a result of Guarantor's payment of
all or a portion of the Guaranteed Obligations to the extent the provisions of
Section 1.4 hereof are unenforceable. Upon the occurrence and during the
continuance of an Event of Default or the occurrence of an event which would,
with the giving of notice or the passage of time, or both, constitute an Event
of Default, Guarantor shall not receive or collect, directly or indirectly,
from Borrower or any other party any amount upon the Guarantor Claims.
4.2.Claims in Bankruptcy. In the event of
receivership, bankruptcy, reorganization, arrangement, debtor's relief, or
other insolvency proceedings involving Guarantor as debtor, Lender shall have
the right to prove its claim in any such proceeding so as to establish its
rights hereunder and receive directly from the receiver, trustee or other court
custodian dividends and payments which would otherwise be payable upon
Guarantor Claims. Guarantor hereby assigns such dividends and payments to
Lender. Should Lender receive, for application upon the Guaranteed
Obligations, any such dividend or payment which is otherwise payable to
Guarantor, and which, as between Borrower and Guarantor, shall constitute a
credit upon the Guarantor Claims, then upon payment to Lender in full of the
Guaranteed Obligations, Guarantor shall become subrogated to the rights of
Lender to the extent that such payments to Lender on the Guarantor Claims have
contributed toward the liquidation of the Guaranteed Obligations, and such
subrogation shall be with respect to that proportion of the Guaranteed
Obligations which would have been unpaid if Lender had not received dividends
or payments upon the Guarantor Claims.
4.3.Payments Held in Trust. In the event that,
notwithstanding anything to the contrary in this Guaranty, Guarantor should
receive any funds, payment, claim or distribution which is prohibited by this
Guaranty, Guarantor agrees to hold in trust for Lender an amount equal to the
amount of all funds, payments, claims or distributions so received, and agrees
that it shall have absolutely no dominion over the amount of such funds,
payments, claims or distributions so received except to pay them promptly to
Lender, and Guarantor covenants promptly to pay the same to Lender.
4.4.Liens Subordinate. Guarantor agrees that any
liens, security interests, judgment liens, charges or other encumbrances upon
Borrower's assets securing payment of the Guarantor Claims shall be and remain
inferior and subordinate to any liens, security interests, judgment liens,
charges or other encumbrances upon Borrower's assets securing payment of the
Guaranteed Obligations, regardless of whether such encumbrances in favor of
Guarantor or Lender presently exist or are hereafter created or attach.
Without the prior written consent of Lender, Guarantor shall not (i) exercise
or enforce any creditor's right it may have against Borrower, or (ii)
foreclose, repossess, sequester or otherwise take steps or institute any action
or proceedings (judicial or otherwise, including without limitation the
commencement of, or joinder in, any liquidation, bankruptcy, rearrangement,
debtor's relief or insolvency proceeding) to enforce any liens, mortgages,
deeds of trust, security interests, collateral rights, judgments or other
encumbrances on assets of Borrower held by Guarantor.
ARTICLE V.
MISCELLANEOUS
5.1.Waiver. No failure to exercise, and no delay
in exercising, on the part of Lender, any right hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise thereof preclude any
other or further exercise thereof or the exercise of any other right. The
rights of Lender hereunder shall be in addition to all other rights provided by
law. No modification or waiver of any provision of this Guaranty, nor consent
to departure therefrom, shall be effective unless in writing and no such
consent or waiver shall extend beyond the particular case and purpose involved.
No notice or demand given in any case shall constitute a waiver of the right to
take other action in the same, similar or other instances without such notice
or demand.
5.2.Notices. Any notice, demand, statement,
request or consent made hereunder shall be in writing and shall be deemed to be
received by the addressee on the day such notice is tendered to a nationally
recognized overnight delivery service or on the third day following the day
such notice is deposited with the United States Postal Service first class
certified mail, return receipt requested, in either instance, addressed to the
address, as set forth below, of the party to whom such notice is to be given,
or to such other address as either party shall in like manner designate in
writing. The addresses of the parties hereto are as follows:
Guarantor:
Kranzco Realty Trust
128 Fayette Street
Conshohocken, Pennsylvania 19482
Attn: Robert Dennis
Lender:
Salomon Brothers Realty Corp.
Seven World Trade Center, 29th Floor
New York, New York 10048
Attn: MaryAnne Merola
5.3.Governing Law; Jurisdiction. This Guaranty
shall be governed by and construed in accordance with the laws of the State of
New York and the applicable laws of the United States of America. Guarantor
hereby irrevocably submits to the jurisdiction of any court of competent
jurisdiction located in the State of New York in connection with any proceeding
out of or relating to this Guaranty.
5.4.Invalid Provisions. If any provision of this
Guaranty is held to be illegal, invalid, or unenforceable under present or
future laws effective during the term of this Guaranty, such provision shall
be fully severable and this Guaranty shall be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part of this
Guaranty, and the remaining provisions of this Guaranty shall remain in full
force and effect and shall not be affected by the illegal, invalid or
unenforceable provision or by its severance from this Guaranty, unless such
continued effectiveness of this Guaranty, as modified, would be contrary to the
basic understandings and intentions of the parties as expressed herein.
5.5.Amendments. This Guaranty may be amended
only by an instrument in writing executed by the party or an authorized
representative of the party against whom such amendment is sought to be
enforced.
5.6.Parties Bound; Assignment. This Guaranty
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, assigns and legal representatives, provided, however,
that Guarantor may not, without the prior written consent of Lender, assign any
of its rights, powers, duties or obligations hereunder.
5.7.Headings. Section headings are for
convenience of reference only and shall in no way affect the interpretation of
this Guaranty.
5.8.Recitals. The recital and introductory
paragraphs hereof are a part hereof, form a basis for this Guaranty and shall
be considered prima facie evidence of the facts and documents referred to
therein.
5.9.Reserved
5.10.Financial Statements: Guarantor shall
furnish or cause to be furnished to Lender the following:
(a)within ninety (90) days after the close of
each fiscal year of Guarantor, a balance sheet of Guarantor dated as of the
close of such fiscal year; and
(b)from time to time, such additional financial
statements and financial information as Lender shall reasonably require.
All balance sheets shall include, among other things, a statement of profit and
loss, disclosure of all contingent liabilities and changes in financial
condition, together with such supporting schedules and documentation as Lender
shall reasonably require. All balance sheets shall be certified by Guarantor
and by Guarantor's independent certified public accountant.
5.11.Rights and Remedies. If Guarantor becomes
liable for any indebtedness owing by Borrower to Lender, by endorsement or
otherwise, other than under this Guaranty, such liability shall not be in any
manner impaired or affected hereby and the rights of Lender hereunder shall be
cumulative of any and all other rights that Lender may ever have against
Guarantor. The exercise by Lender of any right or remedy hereunder or under
any other instrument, or at law or in equity, shall not preclude the concurrent
or subsequent exercise of any other right or remedy.
5.12.Entirety. THIS GUARANTY EMBODIES THE FINAL,
ENTIRE AGREEMENT OF GUARANTOR AND LENDER WITH RESPECT TO GUARANTOR'S GUARANTY
OF THE GUARANTEED OBLIGATIONS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY IS INTENDED BY GUARANTOR
AND LENDER AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS OF THE GUARANTY, AND
NO COURSE OF DEALING BETWEEN GUARANTOR AND LENDER, NO COURSE OF PERFORMANCE, NO
TRADE PRACTICES, AND NO EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OR DISCUSSIONS OR OTHER EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE
USED TO CONTRADICT, VARY, SUPPLEMENT OR MODIFY ANY TERM OF THIS GUARANTY
AGREEMENT. THERE ARE NO ORAL AGREEMENTS BETWEEN GUARANTOR AND LENDER.
5.13.Waiver of Right to Trial by Jury. GUARANTOR
HEREBY AGREES NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY
JURY, AND WAIVES ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS GUARANTY, THE MORTGAGE,
OR THE OTHER LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING
IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN
KNOWINGLY AND VOLUNTARILY BY GUARANTOR, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. LENDER IS HEREBY AUTHORIZED TO FILE A COPY OF
THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY
GUARANTOR.
5.14. THIS GUARANTY HAS BEEN EXECUTED BY THE
UNDERSIGNED ON BEHALF OF GUARANTOR IN THE CAPACITY AS AN OFFICER OR TRUSTEE OF
GUARANTOR WHICH HAS BEEN FORMED AS A MARYLAND REAL ESTATE INVESTMENT TRUST
PURSUANT TO AN AMENDED AND RESTATED DECLARATION OF TRUST OF GUARANTOR, DATED
DECEMBER 11, 1997, AS AMENDED AND RESTATED, AND NOT INDIVIDUALLY, AND NONE OF
THE TRUSTEES, OFFICERS OR SHAREHOLDERS OF GUARANTOR SHALL BE BOUND OR HAVE ANY
PERSONAL LIABILITY HEREUNDER. EACH PARTY HERETO SHALL LOOK SOLELY TO THE
ASSETS OF GUARANTOR FOR SATISFACTION OF ANY LIABILITY OF GUARANTOR, AND SHALL
NOT SEEK RECOURSE OR COMMENCE AN ACTION AGAINST ANY OF THE TRUSTEES, OFFICERS
OR SHAREHOLDERS OF GUARANTOR OR ANY OF THEIR PERSONAL ASSETS FOR THE
PERFORMANCE OR PAYMENT OF ANY OBLIGATION HEREUNDER. THE FOREGOING SHALL ALSO
APPLY TO ANY FUTURE DOCUMENTS, AGREEMENTS, UNDERSTANDINGS, ARRANGEMENTS AND
TRANSACTIONS BETWEEN THE PARTIES HERETO. NOTHING SET FORTH IN THE PRECEDING
TWO SENTENCES SHALL LIMIT THE OBLIGATIONS OF GUARANTOR SET FORTH IN THIS
GUARANTY AND THE OTHER LOAN DOCUMENTS.
(Signature page follows)
<PAGE>
EXECUTED as of the day and year first above written.
GUARANTOR:
KRANZCO REALTY TRUST
By: /s/ Robert H. Dennis
____________________________
Name: Robert H. Dennis
Title: Vice President
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
Dated as of September 29, 1998
by
__________________________
as Mortgagor
to and for the benefit of
SALOMON BROTHERS REALTY CORP.
as Mortgagee
RETURN TO:
Latham & Watkins
885 Third Avenue, Suite 1000
New York, New York 10022
Attention: Brian Krisberg, Esq.
<PAGE>
TABLE OF CONTENTS
Page
1. Payment of Debt and Incorporation of Covenants, Conditions and
Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2. Warranty of Title.. . . . . . . . . . . . . . . . . . . . . . . . . . .4
3. Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
4. Payment of Taxes and Other Charges. . . . . . . . . . . . . . . . . . 10
5. Tax and Insurance Escrow Fund.. . . . . . . . . . . . . . . . . . . . 10
6. Replacement Reserve Fund. . . . . . . . . . . . . . . . . . . . . . . 11
7. Condemnation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
8. Representations Concerning Loan.. . . . . . . . . . . . . . . . . . . 13
9. Single Purpose Entity/Separateness. . . . . . . . . . . . . . . . . . 14
10. Maintenance of Mortgaged Property.. . . . . . . . . . . . . . . . . . 16
11. Use of Mortgaged Property.. . . . . . . . . . . . . . . . . . . . . . 17
12. Transfer or Encumbrance of the Mortgaged Property.. . . . . . . . . . 17
13. Estoppel Certificates and No Default Affidavits.. . . . . . . . . . . 20
14. Taxes on Security; Documentary Stamps; Intangibles Tax. . . . . . . . 21
15. No Credits on Account of the Debt.. . . . . . . . . . . . . . . . . . 22
16. Controlling Agreement.. . . . . . . . . . . . . . . . . . . . . . . . 22
17. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 22
18. Performance of Other Agreements.. . . . . . . . . . . . . . . . . . . 24
19. Further Acts, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . 24
20. Recording of Mortgage, Etc. . . . . . . . . . . . . . . . . . . . . . 26
21. Reporting Requirements. . . . . . . . . . . . . . . . . . . . . . . . 26
22. Events of Default.. . . . . . . . . . . . . . . . . . . . . . . . . . 26
23. Notice and Cure.. . . . . . . . . . . . . . . . . . . . . . . . . . . 28
24. Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
25. Security Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . 34
26. Right of Entry. . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
27. Actions and Proceedings.. . . . . . . . . . . . . . . . . . . . . . . 35
28. Waiver of Setoff and Counterclaim, Marshalling, Statute of Limitations,
Automatic or Supplemental Stay, Etc.. . . . . . . . . . . . . . . . . 35
29. Contest of Certain Claims.. . . . . . . . . . . . . . . . . . . . . . 36
30. Recovery of Sums Required to Be Paid. . . . . . . . . . . . . . . . . 37
31. Handicapped Access. . . . . . . . . . . . . . . . . . . . . . . . . . 37
32. Indemnification.. . . . . . . . . . . . . . . . . . . . . . . . . . . 38
33. Reserved. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
34. Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
35. Authority.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
36. ERISA.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
37. Waiver of Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . 39
38. Remedies of Mortgagor.. . . . . . . . . . . . . . . . . . . . . . . . 39
39. Sole Discretion of Mortgagee. . . . . . . . . . . . . . . . . . . . . 39
40. Non-Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
41. Liability.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
42. Inapplicable Provisions.. . . . . . . . . . . . . . . . . . . . . . . 40
43. Headings, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
44. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
45. Definitions.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
46. Homestead.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
47. Assignments.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
48. Survival of Obligations; Survival of Warranties and Representations.. 41
49. Covenants Running with the Land.. . . . . . . . . . . . . . . . . . . 41
50. Governing Law; Jurisdiction.. . . . . . . . . . . . . . . . . . . . . 41
51. Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
52. No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . 42
53. Relationship of Parties.. . . . . . . . . . . . . . . . . . . . . . . 42
54. Exculpation.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
55. Investigations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
56. Assignment of Leases and Rents. . . . . . . . . . . . . . . . . . . . 42
57. WAIVER OF RIGHT TO TRIAL BY JURY. . . . . . . . . . . . . . . . . . . 42
<PAGE>
MORTGAGE, ASSIGNMENT OF LEASES AND RENTS,
SECURITY AGREEMENT AND FIXTURE FILING
THIS MORTGAGE, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND
FIXTURE FILING (as the same may be amended, restated, extended, supplemented or
otherwise modified from time to time, the "Mortgage"), is made as of the 29th
day of September 1998, by ____________________, a _______________________,
having its principal place of business at 128 Fayette Street, Conshohocken,
Pennsylvania 19428 ("Mortgagor"), to and for the benefit of Salomon Brothers
Realty Corp., a New York corporation, having its principal place of business at
Seven World Trade Center, New York, New York 10048 ("Mortgagee"), the mortgagee
hereunder.
W I T N E S S E T H:
To secure the payment of an indebtedness in the principal sum of
SIXTY-FIVE MILLION, NINE HUNDRED AND NO/100 DOLLARS ($65,900,000),(1) lawful
money of the United States of America, to be paid with interest according to a
certain note dated the date hereof made on a joint and several basis by
Mortgagor and _______________(2) to Mortgagee (the note together with all
extensions, renewals or modifications thereof being hereinafter collectively
called the "Note") and all other sums due hereunder, or otherwise due under the
Loan Documents (as defined in the Note) (said indebtedness, interest and all
sums due hereunder and under the Note and any other Loan Documents being
collectively called the "Debt"), and all of the agreements, covenants,
conditions, warranties, representations and other obligations (other than to
repay the Debt) made or undertaken by Mortgagor or any other person or entity
to Mortgagee or others as set forth in the Loan Documents (the "Obligations"),
Mortgagor has mortgaged, given, granted, bargained, sold, aliened, enfeoffed,
conveyed, confirmed, pledged, assigned, and hypothecated and by these presents
does hereby mortgage, give, grant, bargain, sell, alien, enfeoff, convey,
confirm, pledge, assign and hypothecate unto Mortgagee the real property
described in Exhibit A attached hereto (the "Premises") and the buildings,
structures, fixtures, additions, enlargements, extensions, modifications,
repairs, replacements and improvements now or hereafter located thereon (the
"Improvements");
TOGETHER WITH: all right, title, interest and estate of Mortgagor
now owned, or hereafter acquired, in and to the following property, rights,
interests and estates (the Premises, the Improvements together with the
following property, rights, interests and estates being hereinafter described
are collectively referred to herein as the "Mortgaged Property"):
(a) all easements, rights-of-way, strips and gores of land, streets,
ways, alleys, passages, sewer rights, water, water courses, water rights and
powers, air rights and development rights, and all estates, rights, titles,
interests, privileges, liberties, tenements, hereditaments and appurtenances of
any nature whatsoever, in any way belonging, relating or pertaining to the
Premises and the Improvements and the reversion and reversions, remainder and
remainders,
__________________________
(1) To be modified in states with mortgage recording taxes.
(2) To be filled in.
<PAGE>
and all land lying in the bed of any street, road or avenue, opened or
proposed, in front of or adjoining the Premises, to the center line thereof and
all the estates, rights, titles, interests, dower and rights of dower, curtesy
and rights of curtesy, property, possession, claim and demand whatsoever, both
at law and in equity, of Mortgagor of, in and to the Premises and the
Improvements and every part and parcel thereof, with the appurtenances thereto;
(b) all machinery, equipment, fixtures (including but not limited to
all heating, air conditioning, plumbing, lighting, communications and elevator
fixtures) and other property of every kind and nature, whether tangible or
intangible, whatsoever owned by Mortgagor, or in which Mortgagor has or shall
have an interest, now or hereafter located upon the Premises and the
Improvements, or appurtenant thereto, and usable in connection with the present
or future operation and occupancy of the Premises and the Improvements and all
building equipment, materials and supplies of any nature whatsoever owned by
Mortgagor, or in which Mortgagor has or shall have an interest, now or
hereafter located upon the Premises and the Improvements, or appurtenant
thereto, or usable in connection with the present or future operation,
enjoyment and occupancy of the Premises and the Improvements (hereinafter
collectively called the "Equipment"), including the proceeds of any sale or
transfer of the foregoing, and the right, title and interest of Mortgagor in
and to any of the Equipment which may be subject to any security interests, as
defined in the Uniform Commercial Code, as adopted and enacted by the state or
states where any of the Mortgaged Property is located (the "Uniform Commercial
Code") superior in lien to the lien of this Mortgage;
(c) all awards or payments, including interest thereon, which may
heretofore and hereafter be made with respect to the Mortgaged Property,
whether from the exercise of the right of eminent domain or condemnation
(including but not limited to any transfer made in lieu of or in anticipation
of the exercise of said rights), or for a change of grade, or for any other
injury to or decrease in the value of the Mortgaged Property;
(d) all leases and subleases (including, without limitation, all
guarantees thereof) and other agreements or arrangements heretofore or
hereafter entered into affecting the use, enjoyment or occupancy of, or the
conduct of any activity upon or in, the Premises and the Improvements,
including any extensions, renewals, modifications or amendments thereof (the
"Leases") and all rents, rent equivalents, moneys payable as damages or in lieu
of rent or rent equivalents, royalties (including, without limitation, all oil
and gas or other mineral royalties and bonuses), income, receivables, receipts,
revenues, deposits (including, without limitation, security, utility and other
deposits), accounts, cash, issues, profits, charges for services rendered, and
other consideration of whatever form or nature received by or paid to or for
the account of or benefit of Mortgagor or its agents or employees from any and
all sources arising from or attributable to the Premises and the Improvements
(the "Rents"), together with all proceeds from the sale or other disposition of
the Leases and the right to receive and apply the Rents to the payment of the
Debt;
(e) all proceeds of and any unearned premiums on any insurance
policies covering the Mortgaged Property, including, without limitation, the
right to receive and apply the proceeds of any insurance, judgments, or
settlements made in lieu thereof, for damage to the Mortgaged Property or any
part thereof;
(f) the right, in the name and on behalf of Mortgagor, to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to commence any action or proceeding to protect the interest of
the Mortgagee in the Mortgaged Property or any part thereof;
(g) all accounts, escrows, reserves, documents, instruments, chattel
paper, claims, deposits and general intangibles, as the foregoing terms are
defined in the Uniform Commercial Code, and all franchises, trade names,
trademarks, symbols, service marks, books, records, plans, specifications,
designs, drawings, permits, consents, licenses, management agreements, contract
rights (including, without limitation, any contract with any architect or
engineer or with any other provider of goods or services for or in connection
with any construction, repair, or other work upon the Mortgaged Property),
approvals, actions, refunds or real estate taxes and assessments (and any other
governmental impositions related to the Mortgaged Property), and causes of
action that now or hereafter relate to, are derived from or are used in
connection with the Mortgaged Property, or the use, operation, maintenance,
occupancy or enjoyment thereof or the conduct of any business or activities
thereon;
(h) any and all proceeds and products of any of the foregoing and
any and all other security and collateral of any nature whatsoever, now or
hereafter given for the repayment of the Debt and the performance of
Mortgagor's obligations under the Loan Documents, including (without
limitation) the Tax and Insurance Escrow Fund (hereafter defined), the
Replacement Reserve Fund (hereafter defined), the Deposit Account, the
Collection Account and the Expense Account (each as defined in the Cash
Management, Collateral and Security Agreement (hereafter defined)) and any
other escrows set forth in the Loan Documents;
(i) all accounts receivable, contract rights, interests, estate or
other claims, both in law and in equity, which Mortgagor now has or may
hereafter acquire in the Mortgaged Property or any part thereof; and
(j) all rights which Mortgagor now has or may hereafter acquire, to
be indemnified and/or held harmless from any liability, loss, damage, cost or
expense (including, without limitation, attorneys' fees and disbursements)
relating to the Mortgaged Property or any part thereof.
TO HAVE AND TO HOLD the above granted and described Mortgaged
Property unto and to the use and benefit of Mortgagee, and the successors and
assigns of Mortgagee, forever;
PROVIDED, HOWEVER, these presents are upon the express condition
that, if Mortgagor shall well and truly pay to Mortgagee the Debt at the time
and in the manner provided in the Note and this Mortgage and shall well and
truly abide by and comply with each and every covenant and condition set forth
herein and in the Note in a timely manner, these presents and the estate hereby
granted shall cease, terminate and be void;
AND Mortgagor represents and warrants to and covenants and agrees
with Mortgagee as follows:
1. Payment of Debt and Incorporation of Covenants, Conditions and
Agreements. Mortgagor shall pay the Debt at the time and in the manner
provided in the Note and in this Mortgage. Mortgagor will duly and punctually
perform all of the covenants, conditions and agreements contained in the Note,
this Mortgage and the other Loan Documents all of which covenants, conditions
and agreements are hereby made a part of this Mortgage to the same extent and
with the same force as if fully set forth herein.
2. Warranty of Title. Mortgagor warrants that Mortgagor has good,
marketable and insurable title to the Mortgaged Property and has the right to
mortgage, give, grant, bargain, sell, alien, enfeoff, convey, confirm, pledge,
assign and hypothecate the same and that Mortgagor possess an unencumbered fee
estate in the Premises and the Improvements and that it owns the Mortgaged
Property free and clear of all liens, encumbrances and charges whatsoever
except for those exceptions shown in the title insurance policy insuring the
lien of this Mortgage. Mortgagor shall forever warrant, defend and preserve
such title and the validity and priority of the lien of this Mortgage and shall
forever warrant and defend the same to Mortgagee against the claims of all
persons whomsoever.
3. Insurance. (a) Mortgagor, at its sole cost and expense, will
keep the Mortgaged Property insured during the entire term of this Mortgage for
the mutual benefit of Mortgagor and Mortgagee against loss or damage by fire,
lightning, wind and such other perils as are included in a standard "all-risk"
or "special causes of loss" form and against loss or damage by all other risks
and hazards covered by a standard extended coverage insurance policy including,
without limitation, riot and civil commotion, vandalism, malicious mischief,
burglary and theft. Such insurance shall be in an amount equal to the greatest
of (i) the then full replacement cost of the Improvements and Equipment,
without deduction for physical depreciation, (ii) the Allocated Loan Amount of
the Mortgaged Property (as such term is defined in the Cash Management,
Collateral and Security Agreement), and (iii) such amount that the insurer
would not deem Mortgagor a co-insurer under said policies. The policies of
insurance carried in accordance with this section shall be paid annually in
advance and shall contain a "Replacement Cost Endorsement" with a waiver of
depreciation and an "Agreed Amount Endorsement". The policies shall have a
deductible no greater than $100,000 unless agreed to by Mortgagee.
(b) Mortgagor, at its sole cost and expense, for the mutual
benefit of Mortgagor and Mortgagee, shall also obtain and maintain during the
entire term of this Mortgage the following Policies:
(i) Flood insurance if any part of the Mortgaged Property
is located in an area identified by the Federal Emergency Management
Agency as an area having special flood hazards and in which flood
insurance has been made available under the National Flood Insurance Act
of 1968, the Flood Disaster Protection Act of 1973 or the National Flood
Insurance Reform Act of 1994 (and any amendment or successor act thereto)
in an amount at least equal to the least of (A) the full replacement cost
of the Improvements and the Equipment within the parts of the Mortgaged
Property so affected, (B) the Allocated Loan Amount of the Mortgaged
Property or (C) the maximum limit of coverage available with respect to
the Improvements and Equipment under said Act. Mortgagor hereby agrees to
pay Mortgagee such fees as may be permitted under applicable law for the
costs incurred by Mortgagee in reasonably determining, from time to time,
whether the Mortgaged Property is then located within such area.
(ii) Comprehensive General Liability or Commercial General
Liability insurance, including a broad form comprehensive general
liability endorsement and coverage for broad form property damage,
contractual damages, personal injuries (including death resulting
therefrom) and a liquor liability endorsement if liquor is sold on the
Mortgaged Property, containing minimum limits of liability of $2 million
for the Mortgaged Property for both injury to or death of a person and for
property damage per occurrence, and such other liability insurance
reasonably requested by Mortgagee. In addition, at least $10 million for
the Mortgaged Property excess and/or umbrella liability insurance shall be
obtained and maintained for any and all claims, including all legal
liability imposed upon Mortgagor and all court costs and attorneys' fees
incurred in connection with the ownership, operation and maintenance of
the Mortgaged Property.
(iii) Rental loss and/or business interruption insurance
for a period of 12 months in an amount equal to the greater of (A)
estimated gross revenues from the operations of the Mortgaged Property
over 12 months or (B) the projected operating expenses (including
stabilized management fees, applicable reserve deposits, and debt service)
for the maintenance and operation of the Mortgaged Property over 12
months. The amount of such rental loss insurance shall be increased from
time to time during the term of this Mortgage as and when new Leases and
renewal Leases are entered into in accordance with the terms of this
Mortgage, to reflect all increased rent and increased additional rent
payable by all of the tenants under such Leases.
(iv) Insurance against loss or damage from explosion of
steam boilers, air conditioning equipment, high pressure piping, machinery
and equipment, pressure vessels or similar apparatus now or hereafter
installed in the Improvements and including broad form boiler and
machinery insurance (without exclusion for explosion) covering all boilers
or other pressure vessels, machinery and equipment located in, on, or
about the Premises and the Improvements. Coverage is required in an
amount at least equal to the full replacement cost of such equipment and
the building or buildings housing same. Coverage must extend to
electrical equipment, sprinkler systems, heating and air conditioning
equipment, refrigeration equipment and piping.
(v) If the Mortgaged Property includes commercial
property, worker's compensation insurance with respect to any employees of
Mortgagor, as required by any governmental authority or legal requirement.
(vi) During any period of repair or restoration, builder's
"all risk" insurance in an amount equal to not less than the full
insurable value of the Mortgaged Property against such risks (including,
without limitation, fire and extended coverage and collapse of the
Improvements to agreed limits) as Mortgagee may request, in form and
substance acceptable to Mortgagee.
(vii) Ordinance or law coverage to compensate for the cost
of demolition, increased cost of construction, and loss to any undamaged
portions of the Improvements.
(viii) If applicable, earthquake insurance in an amount
equal to the lesser of the initial Allocated Loan Amount of the Mortgaged
Property and the maximum amount permitted by law.
(ix) Windstorm insurance in an amount equal to the lesser
of the initial Allocated Loan Amount of the Mortgaged Property and the
maximum amount permitted by law.
(x) Such other insurance as may from time to time be
reasonably required by Mortgagee in order to protect its interests;
provided, such insurance is consistent with the types of insurance
required by other lenders of mortgage loans secured by properties of a
similar type in a similar geographic area.
(c) All Policies (i) shall be issued by companies approved by
Mortgagee and licensed to do business in the state where the Mortgaged Property
is located, with a claims paying ability rating of "AA" or better by Standard &
Poor's Ratings Services and a rating of "A:VIII" or better in the current
Best's Insurance Reports; (ii) shall be maintained throughout the term of this
Mortgage without cost to Mortgagee; (iii) shall contain a Non-Contributory
Standard Mortgagee Clause and a Lender's Loss Payable Endorsement, or their
equivalents, naming Mortgagee as the person to which all payments made by such
insurance company shall be paid; (iv) shall contain a waiver of subrogation
against Mortgagee; (v) shall be maintained throughout the term of the Mortgage
without cost to Mortgagee; (vi) shall be assigned and the originals (or
duplicate originals, if a blanket policy) delivered to Mortgagee (including
certified copies of the Policies in effect on the date hereof within thirty
(30) days after the closing of the Loan); (vii) shall contain such provisions
as Mortgagee deems reasonably necessary or desirable to protect its interest
(including, without limitation, endorsements providing that neither Mortgagor,
Mortgagee nor any other party shall be a co-insurer under said Policies and
that Mortgagee shall receive at least thirty (30) days prior written notice of
any modification or cancellation); provided, such insurance is consistent with
the types of insurance required by other lenders of mortgage loans secured by
properties of a similar type in a similar geographic area, (viii) shall be for
a term of not less than one year, (ix) shall be issued by an insurer licensed
in the state in which the Mortgaged Property is located, (x) shall provide that
Mortgagee may, but shall not be obligated to, make premium payments to prevent
any cancellation, endorsement, alteration or reissuance, and such payments
shall be accepted by the insurer to prevent same, (xi) shall be reasonably
satisfactory in form and substance to Mortgagee and shall be approved by
Mortgagee as to amounts, form, risk coverage, deductibles, loss payees and
insureds; and (xii) shall provide that all claims shall be allowable on events
as they occur. Upon demand therefor, Mortgagor shall reimburse Mortgagee as
provided in Section 24(a) for all of Mortgagee's (or its servicer's) reasonable
costs and expenses incurred in obtaining any or all of the Policies or
otherwise causing the compliance with the terms and provisions of this Section
3, including (without limitation) obtaining updated flood hazard certificates
and replacement of any so-called "forced placed" insurance coverages.
Mortgagor shall pay the premiums for such Policies (the "Insurance Premiums")
as the same become due and payable and shall furnish to Mortgagee evidence of
the renewal of each of the Policies with receipts for the payment of the
Insurance Premiums or other evidence of such payment reasonably satisfactory to
Mortgagee (provided, however, that Mortgagor is not required to furnish such
evidence of payment to Mortgagee in the event that such Insurance Premiums have
been paid by Mortgagee pursuant to Section 5 hereof). If Mortgagor does not
furnish such evidence and receipts at least thirty (30) days prior to the
expiration of any expiring Policy, then Mortgagee may procure, but shall not be
obligated to procure, such insurance and pay the Insurance Premiums therefor,
and Mortgagor agrees to reimburse Mortgagee for the cost of such Insurance
Premiums promptly on demand. Within thirty (30) days after request by
Mortgagee, Mortgagor shall obtain such increases in the amounts of coverage
required hereunder as may be reasonably requested by Mortgagee, taking into
consideration changes in the value of money over time, changes in liability
laws, changes in prudent customs and practices, and the like; provided, such
insurance is consistent with the amounts of insurance required by other lenders
of mortgage loans secured by properties of a similar type in a similar
geographic area. Mortgagor shall give Mortgagee prompt written notice if
Mortgagor receives from any insurer any written notification or threat of any
actions or proceedings regarding the non-compliance or non-conformity of the
Mortgaged Property with any insurance requirements. For purposes hereof,
references to "Mortgagee" shall also be deemed to include, without limitation,
Mortgagee's successors, assigns or other designees.
(d) In the event of the entry of a judgment of foreclosure,
sale of the Mortgaged Property by non-judicial foreclosure sale, or delivery of
a deed in lieu of foreclosure, Mortgagee hereby is authorized (without the
consent of Mortgagor) to assign any and all Policies to the purchaser or
transferee thereunder, or to take such other steps as Mortgagee may deem
advisable to cause the interest of such transferee or purchaser to be protected
by any of the Policies without credit or allowance to Mortgagor for prepaid
premiums thereon.
(e) If the Mortgaged Property shall be damaged or destroyed, in
whole or in part, by fire or other casualty (an "Insured Casualty"), the
Mortgagor shall give prompt notice thereof to the Mortgagee and, provided
Mortgagee makes the insurance proceeds available to Mortgagor, Mortgagor shall
promptly repair the Mortgaged Property to be at least equal value and of
substantially the same character as prior to such damage, all to be effected in
accordance with applicable law and plans and specifications approved in advance
by Mortgagee. The expenses incurred by Mortgagee in the adjustment and
collection of insurance proceeds shall become part of the Debt and be secured
hereby and shall be reimbursed by Mortgagor to Mortgagee upon demand.
(f) In case of loss or damages covered by any of the Policies,
the following provisions shall apply:
(i) In the event of an Insured Casualty that does not
exceed $250,000, Mortgagor may settle and adjust any claim without the
consent of Mortgagee and agree with the insurance company or companies on
the amount to be paid upon the loss; provided that such adjustment is
carried out in a competent and timely manner. In such case, Mortgagor is
hereby authorized to collect and receipt for any such insurance proceeds.
(ii) In the event an Insured Casualty shall exceed
$250,000, then and in that event, Mortgagee may settle and adjust any
claim without the consent of Mortgagor and agree with the insurance
company or companies on the amount to be paid on the loss and the proceeds
of any such policy shall be due and payable solely to Mortgagee and held
in escrow by Mortgagee in accordance with the terms of this Mortgage.
(iii) In the event of any Insured Casualty, if (A) the loss
is in an aggregate amount less than twenty-five percent (25%) of the
portion of the original principal balance of the Note equal to the initial
Allocated Loan Amount (as defined in the Cash Management, Collateral and
Security Agreement) of the Mortgaged Property, and (B), in the reasonable
judgment of Mortgagee, the Mortgaged Property can be restored within nine
(9) months after insurance proceeds are made available to an economic unit
not less valuable (including an assessment of the impact of the
termination of any Leases due to such Insured Casualty) and not less
useful than the same was prior to the Insured Casualty, and after such
restoration will adequately secure the outstanding balance of the Debt,
and such restoration can be completed on or before six (6) months prior to
the Maturity Date of the Loan, and (C) no Event of Default (hereinafter
defined) shall have occurred and be then continuing, then the proceeds of
insurance shall be applied to reimburse Mortgagor for the cost of
restoring, repairing, replacing or rebuilding the Mortgaged Property or
part thereof subject to Insured Casualty, as provided for below; and
Mortgagor hereby covenants and agrees forthwith to commence and diligently
to prosecute such restoring, repairing, replacing or rebuilding; provided,
however, in any event Mortgagor shall pay all costs (and if required by
Mortgagee, Mortgagor shall deposit the total thereof with Mortgagee in
advance) of such restoring, repairing, replacing or rebuilding in excess
of the net proceeds of insurance made available pursuant to the terms
hereof.
(iv) Except as provided above, the proceeds of insurance
collected upon any Insured Casualty shall, at the option of Mortgagee in
its sole discretion, be applied to the payment of the Debt or applied to
reimburse Mortgagor for the cost of restoring, repairing, replacing or
rebuilding the Mortgaged Property or part thereof subject to the Insured
Casualty, in the manner set forth below. Any such application to the Debt
shall not be considered a voluntary prepayment requiring payment of the
prepayment consideration provided in the Note, and shall not reduce or
postpone any payments otherwise required pursuant to the Note, other than
the final payment on the Note.
(v) In the event Mortgagor is entitled to reimbursement
out of insurance proceeds held by Mortgagee, such proceeds shall be
disbursed from time to time upon Mortgagee being furnished with (A)
evidence satisfactory to it (which evidence may include inspection[s] of
the work performed) that the restoration, repair, replacement and
rebuilding covered by the disbursement has been completed substantially in
accordance with plans and specifications approved by Mortgagee, such
approval not to be unreasonably withheld or delayed, (B) evidence
satisfactory to it of the estimated cost of completion of the restoration,
repair, replacement and rebuilding, (C) assurances satisfactory to
Mortgagee that sufficient funds are available, in addition to the proceeds
of insurance, to complete the proposed restoration, repair, replacement
and rebuilding, and (D) such architect's certificates, waivers of lien,
contractor's sworn statements, title insurance endorsements, bonds, plats
of survey and such other evidences of cost, payment and performance as
Mortgagee may reasonably require and approve; and Mortgagee may, in any
event, require that all plans and specifications for such restoration,
repair, replacement and rebuilding be submitted to and approved by
Mortgagee prior to commencement of work, such approval not to be
unreasonably withheld or delayed. With respect to disbursements to be
made by Mortgagee: (A) no payment made prior to the final completion of
the restoration, repair, replacement and rebuilding shall exceed ninety
percent (90%) of the value of the work performed from time to time;
(B) funds other than proceeds of insurance shall be disbursed prior to
disbursement of such proceeds; and (C) at all times, the undisbursed
balance of such proceeds remaining in the hands of Mortgagee, together
with funds deposited for that purpose or irrevocably committed to the
satisfaction of Mortgagee by or on behalf of Mortgagor for that purpose,
shall be at least sufficient in the reasonable judgment of Mortgagee to
pay for the cost of completion of the restoration, repair, replacement or
rebuilding, free and clear of all liens or claims for lien and the costs
described in Subsection (vi) below. Any surplus which may remain out of
insurance proceeds held by Mortgagee after payment of such costs of
restoration, repair, replacement or rebuilding shall be paid, at
Mortgagee's option, (x) to Mortgagee and applied to repay the Debt on
subsequent Payment Dates or (y) to Mortgagor, but subject to the rights of
any other party entitled thereto. In no event shall Mortgagee assume any
duty or obligation for the adequacy, form or content of any such plans and
specifications, nor for the performance, quality or workmanship of any
restoration, repair, replacement and rebuilding.
(vi) Notwithstanding anything to the contrary contained
herein, the proceeds of insurance reimbursed to Mortgagor in accordance
with the terms and provisions of this Mortgage shall be reduced by the
reasonable costs (if any) incurred by Mortgagee in the adjustment and
collection thereof and by the reasonable costs incurred by Mortgagee of
paying out such proceeds (including, without limitation, reasonable
attorneys' fees and costs paid to third parties for inspecting the
restoration, repair, replacement and rebuilding and reviewing the plans
and specifications therefor).
4. Payment of Taxes and Other Charges. Subject to the provisions
of Section 5 below, Mortgagor shall pay all taxes, assessments, water rates and
sewer rents, now or hereafter levied or assessed or imposed against the
Mortgaged Property or any part thereof (the "Taxes") and all ground rents,
maintenance charges, other governmental impositions, and other charges,
including without limitation vault charges and license fees for the use of
vaults, chutes and similar areas adjoining the Premises, now or hereafter
levied or assessed or imposed against the Mortgaged Property or any part
thereof (the "Other Charges") as the same become due and payable. Mortgagor
will deliver to Mortgagee, promptly upon Mortgagee's request, evidence
satisfactory to Mortgagee that the Taxes and Other Charges have been so paid or
are not then delinquent. Mortgagor shall not suffer and shall promptly cause
to be paid and discharged any lien or charge whatsoever which may be or become
a lien or charge against the Mortgaged Property, and shall promptly pay for all
utility services provided to the Mortgaged Property. Mortgagor shall furnish
to Mortgagee or its designee receipts for the payment of the Taxes, Other
Charges and said utility services prior to the date the same shall become
delinquent; provided, however, that Mortgagor is not required to furnish such
receipts for payment of Taxes in the event that such Taxes have been paid by
Mortgagee pursuant to Section 5 hereof.
5. Tax and Insurance Escrow Fund. On the Closing Date, Mortgagor
shall make an initial deposit to the Tax and Insurance Escrow Fund, as
hereinafter defined, in an amount which, when added to the monthly amounts to
be deposited as specified below, will be sufficient in the estimation of
Mortgagee to satisfy the next due taxes, assessments, insurance premiums and
other similar charges, one month prior to their respective due dates.
Beginning on the date the first constant monthly payment is due under the Note,
and on the first day of each calendar month thereafter, Mortgagor shall, at the
option of Mortgagee or its designee (including the servicer of the Debt), pay
to Mortgagee (a) one-twelfth of an amount which would be sufficient to pay the
Taxes payable, or estimated by Mortgagee to be payable, during the next ensuing
twelve (12) months, and (b) one-twelfth of an amount which would be sufficient
to pay the Insurance Premiums due for the renewal of the coverage afforded by
the Policies upon the expiration thereof (said amounts in (a) and (b) above
hereinafter called the "Tax and Insurance Escrow Fund"); provided, that
notwithstanding the foregoing, the amount referred to in the preceding clause
(a) shall be adjusted downward to reflect any Taxes which Wal-Mart Stores Inc.
as tenant pays directly to the applicable governmental authority. Mortgagee
may, in its sole discretion, retain a third party tax consultant to obtain tax
certificates or other evidence or estimates of tax due or to become due or to
verify the payment of taxes and Mortgagor will promptly reimburse Mortgagee for
the reasonable cost of retaining any such third parties or obtaining such
certificates. Any unpaid reimbursements for the aforesaid shall be added to
the Debt. The Tax and Insurance Escrow Fund and the payments of interest or
principal or both, payable pursuant to the Note, shall be added together and
shall be paid as an aggregate sum by Mortgagor to Mortgagee. Mortgagor hereby
pledges to Mortgagee any and all monies now or hereafter deposited in the Tax
and Insurance Escrow Fund as additional security for the payment of the Debt.
Mortgagee will apply the Tax and Insurance Escrow Fund to payments of Taxes and
Insurance Premiums required to be made by Mortgagor pursuant to Sections 3 and
4 hereof. In making any payment relating to the Tax and Insurance Escrow Fund,
Mortgagee may do so according to any bill, statement or estimate procured from
the appropriate public office (with respect to Taxes) or insurer or agent (with
respect to Insurance Premiums), without inquiry into the accuracy of such bill,
statement or estimate or into the validity of any tax, assessment, sale,
forfeiture, tax lien or title or claim thereof. If the amount of the Tax and
Insurance Escrow Fund shall exceed the amounts due for Taxes and Insurance
Premiums pursuant to Sections 3 and 4 hereof, Mortgagee shall credit such
excess against future payments to be made to the Tax and Insurance Escrow Fund.
In allocating such excess, Mortgagee may deal with the person shown on the
records of Mortgagee to be the owner of the Mortgaged Property. If at any time
Mortgagee determines that the Tax and Insurance Escrow Fund is not or will not
be sufficient to pay the items set forth in (a) and (b) above, Mortgagee shall
notify Mortgagor of such determination and Mortgagor shall increase its monthly
payments to Mortgagee by the amount that Mortgagee estimates is sufficient to
make up the deficiency at least thirty (30) days prior to delinquency of the
Taxes and/or expiration of the Policies, as the case may be. Upon the
occurrence of an Event of Default, Mortgagee may apply any sums then present in
the Escrow Fund to the payment of the following items in any order in its sole
discretion. Until expended or applied as above provided, any amounts in the
Tax and Insurance Escrow Fund shall constitute additional security for the
Debt. The Tax and Insurance Escrow Fund shall not constitute a trust fund and
may only be commingled with other monies held by Mortgagee as collateral for
the Debt (or, in the event of a Secondary Market Transaction, such
transaction). Unless otherwise required by applicable law, no earnings or
interest on the Tax and Insurance Escrow Fund shall be payable to Mortgagor
even if the Mortgagee or its servicer is paid a fee and/or receives interest or
other income in connection with the deposit or placement of such fund (in which
event such income shall be reported under Mortgagee's or its servicer's tax
identification number, as applicable). Upon payment of the Debt and
performance by Mortgagor of all its obligations under this Mortgage and the
other Loan Documents, any amounts remaining in the Tax and Insurance Escrow
Fund shall be refunded to Mortgagor.
6. Replacement Reserve Fund. Mortgagor and the other mortgagors
pledging properties securing the Note shall pay to Mortgagee beginning on the
date the first constant monthly payment is due under the Note, and on the first
day of each calendar month thereafter, an amount equal to one-twelfth of
$251,805, the amount estimated by Mortgagee in its sole discretion to be due
for replacements and repairs required to be made to the Mortgaged Property and
the other properties pledged to secure the Note during the calendar year for
the replacements and repairs deemed reasonably necessary by Mortgagee (the
"Replacement Reserve Fund"). Mortgagor hereby pledges (and grants a lien and
security interest) to Mortgagee any and all monies now or hereafter deposited
in the Replacement Reserve Fund as additional security for the payment of the
Debt. As required in Section 17 below, Mortgagor shall deliver to Mortgagee a
capital expenditure budget (the "Capital Expenditure Budget") itemizing the
replacements and capital repairs which are anticipated to be made to the
Mortgaged Property during the next immediately succeeding calendar year.
Provided that no Event of Default shall exist and remain uncured, Mortgagee
shall make disbursements from the Replacement Reserve Fund as requested, in
writing, by Mortgagor, and approved by Mortgagee, such approval not to be
unreasonably withheld, on a quarterly basis in increments of no less than
$10,000 upon delivery by Mortgagor of copies of invoices for the amounts
requested, a certification from the Mortgagor stating: (a) the nature and type
of the related replacement or repair, (b) that the related replacement or
repair has been completed in a good and workmanlike manner and (c) that the
related replacement or repair has been paid for in full (or, with respect to
requests in excess of $10,000, will be paid for in full from the requested
disbursement) and, if required by Mortgagee, lien waivers and releases from all
parties furnishing materials and/or services in connection with the requested
payment. Any disbursement by Mortgagee hereunder for a capital item in excess
of $10,000 and not already paid for by Mortgagor, shall be made by check,
payable to the applicable contractor, supplier, materialman, mechanic,
subcontractor or other party to whom payment is due in connection with such
capital item. Mortgagee may require an inspection of the Mortgaged Property at
Mortgagor's expense prior to making a disbursement in order to verify
completion of replacements and repairs for which reimbursement is sought. The
Replacement Reserve Fund is solely for the protection of Mortgagee and entails
no responsibility or obligation on Mortgagee's part beyond the payment of the
costs and expenses described in this section in accordance with the terms
hereof and beyond the allowing of due credit for the sums actually received.
The Replacement Reserve Fund shall be held in an interest bearing account in
Mortgagee's name at a financial institution selected by Mortgagee in its sole
discretion. All earnings or interest on the Replacement Reserve Fund shall be
and become part of such Replacement Reserve Fund and shall be disbursed as
provided in this Section 6. Upon the occurrence and during the continuance of
an Event of Default, Mortgagee may apply any sums then present in the
Replacement Reserve Fund to the payment of the Debt in any order in its sole
discretion. Upon payment of the Debt and performance by Mortgagor of all its
obligations under this Mortgage and the other Loan Documents, any amounts
remaining in the Replacement Reserve Fund shall be refunded to Mortgagor. The
Replacement Reserve Fund shall not constitute a trust fund and may only be
commingled with other monies held by Mortgagee as collateral for the Debt (or,
in the event of a Secondary Market Transaction, such transaction).
7. Condemnation. (a) Mortgagor shall promptly give Mortgagee
written notice of the actual or threatened commencement of any condemnation or
eminent domain proceeding and shall deliver to Mortgagee copies of any and all
papers served in connection with such proceedings. Mortgagee is hereby
irrevocably appointed as Mortgagor's attorney-in-fact, coupled with an
interest, with exclusive power to collect, receive and retain any award or
payment for said condemnation or eminent domain and to make any compromise or
settlement in connection with such proceeding, subject to the provisions of
this Mortgage. Notwithstanding any taking by any public or quasi-public
authority through eminent domain or otherwise (including but not limited to any
transfer made in lieu of or in anticipation of the exercise of such taking),
Mortgagor shall continue to pay the Debt at the time and in the manner provided
for its payment in the Note, in this Mortgage and the other Loan Documents and
the Debt shall not be reduced until any award or payment therefor shall have
been actually received after expenses of collection and applied by Mortgagee to
the discharge of the Debt. Mortgagee shall not be limited to the interest paid
on the award by the condemning authority but shall be entitled to receive out
of the award interest at the rate or rates provided herein and in the Note.
Mortgagor shall cause the award or payment made in any condemnation or eminent
domain proceeding, which is payable to Mortgagor, to be paid directly to
Mortgagee. Subject to the provisions of Section 7(b), Mortgagee may apply any
such award or payment to the reduction or discharge of the Debt whether or not
then due and payable (such application to be without any prepayment
consideration, except that if an Event of Default has occurred and is
continuing, then such application shall be subject to the prepayment
consideration computed in accordance with the Note). If the Mortgaged Property
is sold, through foreclosure or otherwise, prior to the receipt by Mortgagee of
such award or payment, and prior to the payment in full of the Debt, Mortgagee
shall have the right, whether or not a deficiency judgment on the Note shall
have been sought, recovered or denied, to receive said award or payment, or a
portion thereof sufficient to pay the Debt.
(b) Notwithstanding the provisions of Subsection (a) above, in
the event of a condemnation of less than all of the Mortgaged Property where:
(i) no Event of Default shall have occurred and be continuing; (ii) the
condemnation will not, in Mortgagee's sole reasonable discretion, result in a
material adverse effect to the use or operation of the Mortgaged Property, the
Mortgagor's ability to make payments hereunder, or the operating income from
the Mortgaged Property; and (iii) the amount of any award or payment that is
uncontested shall have been paid to Mortgagee, then Mortgagee and Mortgagor
shall jointly make any such compromise or settlement hereunder, or otherwise
adjudicate such claim, and such award or payment (less amounts payable to
Mortgagee for its costs and expenses incurred in connection therewith) shall be
paid by Mortgagee to Mortgagor in the same manner as provided by Subsection
3(f)(v) above to restore the Mortgaged Property to an architecturally and
functionally compatible condition.
8. Representations Concerning Loan. Mortgagor represents, warrants
and covenants as follows:
(a) The Mortgagor shall comply with all of the recommendations
concerning the maintenance and repair of the Mortgaged Property which are
contained in the inspection and engineering report which was delivered to
Mortgagee in connection with the origination of the Loan.
(b) In the event Mortgagor decides to engage a third party
management company to manage the Mortgaged Property, Mortgagor agrees to engage
a management company reasonably satisfactory to Mortgagee, pursuant to a
management agreement reasonably satisfactory to Mortgagee, and to cause such
management company to execute the Acknowledgment of Property Manager in form
and substance as executed by the existing manager of the Mortgaged Property in
connection with the Loan, and to deliver to Mortgagee promptly upon such
engagement, a fully-executed copy of the management agreement, together with
the Acknowledgment of Property Manager signed by such manager.
(c) In the event Mortgagee determines in its sole and
reasonable discretion that the quality of management for the Mortgaged Property
has deteriorated, Mortgagee shall provide to Mortgagor written notice of such
deterioration and thirty (30) days from the date of such notice to remedy such
deterioration. In the event Mortgagee is not satisfied that the deterioration
has been remedied, Mortgagor agrees to engage a management company reasonably
satisfactory to Mortgagee within thirty (30) days after the expiration of such
thirty (30) day period, pursuant to a management agreement reasonably
satisfactory to Mortgagee, and to cause such management company to execute the
Acknowledgment of Property Manager in form and substance as executed by the
existing manager of the Mortgaged Property in connection with the Loan, and to
deliver to Mortgagee promptly upon such engagement, a fully-executed copy of
the management agreement, together with the Acknowledgment of Property Manager
signed by such manager.
(d) The representations and warranties contained in the Closing
Certificate executed by Mortgagor in connection with the Note (which
certificate constitutes one of the Loan Documents) are true and correct and
Mortgagor shall observe the covenants contained therein.
9. Single Purpose Entity/Separateness. Mortgagor represents,
warrants and covenants as follows:
(a) Mortgagor does not own and will not own any asset or
property other than (i) the Mortgaged Property, and (ii) incidental personal
property necessary for the ownership or operation of the Mortgaged Property.
(b) Mortgagor will not engage in any business other than the
ownership, management and operation of the Mortgaged Property and Mortgagor
will conduct and operate its business as presently conducted and operated.
(c) Other than any lease of a portion of the Mortgaged Property
dated as of the date hereof, Mortgagor will not enter into any contract or
agreement with any guarantor of the Debt or any part thereof (a "Guarantor") or
any party which is directly or indirectly controlling, controlled by or under
common control with Mortgagor or Guarantor (an "Affiliate"), except upon terms
and conditions that are intrinsically fair and substantially similar to those
that would be available on an arms-length basis with third parties other than
any Guarantor or Affiliate.
(d) Mortgagor has not incurred and will not incur any
indebtedness, secured or unsecured, direct or indirect, absolute or contingent
(including guaranteeing any obligation), other than (i) the Debt, (ii) trade
and operational debt incurred in the ordinary course of business with trade
creditors and in amounts as are normal and reasonable under the circumstances;
and (iii) debt incurred in the financing of equipment and other personal
property used on the Mortgaged Property. No indebtedness other than the Debt
may be secured (senior, subordinate or pari passu) by the Mortgaged Property.
(e) Mortgagor has not made and will not make any loans or
advances to any third party, nor to Guarantor, any Affiliate or any constituent
party of Mortgagor.
(f) Mortgagor is and will remain solvent and Mortgagor will pay
its debts from its assets as the same shall become due.
(g) Mortgagor has done or caused to be done and will do all
things necessary, to preserve its existence, and Mortgagor will not, nor will
Mortgagor permit Guarantor to amend, modify or otherwise change the partnership
certificate, partnership agreement, articles of incorporation and bylaws,
operating agreement, trust or other organizational documents of Mortgagor or
Guarantor in a manner which would adversely affect the Mortgagor's existence as
a single-purpose entity, without the prior written consent of Mortgagee.
(h) Mortgagor will maintain books and records and bank accounts
separate from those of its Affiliates and any constituent party of Mortgagor
(other than any other maker of the Note).
(i) Mortgagor will be, and at all times will hold itself out to
the public as, a legal entity separate and distinct from any other entity
(including any Affiliate, any constituent party of Mortgagor or any Guarantor),
shall correct any known misunderstanding regarding its status as a separate
entity, shall conduct business in its own name, shall not identify itself or
any of its Affiliates as a division or part of the other and shall maintain and
utilize separate stationery, invoices and checks; provided, that such items may
identify its relationship vis-a-vis the Guarantor.
(j) Mortgagor will preserve and keep in full force and effect
its existence, good standing and qualification to do business in the state in
which the Mortgaged Property is located.
(k) Mortgagor will maintain adequate capital for the normal
obligations reasonably foreseeable in a business of its size and character and
in light of its contemplated business operations.
(l) Neither Mortgagor nor any constituent party of Mortgagor
will seek the dissolution or winding up, in whole or in part, of Mortgagor, nor
will Mortgagor merge with or be consolidated into any other entity (other than
any other maker of the Note).
(m) Mortgagor will not commingle the funds and other assets of
Mortgagor with those of any Affiliate, any Guarantor, any constituent party of
Mortgagor or any other person (other than any other maker of the Note).
(n) Mortgagor has and will maintain its assets in such a manner
that it will not be costly or difficult to segregate, ascertain or identify its
individual assets from those of any constituent party of Mortgagor, Affiliate,
Guarantor or any other person.
(o) Mortgagor does not and will not hold itself out to be
responsible for the debts or obligations of any other person (other than any
other maker of the Note) (provided, that the foregoing shall not prevent
Mortgagor from being and holding itself responsible for expenses incurred or
obligations undertaken by the property manager of the Mortgaged Property in
respect of its duties regarding the Mortgaged Property).
(p) Mortgagor shall obtain and maintain in full force and
effect, and abide by and satisfy the material terms and conditions of, all
material permits, licenses, registrations and other authorizations with or
granted by any governmental authorities that may be required from time to time
with respect to the performance of its obligations under this Mortgage.
(q) If Mortgagor is a limited partnership, each general partner
(each, an "SPC Party") shall be a corporation whose sole asset is its interest
in Mortgagor and each such SPC Party will at all times comply, and will cause
Mortgagor to comply, with each of the representations, warranties, and
covenants contained in this Section 9 as if such representation, warranty or
covenant was made directly by such SPC Party.
(r) Mortgagor shall at all times cause there to be at least one
duly appointed member of the board of directors (an "Independent Director") of
Mortgagor and each SPC Party in Mortgagor reasonably satisfactory to Mortgagee
who shall not have been at the time of such individual's appointment, and may
not have been at any time during the preceding five years (i) a shareholder of,
or an officer, director, partner or employee of, Mortgagor or any of its
shareholders, subsidiaries or affiliates (other than any other maker of the
Note or its corporate general partner, if applicable), (ii) a customer of, or
supplier to, Mortgagor or any of its shareholders, subsidiaries or affiliates,
(iii) a person or other entity controlling or under common control with any
such shareholder, partner, supplier or customer, or (iv) a member of the
immediate family of any such shareholder, officer, director, partner, employee,
supplier or customer of Mortgagor. As used herein, the term "control" means
the possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a person or entity, whether through
ownership of voting securities, by contract or otherwise.
(s) Mortgagor shall not cause or permit the board of directors
of each SPC Party in Mortgagor to take any action which, under the terms of any
certificate of incorporation, by-laws or any voting trust agreement with
respect to any common stock, requires the vote of the board of directors of
Mortgagor and/or any SPC Party in Mortgagor unless at the time of such action
there shall be at least one member who is an Independent Director.
(t) Mortgagor shall conduct its business so that the
assumptions made with respect to Mortgagor in that certain opinion letter dated
of even date herewith (the "Nonconsolidation Opinion") delivered by Robinson
Silverman Pearce Aronsohn & Berman LLP in connection with the Loan shall be
true and correct in all respects.
10. Maintenance of Mortgaged Property. Mortgagor shall cause the
Mortgaged Property to be operated and maintained in a good and safe condition
and repair and in keeping with the condition and repair of properties of a
similar use, value, age, nature and construction. Mortgagor shall not use,
maintain or operate the Mortgaged Property in any manner which constitutes a
public or private nuisance or which makes void, voidable, or cancelable, or
materially increases the premium of, any insurance then in force with respect
thereto. The Improvements and the Equipment shall not be removed, demolished
or materially altered (except for alteration or demolition permitted by the
tenants under the Leases and for normal replacement of the Equipment) without
the consent of Mortgagee. Mortgagor shall promptly comply in all material
respects with all laws, orders and ordinances affecting the Mortgaged Property,
or the use thereof. Mortgagor shall promptly repair, replace or rebuild any
part of the Mortgaged Property which may be destroyed by any casualty, or
become damaged, worn or dilapidated or which may be affected by any proceeding
of the character referred to in Section 7 hereof and shall complete and pay for
any structure at any time in the process of construction or repair on the
Premises.
11. Use of Mortgaged Property. Mortgagor shall not initiate, join
in, acquiesce in, or consent to any change in any private restrictive covenant,
zoning law or other public or private restriction, limiting or defining the
uses which may be made of the Mortgaged Property or any part thereof, nor shall
Mortgagor initiate, join in, acquiesce in, or consent to any zoning change or
zoning matter affecting the Mortgaged Property. If under applicable zoning
provisions the use of all or any portion of the Mortgaged Property is or shall
become a nonconforming use, Mortgagor will not cause or permit such
nonconforming use to be discontinued or abandoned without the express written
consent of Mortgagee. Mortgagor shall not permit or suffer to occur any waste
on or to the Mortgaged Property or to any portion thereof and shall not take
any steps whatsoever to convert the Mortgaged Property, or any portion thereof,
to a condominium or cooperative form of management. Mortgagor will not install
or permit to be installed on the Premises any underground storage tank without
the written consent of Mortgagee.
12. Transfer or Encumbrance of the Mortgaged Property.
(a) Mortgagor acknowledges that Mortgagee has examined and relied on the
creditworthiness and experience of Mortgagor in owning and operating properties
such as the Mortgaged Property in agreeing to make the loan secured hereby, and
that Mortgagee will continue to rely on Mortgagor's ownership of the Mortgaged
Property as a means of maintaining the value of the Mortgaged Property as
security for repayment of the Debt. Mortgagor acknowledges that Mortgagee has
a valid interest in maintaining the value of the Mortgaged Property so as to
ensure that, should Mortgagor default in the repayment of the Debt, Mortgagee
can recover the Debt by a sale of the Mortgaged Property. Without the prior
written consent of Mortgagee:
(i) neither Mortgagor nor any other Person having an
ownership or beneficial interest in Mortgagor shall (A) directly or
indirectly sell, transfer, convey, mortgage, pledge, or assign any
interest in the Mortgaged Property or any part thereof (including any
partnership or any other ownership interest in Mortgagor); (B) further
encumber, alienate, grant a lien or grant any other interest in the
Mortgaged Property or any part thereof (including any partnership or other
ownership interest in Mortgagor), whether voluntarily or involuntarily; or
(C) enter into any easement or other agreement granting rights in or
restricting the use or development of the Mortgaged Property;
(ii) no new general partner, member, shareholder or
limited partner having the ability to control the affairs of Mortgagor
shall be admitted to or created in Mortgagor (nor shall any existing
general partner or member or shareholder or controlling limited partner
withdraw from Mortgagor), and no change in Mortgagor's organizational
documents relating to control over Mortgagor and/or the Mortgaged Property
shall be effected; and
(iii) no transfer shall be permitted which would cause
Kranzco Realty Trust ("Kranzco") to own less than fifty-one percent (51%)
of the beneficial interest in Mortgagor and the Mortgaged Property and
less than one hundred percent (100%) of the voting stock in the corporate
general partner or managing member of Mortgagor and not to have the power
to direct the affairs of Mortgagor;
provided, that notwithstanding the foregoing, no sale of the Mortgaged Property
by the Mortgagor may occur prior to the fourth (4th) anniversary of the date of
this Mortgage and any such sale after the fourth (4th) anniversary of the date
of this Mortgage may only be consummated in accordance with the provisions of
this Mortgage and the Cash Management, Collateral and Security Agreement, dated
as of the date hereof by and among Mortgagor and the other mortgagors pledging
properties securing the Note, Mortgagee and LaSalle National Bank, as
collateral agent (the "Cash Management, Collateral and Security Agreement").
(b) As used in this Section 12, "transfer" shall include (i) an
installment sales agreement wherein Mortgagor agrees to sell the Mortgaged
Property or any part thereof for a price to be paid in installments; (ii) an
agreement by Mortgagor leasing all or a substantial part of the Mortgaged
Property for other than actual occupancy by a space tenant thereunder or a
sale, assignment or other transfer of, or the grant of a security interest in,
Mortgagor's right, title and interest in and to any Leases or any Rents, (iii)
the sale, transfer, conveyance, mortgage, pledge, or assignment of the legal or
beneficial ownership of any partnership interest in any general partner in
Mortgagor that is a partnership or membership interest in any managing member
in Mortgagor that is a limited liability company, (iv) the sale, transfer,
conveyance, mortgage, pledge, or assignment of the legal or beneficial
ownership of any voting stock in any general partner in Mortgagor that is a
corporation, and (v) a transfer of management of the Mortgaged Property to an
entity other than Kranzco; "transfer" shall not include:
(A) the leasing of portions of the Mortgaged Property so long
as Mortgagor complies with the provisions of the Loan Documents relating
to such leasing activity;
(B) the transfers of limited partnership interests in Mortgagor
so long as the results of such transfers do not result in the transfer of
more than 49% of the ownership or beneficial interest in the Mortgagor and
the provisions of Subsections 12(a)(ii) and 12(a)(iii) are satisfied;
(C) a transfer that occurs by inheritance, devise, or bequest
or by operation of law upon the death of a natural person who is an owner
of the Mortgaged Property or the owner of a direct or indirect ownership
interest in Mortgagor; provided, that, if such person held a managerial or
control position with respect to Mortgagor (as determined by Mortgagee),
unless such person is replaced by another person acceptable to Mortgagee
in its sole discretion within thirty (30) days after such death, such
event shall be deemed to be a "transfer";
(D) a sale or other disposition of obsolete or worn-out
personal property which is contemporaneously replaced by comparable
personal property of equal or greater value which is free and clear of
liens, encumbrances and security interests other than those created by the
Loan Documents;
(E) the grant of an easement, if prior to the granting of the
easement Mortgagor causes to be submitted to Mortgagee all information
required by Mortgagee to evaluate the easement, and if Mortgagee
determines that the easement will not materially affect the operation of
the Mortgaged Property or Mortgagee's interest in the Mortgaged Property
and Mortgagor pays to Mortgagee, on demand, all cost and expense incurred
by Mortgagee in connection with reviewing Mortgagor's request;
(F) purchases and sales of stock of Kranzco on a national stock
exchange; or
(G) a transfer of management of the Mortgaged Property pursuant
to and in connection with or as a result of a merger of Kranzco with
another entity; provided, that in the event a Secondary Market Transaction
shall have occurred, such event referred to in this clause (G) shall not
be a "transfer" only so long as it shall not result in a re-qualification,
reduction or withdrawal of any rating initially assigned or to be assigned
in a Secondary Market Transaction by the Rating Agencies (as hereinafter
defined).
(c) Mortgagee shall not be required to demonstrate any actual
impairment of its security or any increased risk of default hereunder in order
to declare the Debt immediately due and payable upon Mortgagor's sale,
conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Mortgaged Property in violation of the provisions of this Section 12. This
provision shall apply to every sale, conveyance, alienation, mortgage,
encumbrance, pledge or transfer of the Mortgaged Property regardless of whether
voluntary or not, or whether or not Mortgagee has consented to any previous
sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the
Mortgaged Property.
(d) Mortgagor agrees to bear and shall pay or reimburse
Mortgagee on demand for all reasonable expenses (including, without limitation,
reasonable attorneys' fees and disbursements, title search costs and title
insurance endorsement premiums) incurred by Mortgagee in connection with the
review, approval and documentation of any such sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer. In addition, prior to the
effectiveness of any such transfer following the initial transfer, Mortgagee
shall have received an assumption fee equal to one percent (1%) of the then
unpaid principal balance of the Note.
(e) Mortgagee's consent to one sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Mortgaged Property or any part
thereof shall not be deemed to be a waiver of Mortgagee's right to require such
consent to any future occurrence of same. Any sale, conveyance, alienation,
mortgage, encumbrance, pledge or transfer of the Mortgaged Property made in
contravention of this section shall be null and void and of no force and
effect.
(f) Notwithstanding the foregoing provisions of Subsections
12(a) and (b) above, Mortgagee's consent to the one-time sale or transfer of
the Mortgaged Property and the other mortgaged properties securing the Note
will not be unreasonably withheld after consideration of all relevant factors,
provided that:
(i) no Event of Default or event which with the giving of
notice or the passage of time would constitute an Event of Default shall
have occurred and remain uncured;
(ii) the proposed transferee ("Transferee") shall be a
reputable entity or person of good character, creditworthy, with
sufficient financial worth considering the obligations assumed and
undertaken, as evidenced by financial statements and other information
reasonably requested by Mortgagee;
(iii) the Transferee and its property manager shall have
sufficient experience in the ownership and management of properties
similar to the Mortgaged Property, and Mortgagee shall be provided with
reasonable evidence thereof (and Mortgagee reserves the right to approve
the Transferee without approving the substitution of the property
manager);
(iv) unless otherwise waived by Mortgagee based on
applicable guidelines of the Rating Agencies (as hereinafter defined),
Mortgagee shall have recommendations in writing from the Rating Agencies
to the effect that such transfer will not result in a re-qualification,
reduction or withdrawal of any rating initially assigned or to be assigned
in a Secondary Market Transaction (as hereinafter defined). The term
"Rating Agencies" as used herein shall mean each of Standard & Poor's
Ratings Services, a division of McGraw-Hill Companies, Inc., Moody's
Investors Service, Inc., Duff & Phelps Credit Rating Co. and Fitch/IBCA
Inc., or any other nationally-recognized statistical rating agency which
has been approved by Mortgagee;
(v) the Transferee shall have executed and delivered to
Mortgagee an assumption agreement in form and substance acceptable to
Mortgagee, evidencing such Transferee's agreement to abide and be bound by
the terms of the Note, this Mortgage and the other Loan Documents together
with such legal opinions and title insurance endorsements as may be
reasonably requested by Mortgagee; and
(vi) Mortgagor shall have paid and Mortgagee shall have
received the payments, fees, and reimbursements required under Section
12(d) hereof.
13. Estoppel Certificates and No Default Affidavits. (a) Upon
request, Mortgagor or Mortgagee shall within ten (10) days furnish the other
with a statement, duly acknowledged and certified, setting forth (i) the
original principal amount of the Note, (ii) the unpaid principal amount of the
Note, (iii) the rate of interest of the Note, (iv) the date installments of
interest and/or principal were last paid, (v) any offsets or defenses to the
payment of the Debt, if any, and (vi) that the Note, this Mortgage and the
other Loan Documents are valid, legal and binding obligations and have not been
modified or if modified, giving particulars of such modification.
(b) After request by Mortgagee, Mortgagor shall within fifteen
(15) days furnish Mortgagee with a certificate reaffirming all representations
and warranties of Mortgagor set forth herein and in the other Loan Documents as
of the date requested by Mortgagee or, to the extent of any changes to any such
representations and warranties, so stating such changes.
(c) If the Mortgaged Property includes commercial property,
Mortgagor shall deliver to Mortgagee tenant estoppel certificates from each
commercial tenant at the Mortgaged Property that is a tenant occupying more
than 5% of the rentable square footage of the Mortgaged Property or shall use
commercially reasonable efforts to deliver, upon request, to Mortgagee tenant
estoppel certificates from any other commercial tenant , in each case in form
and substance reasonably satisfactory to Mortgagee (it being understood that
anchor tenants shall be permitted to deliver their standard form), provided
that Mortgagor shall not be required to deliver such certificates more
frequently than two (2) times (or if a Secondary Market Transaction shall have
occurred, one time) in any calendar year.
14. Taxes on Security; Documentary Stamps; Intangibles Tax.
(a) Mortgagor shall pay all taxes, charges, filing,
registration and recording fees, excises and levies payable with respect to the
Note or the liens created or secured by the Loan Documents, other than income,
franchise and doing business taxes imposed on Mortgagee. If there shall be
enacted any law (a) deducting the Loan from the value of the Mortgaged Property
for the purpose of taxation, (b) affecting any lien on the Mortgaged Property,
or (c) changing existing laws of taxation of mortgages, deeds of trust,
security deeds, or debts secured by real property, or changing the manner of
collecting any such taxes, Mortgagor shall promptly pay to Mortgagee, on
demand, all taxes, costs and charges for which Mortgagee is or may be liable as
a result thereof; however, if such payment would be prohibited by law or would
render the Loan usurious, then instead of collecting such payment, Mortgagee
may declare all amounts owing under the Loan Documents to be immediately due
and payable. No prepayment consideration shall be imposed on any such payment.
(b) If at any time the United States of America, any State
thereof or any subdivision of any such State shall require revenue or other
stamps to be affixed to the Note or this Mortgage, or impose any other tax or
charge on the same, Mortgagor will pay for the same, with interest and
penalties thereon, if any. Mortgagor hereby agrees that, in the event that it
is determined that additional documentary stamp tax or intangible tax is due
hereon or any mortgage or promissory note executed in connection herewith
(including, without limitation, the Note), Mortgagor shall indemnify and hold
harmless Mortgagee for all such documentary stamp tax and/or intangible tax,
including all penalties and interest assessed or charged in connection
therewith. Mortgagor shall pay same within ten (10) days after demand of
payment from Mortgagee.
(c) Mortgagor shall hold harmless and indemnify Mortgagee, its
successors and assigns, against any liability incurred by reason of the
imposition of any tax on the making and recording of this Mortgage.
15. No Credits on Account of the Debt. Mortgagor will not claim or
demand or be entitled to any credit or credits on account of the Debt for any
part of the Taxes or Other Charges assessed against the Mortgaged Property, or
any part thereof, and no deduction shall otherwise be made or claimed from the
assessed value of the Mortgaged Property, or any part thereof, for real estate
tax purposes by reason of this Mortgage or the Debt. In the event such claim,
credit or deduction shall be required by law, Mortgagee shall have the option,
by written notice of not less than ninety (90) days, to declare the Debt
immediately due and payable.
16. Controlling Agreement. It is expressly stipulated and agreed to
be the intent of Mortgagor and Mortgagee at all times to comply with applicable
state law or applicable United States federal law (to the extent that it
permits Mortgagee to contract for, charge, take, reserve, or receive a greater
amount of interest than under state law) and that this section shall control
every other covenant and agreement in this Mortgage and the other Loan
Documents. If the applicable law (state or federal) is ever judicially
interpreted so as to render usurious any amount called for under the Note or
under any of the other Loan Documents, or contracted for, charged, taken,
reserved, or received with respect to the Debt, or if Mortgagee's exercise of
the option to accelerate the maturity of the Note, or if any prepayment by
Mortgagor results in Mortgagor having paid any interest in excess of that
permitted by applicable law, then it is Mortgagor's and Mortgagee's express
intent that all excess amounts theretofore collected by Mortgagee shall be
credited on the principal balance of the Note and all other Debt (or, if the
Note and all other Debt have been or would thereby be paid in full, refunded to
Mortgagor), and the provisions of the Note and the other Loan Documents
immediately be deemed reformed and the amounts thereafter collectible hereunder
and thereunder reduced, without the necessity of the execution of any new
documents, so as to comply with the applicable law, but so as to permit the
recovery of the fullest amount otherwise called for hereunder or thereunder.
All sums paid or agreed to be paid to Mortgagee for the use, forbearance, or
detention of the Debt shall, to the extent permitted by applicable law, be
amortized, prorated, allocated, and spread throughout the full stated term of
the Debt until payment in full so that the rate or amount of interest on
account of the Debt does not exceed the maximum rate permitted under applicable
law from time to time in effect and applicable to the Debt for so long as the
Debt is outstanding. Notwithstanding anything to the contrary contained herein
or in any of the other Loan Documents, it is not the intention of the Mortgagee
to accelerate the maturity of any interest that has not accrued at the time of
such acceleration or to collect unearned interest at the time of such
acceleration.
17. Financial Statements. (a) The financial statements heretofore
furnished to Mortgagee are, as of the dates specified therein, complete and
correct and fairly present the financial condition of the Mortgagor and any
other persons or entities that are the subject of such financial statements,
and are prepared in accordance with generally accepted accounting principles in
the United States of America consistently applied (or such other accounting
basis reasonably acceptable to Mortgagee). Mortgagor does not have any
contingent liabilities, liabilities for taxes, unusual forward or long-term
commitments or unrealized or anticipated losses from any unfavorable
commitments that are known to Mortgagor and reasonably likely to have a
materially adverse effect on the Mortgaged Property or the operation thereof
for its current use, except as referred to or reflected in said financial
statements. Since the date of such financial statements, there has been no
materially adverse change in the financial condition, operation or business of
Mortgagor or any other persons or entities that are the subject of such
financial statements from that set forth in said financial statements.
(b) Mortgagor will maintain full and accurate books of accounts
and other records reflecting the results of the operations of the Mortgaged
Property and will furnish to Mortgagee the following items, each certified by
Mortgagor as being true and correct and presented in such format as Mortgagee
or its designee (including the servicer of the Debt) may reasonably request, as
follows:
(i) Until the earlier to occur of (A) eighteen (18)
months following the date hereof, or (B) a Secondary Market Transaction
(hereinafter defined), Mortgagor shall furnish quarterly (or more
frequently if requested by Mortgagee in connection with a Secondary Market
Transaction) each of the items listed in Subsection (ii)(A), (ii)(B) and
(ii) (C) below, but dated as of the last day of such quarter
(collectively, the "Pre-Securitization Financials") within forty-five (45)
days after the end of such quarter.
(ii) On or before sixty (60) days after the end of each
calendar quarter: (A) a written statement (rent roll) dated as of the
last day of each such calendar quarter identifying each of the Leases by
the term, renewal options (including rental base), space occupied, rental
and other charges required to be paid, security deposit paid, real estate
taxes paid by tenants, common area charges paid by tenants, tenant pass-
throughs, any rental concessions or special provisions or inducements,
tenant sales (if the tenant is required to report sales to Mortgagor),
rent delinquencies, rent escalations, amounts taken in settlement of
outstanding arrears, collections of rent for more than one (1) month in
advance, continuous operation obligations, cancellation or "go dark"
provisions, "non-competition" provisions (restricting Mortgagor or any
tenant), any defaults thereunder and any other information reasonably
required by Mortgagee; (B) quarterly and year to date operating statements
prepared for each calendar quarter, each of which shall include an
itemization of actual (not pro forma) capital expenditures during the
applicable period; (C) a property balance sheet for such quarter; (D) a
comparison of the budgeted income and expenses with the actual income and
expenses for such quarter and year to date, together with an explanation
of any material variances between budgeted and actual amounts for each
line item therein (it being understood that Mortgagor shall supplement
such explanation in more detail upon reasonable request of Mortgagee from
time to time) and (E) any other operating expenses and revenues
information reasonably requested by Mortgagee in order to calculate the
Debt Service Coverage Test (as defined in the Cash Management, Collateral
and Security Agreement) under the Cash Management, Collateral and Security
Agreement.
(iii) Within one-hundred five (105) days following the end
of each calendar year: (A) a written statement (rent roll) dated as of
the last day of each such calendar year identifying each of the Leases by
the term, space occupied, rental required to be paid, security deposit
paid, any rental concessions, and identifying any defaults or payment
delinquencies thereunder; (B) annual operating statements prepared for
such calendar year, which shall include an itemization of actual (not pro
forma) capital expenditures during the applicable period, total revenues
received, total expenses incurred, total debt service and total cash flow;
and (C) an annual balance sheet and profit and loss statement of
Mortgagor, each general partner, member or principal shareholder of
Mortgagor, and any Guarantors in the form required by Mortgagee, prepared
and certified by the respective Mortgagor, general partner, member or
principal shareholder of Mortgagor and/or Guarantors, or if available,
audited financial statements prepared by an independent certified public
accountant acceptable to Mortgagee.
(iv) On or before December 1 of the year preceding the
year to which such budget pertains, Mortgagor shall furnish to Mortgagee
for its approval, such approval not to be unreasonably withheld or
delayed, an annual budget (including the Capital Expenditure Budget and
the TI/LC Budget) of the operation of the Mortgaged Property.
(c) In the event that Mortgagor fails to provide to Mortgagee
or its designee any of the financial statements, certificates, reports or
information (the "Required Records") required by this Section 17 within thirty
(30) days after the date upon which such Required Record is due, Mortgagor
shall pay to Mortgagee, at Mortgagee's option and in its sole discretion, an
amount equal to $7,500 if the Required Records are not so delivered; provided
that, Mortgagee has given at least ten (10) days prior written notice to
Mortgagor of such failure by Mortgagor to timely submit the applicable Required
Records. Notwithstanding the foregoing, in the event that Mortgagor fails to
provide Mortgagee with Pre-Securitization Financials on or before the date they
are due, Mortgagor shall pay to Mortgagee, at Mortgagee's option and in its
sole discretion, an amount equal to $7,500 if the Pre-Securitization Financials
are not so delivered.
18. Performance of Other Agreements. Mortgagor shall observe and
perform each and every term to be observed or performed by Mortgagor pursuant
to the terms of any agreement or recorded instrument affecting or pertaining to
the Mortgaged Property, except where the failure to observe or perform such
term is not reasonably likely to have a material adverse effect on the
Mortgagor, such determination of a material adverse effect to be in the sole
discretion of the Mortgagee.
19. Further Acts, Etc. (a) Mortgagor will, at the cost of
Mortgagor, and without expense to Mortgagee, do, execute, acknowledge and
deliver all and every such further acts, deeds, conveyances, mortgages,
assignments, notices of assignment, Uniform Commercial Code financing
statements or continuation statements, transfers and assurances as Mortgagee
shall, from time to time, reasonably require, for the better assuring,
conveying, assigning, transferring, and confirming unto Mortgagee the property
and rights hereby mortgaged, given, granted, bargained, sold, alienated,
enfeoffed, conveyed, confirmed, pledged, assigned and hypothecated or intended
now or hereafter so to be, or which Mortgagor may be or may hereafter become
bound to convey or assign to Mortgagee, or for carrying out the intention or
facilitating the performance of the terms of this Mortgage or for filing,
registering or recording this Mortgage or for facilitating the sale of the Loan
and the Loan Documents as described in Subsection 19(b) below. Mortgagor, on
demand, will execute and deliver and hereby authorizes Mortgagee to execute
without the signature of Mortgagor to the extent Mortgagee may lawfully do so,
one or more financing statements, chattel mortgages or other instruments, to
evidence more effectively the security interest of Mortgagee in the Mortgaged
Property. Upon foreclosure, the appointment of a receiver or any other
relevant action, Mortgagor will, at the cost of Mortgagor and without expense
to Mortgagee, cooperate fully and completely to effect the assignment or
transfer of any license, permit, agreement or any other right necessary or
useful to the operation of the Mortgaged Property. Mortgagor grants to
Mortgagee an irrevocable power of attorney coupled with an interest for the
purpose of perfecting and, after the occurrence and during the continuance of
an Event of Default, exercising any and all rights and remedies available to
Mortgagee at law and in equity, including, without limitation, such rights and
remedies available to Mortgagee pursuant to this section.
(b) Mortgagor acknowledges that Mortgagee and its successors
and assigns may (i) sell this Mortgage, the Note and other Loan Documents to
one or more investors as a whole loan, (ii) participate the Loan secured by
this Mortgage to one or more investors, (iii) sell this Mortgage, the Note and
other Loan Documents to a depositor which entity shall deposit this Mortgage,
the Note and the other Loan Documents with a trust, which trust may sell
certificates to investors evidencing an ownership interest in the trust assets,
or (iv) otherwise sell the Loan or interest therein to investors (the
transactions referred to in clauses (i) through (iv) are hereinafter each
referred to as a "Secondary Market Transaction"). Mortgagor shall cooperate
with Mortgagee in effecting any such Secondary Market Transaction and shall
cooperate to implement all requirements imposed by any Rating Agency involved
in any Secondary Market Transaction. Mortgagor shall provide such information,
legal opinions and documents relating to Mortgagor, Guarantor, if any, the
Mortgaged Property and any tenants of the Improvements as Mortgagee may
reasonably request in connection with such Secondary Market Transaction.
Mortgagee shall be responsible for payment of the reasonable out-of-pocket
expenses incurred by Mortgagor in complying with the two preceding sentences
(other than amendments to the articles of incorporation or partnership
agreement of Mortgagor referred to in an undelivered items letter). In
addition, Mortgagor shall make available to Mortgagee all information
concerning its business and operations that Mortgagee may reasonably request.
Mortgagee shall be permitted to share all such information with the investment
banking firms, Rating Agencies, accounting firms, law firms and other third-
party advisory firms and investors involved with the Loan and the Loan
Documents or the applicable Secondary Market Transaction; provided, however,
that Mortgagee shall use reasonable efforts to preserve the confidentiality of
any nonpublic information. Mortgagee and all of the aforesaid third-party
advisors and professional firms shall be entitled to rely on the information
supplied by, or on behalf of, Mortgagor and Mortgagor indemnifies Mortgagee,
its successors, assigns and their respective shareholders, employees,
directors, officers, and agents (each an "Indemnified Party" and, collectively,
the "Indemnified Parties") as to any losses, claims, damages or liabilities
that arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in such information 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 information or necessary in order to make
the statements in such information, or in light of the circumstances under
which they were made, not misleading. Mortgagee may publicize the existence of
the Loan in connection with its marketing for a Secondary Market Transaction or
otherwise as part of its business development.
20. Recording of Mortgage, Etc. Upon the execution and delivery of
this Mortgage and thereafter, from time to time, Mortgagor will cause this
Mortgage, and any security instrument creating a lien or security interest or
evidencing the lien hereof upon the Mortgaged Property and each instrument of
further assurance to be filed, registered or recorded in such manner and in
such places as may be required by any present or future law in order to publish
notice of and fully to protect the lien or security interest hereof upon, and
the interest of Mortgagee in, the Mortgaged Property. Mortgagor will pay all
filing, registration or recording fees, and all expenses incident to the
preparation, execution and acknowledgment of this Mortgage, any mortgage
supplemental hereto, any security instrument with respect to the Mortgaged
Property and any instrument of further assurance, and all federal, state,
county and municipal, taxes, duties, imposts, assessments and charges arising
out of or in connection with the execution and delivery of this Mortgage, any
mortgage supplemental hereto, any security instrument with respect to the
Mortgaged Property or any instrument of further assurance, except where
prohibited by law so to do.
21. Reporting Requirements. Mortgagor agrees to give prompt notice
to Mortgagee of the insolvency or bankruptcy filing of Mortgagor or the death,
insolvency or bankruptcy filing of any Guarantor.
22. Events of Default. Subject to the provisions of Section 23, the
term "Event of Default" as used herein shall mean the occurrence or happening,
at any time and from time to time, of any one or more of the following:
(a) if any portion of the Debt is not paid within ten (10) days
from the date when the same is due;
(b) if the Policies are not kept in full force and effect, or
if certificates or copies of the Policies are not delivered to Mortgagee upon
request;
(c) if Mortgagor fails to timely provide any financial or
accounting report;
(d) if Mortgagor transfers or encumbers any portion of the
Mortgaged Property in violation of Section 12 of this Mortgage;
(e) if any representation or warranty of Mortgagor, or of any
Guarantor, made herein or in any other Loan Document or in any certificate,
report, financial statement or other instrument or document furnished to
Mortgagee shall have been false or misleading in any material respect when
made;
(f) if Mortgagor or any Guarantor shall make an assignment for
the benefit of creditors or if Mortgagor shall generally not be paying its
debts as they become due;
(g) if a receiver, liquidator or trustee of Mortgagor or of any
Guarantor shall be appointed or if Mortgagor or any Guarantor shall be
adjudicated a bankrupt or insolvent, or if any petition for bankruptcy,
reorganization or 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, Mortgagor or any Guarantor or if any proceeding for the
dissolution or liquidation of Mortgagor or of any Guarantor shall be instituted
and if such appointment, adjudication, petition or proceeding was involuntary
and not consented to by Mortgagor or such Guarantor, upon the same not being
discharged, stayed or dismissed within sixty (60) days;
(h) if Mortgagor shall be in default under any other mortgage
or security agreement covering any part of the Mortgaged Property and otherwise
permitted hereunder;
(i) subject to Mortgagor's right to contest as provided herein,
if the Mortgaged Property becomes subject to any mechanic's, materialman's,
mortgage or other lien except a lien for local real estate taxes and
assessments not then due and payable;
(j) if Mortgagor fails to cure properly any violations of laws
or ordinances affecting the Mortgaged Property;
(k) except as permitted in this Mortgage, the alteration,
improvement, demolition or removal of any of the Improvements without the prior
consent of Mortgagee;
(l) damage to the Mortgaged Property in any manner which is not
covered by insurance solely as a result of Mortgagor's failure to maintain
insurance required in accordance with this Mortgage;
(m) if Mortgagor or Guarantor shall continue to be in default
under any term, covenant, or provision of the Note or any of the other Loan
Documents, beyond applicable cure periods contained therein;
(n) if without Mortgagee's prior consent, except as permitted
in this Mortgage (i) the manager of the Mortgaged Property is removed by
Mortgagor, or (ii) the manager for the Mortgaged Property approved by Mortgagee
resigns and is not replaced within sixty (60) days by Mortgagor with a manager
satisfactory to Mortgagee, (iii) there is any material change in any management
agreement of the Mortgaged Property, or (iv) the manager engaged by Mortgagor
and approved by Mortgagee fails to execute the Acknowledgment of Property
Manager;
(o) entry of a judgment in excess of $100,000 of which the
Mortgagor has notice and the expiration of any appeal rights or the dismissal
or final adjudication of appeals against Mortgagor and the same shall not have
been discharged or bonded within thirty (30) days from the date of entry of
which the Mortgagor has notice thereof;
(p) the Mortgage shall cease to constitute a first-priority
lien on the Mortgaged Property (other than in accordance with its terms);
(q) seizure or forfeiture of the Mortgaged Property, or any
portion thereof, or Mortgagor's interest therein, resulting from criminal
wrongdoing or other unlawful action of Mortgagor, its affiliates, or any tenant
in the Mortgaged Property under any federal, state or local law;
(r) if, without Mortgagee's prior written consent, Mortgagor
ceases to continuously operate the Mortgaged Property or any material portion
thereof as the same use that is currently permitted under applicable zoning or
other local laws for any reason whatsoever (other than temporary cessation in
connection with any repair or renovation thereof undertaken with the consent of
Mortgagee and other than any tenant's space "going dark"); or
(s) Mortgagor shall fail to deliver any item described in an
undelivered items letter or other post-closing letter on or before the date set
forth in such letter for the delivery of such item.
23. Notice and Cure. Notwithstanding the foregoing, Mortgagee
agrees to give to Mortgagor written notice as described below of (a)
Mortgagor's failure to pay any part of the Debt when due (a "Monetary
Default"), (b) a default referred to in Subsection 22(p) above (a "First Lien
Default") and (c) a default referred to in Subsections 22(c), (h), (i), (j),
(l), (m), (q), (r) or (s) above (a "Nonmonetary Default"). Without limiting
Mortgagee's rights to impose a late charge for Mortgagor's nonpayment as
provided in the Note, Mortgagor shall have a period of ten (10) days from its
receipt of notice in which to cure a Monetary Default which written notice
period may run concurrently with the ten (10) day period referred to in
Subsection 22(a), shall have a period of twenty (20) days from its receipt of
notice to cure a First Lien Default and shall have a period of thirty (30) days
from its receipt of notice in which to cure a Nonmonetary Default; provided,
however, that if such Nonmonetary Default is reasonably susceptible of cure,
but not within such thirty (30) day period, then Mortgagor shall be permitted
up to an additional thirty (30) days to cure such default provided that
Mortgagor diligently and continuously pursues such cure. Notwithstanding the
foregoing, Mortgagee may, but shall not be required, to give notice of a
Monetary Default or a recurrence of the same Nonmonetary Default more
frequently than two times in any twelve-month period. A Monetary Default
and/or First Lien Default and/or Nonmonetary Default (other than those referred
to in Subsections 22 (c), (e), (h), (i), (j), (k) and (r)) shall nevertheless
be an Event of Default for all purposes under the Loan Documents (including,
without limitation, Mortgagee's right to collect Default Interest and any other
administrative charge set forth in the Note) except that the acceleration of
the Debt or other exercise of remedies shall not be prior to the expiration of
the applicable cure and/or grace periods provided in Section 22 or in this
section.
24. Remedies. Upon the occurrence of an Event of Default and
subject to applicable law and any applicable cure period, Mortgagee may, at
Mortgagee's option, by Mortgagee itself, or otherwise, do any one or more of
the following:
(a) Right to Perform Mortgagor's Covenants. If Mortgagor has
failed to keep or perform any covenant whatsoever contained in this Mortgage or
the other Loan Documents, Mortgagee may, but shall not be obligated to any
person to do so, perform or attempt to perform said covenant; and any payment
made or expense incurred in the performance or attempted performance of any
such covenant, together with any sum expended by Mortgagee that is chargeable
to Mortgagor or subject to reimbursement by Mortgagor under the Loan Documents,
shall be and become a part of the Debt, and Mortgagor promises, upon demand, to
pay to Mortgagee, at the place where the Note is payable, all sums so incurred,
paid or expended by Mortgagee, with interest from the date when paid, incurred
or expended by Mortgagee at the Default Rate (as defined and otherwise
specified in the Note).
(b) Right of Entry. Mortgagee may, prior or subsequent to the
institution of any foreclosure proceedings, enter upon the Mortgaged Property,
or any part thereof, and take exclusive possession of the Mortgaged Property
and of all books, records, and accounts relating thereto and to exercise
without interference from Mortgagor any and all rights which Mortgagor has with
respect to the management, possession, operation, protection, or preservation
of the Mortgaged Property, including without limitation the right to rent the
same for the account of Mortgagor and to deduct from such Rents all costs,
expenses, and liabilities of every character incurred by the Mortgagee in
collecting such Rents and in managing, operating, maintaining, protecting, or
preserving the Mortgaged Property and to apply the remainder of such Rents on
the Debt in such manner as Mortgagee may elect. All such costs, expenses, and
liabilities incurred by the Mortgagee in collecting such Rents and in managing,
operating, maintaining, protecting, or preserving the Mortgaged Property, if
not paid out of Rents as hereinabove provided, shall constitute a demand
obligation owing by Mortgagor and shall bear interest from the date of
expenditure until paid at the Default Rate as specified in the Note, all of
which shall constitute a portion of the Debt. If necessary to obtain the
possession provided for above, the Mortgagee may invoke any and all legal
remedies to dispossess Mortgagor, including specifically one or more actions
for forcible entry and detainer, trespass to try title, and restitution. In
connection with any action taken by the Mortgagee pursuant to this subsection,
the Mortgagee shall not be liable for any loss sustained by Mortgagor resulting
from any failure to let the Mortgaged Property, or any part thereof, or from
any other act or omission of the Mortgagee in managing the Mortgaged Property
unless such loss is caused by the willful misconduct of the Mortgagee, nor
shall the Mortgagee be obligated to perform or discharge any obligation, duty,
or liability under any Lease or under or by reason hereof or the exercise of
rights or remedies hereunder. Mortgagor shall and does hereby agree to
indemnify the Indemnified Parties for, and to hold the Indemnified Parties
harmless from, any and all liability, loss, or damage, which may or might be
incurred by any Indemnified Party under any such Lease or under or by reason
hereof or the exercise of rights or remedies hereunder, and from any and all
claims and demands whatsoever which may be asserted against any Indemnified
Party by reason of any alleged obligations or undertakings on its part to
perform or discharge any of the terms, covenants, or agreements contained in
any such Lease, INCLUDING, WITHOUT LIMITATION, ANY LIABILITY, LOSS, DAMAGE, OR
CLAIM CAUSED BY OR RESULTING FROM THE ORDINARY NEGLIGENCE OF ANY INDEMNIFIED
PARTY. Should any Indemnified Party incur any such liability, the amount
thereof, including without limitation costs, expenses, and reasonable
attorneys' fees, together with interest thereon from the date of expenditure
until paid at the Default Rate as specified in the Note, shall be secured
hereby, and Mortgagor shall reimburse such Indemnified Party therefor
immediately upon demand. Nothing in this subsection shall impose any duty,
obligation, or responsibility upon any Indemnified Party for the control, care,
management, leasing, or repair of the Mortgaged Property, nor for the carrying
out of any of the terms and conditions of any such Lease; nor shall it operate
to make any Indemnified Party responsible or liable for any waste committed on
the Mortgaged Property by the tenants or by any other parties, or for any
hazardous substances or environmental conditions on or under the Mortgaged
Property, or for any dangerous or defective condition of the Mortgaged Property
or for any negligence in the management, leasing, upkeep, repair, or control of
the Mortgaged Property resulting in loss or injury or death to any tenant,
licensee, employee, or stranger. Mortgagor hereby assents to, ratifies, and
confirms any and all actions of the Mortgagee with respect to the Mortgaged
Property taken under this subsection.
(c) Right to Accelerate. Mortgagee may, without notice except
as provided in Section 23 above, demand, presentment, notice of nonpayment or
nonperformance, protest, notice of protest, notice of intent to accelerate,
notice of acceleration, or any other notice or any other action, all of which
are hereby waived by Mortgagor and all other parties obligated in any manner
whatsoever on the Debt, declare the entire unpaid balance of the Debt
immediately due and payable, and upon such declaration, the entire unpaid
balance of the Debt shall be immediately due and payable.
(d) Foreclosure-Power of Sale. Mortgagee may institute a
proceeding or proceedings, judicial, or nonjudicial, by advertisement or
otherwise, for the complete or partial foreclosure of this Mortgage or the
complete or partial sale of the Mortgaged Property under the power of sale
contained herein or under any applicable provision of law. Mortgagee may sell
the Mortgaged Property, and all estate, right, title, interest, claim and
demand of Mortgagor therein, and all rights of redemption thereof, at one or
more sales, as an entirety or in parcels, with such elements of real and/or
personal property, and at such time and place and upon such terms as it may
deem expedient, or as may be required by applicable law, and in the event of a
sale, by foreclosure or otherwise, of less than all of the Mortgaged Property,
this Mortgage shall continue as a lien and security interest on the remaining
portion of the Mortgaged Property.
(e) Rights Pertaining to Sales. Subject to the requirements of
applicable law and except as otherwise provided herein, the following
provisions shall apply to any sale or sales of all or any portion of the
Mortgaged Property under or by virtue of Subsection (d) above, whether made
under the power of sale herein granted or by virtue of judicial proceedings or
of a judgment or decree of foreclosure and sale:
(i) Mortgagee may conduct any number of sales from time
to time. The power of sale set forth above shall not be exhausted by any
one or more such sales as to any part of the Mortgaged Property which
shall not have been sold, nor by any sale which is not completed or is
defective in Mortgagee's opinion, until the Debt shall have been paid in
full.
(ii) Any sale may be postponed or adjourned by public
announcement at the time and place appointed for such sale or for such
postponed or adjourned sale without further notice.
(iii) After each sale, Mortgagee or an officer of any court
empowered to do so shall execute and deliver to the purchaser or
purchasers at such sale a good and sufficient instrument or instruments
granting, conveying, assigning and transferring all right, title and
interest of Mortgagor in and to the property and rights sold and shall
receive the proceeds of said sale or sales and apply the same as specified
in the Note. Mortgagee is hereby appointed the true and lawful
attorney-in-fact of Mortgagor, which appointment is irrevocable and shall
be deemed to be coupled with an interest, in Mortgagor's name and stead,
to make all necessary conveyances, assignments, transfers and deliveries
of the property and rights so sold, Mortgagor hereby ratifying and
confirming all that said attorney or such substitute or substitutes shall
lawfully do by virtue thereof. Nevertheless, Mortgagor, if requested by
Mortgagee, shall ratify and confirm any such sale or sales by executing
and delivering to Mortgagee or such purchaser or purchasers all such
instruments as may be advisable, in Mortgagee's judgment, for the purposes
as may be designated in such request.
(iv) Any and all statements of fact or other recitals made
in any of the instruments referred to in Subsection (e)(iii) above given
by Mortgagee shall be taken as conclusive and binding against all persons
as to evidence of the truth of the facts so stated and recited.
(v) Any such sale or sales shall operate to divest all of
the estate, right, title, interest, claim and demand whatsoever, whether
at law or in equity, of Mortgagor in and to the properties and rights so
sold, and shall be a perpetual bar both at law and in equity against
Mortgagor and any and all persons claiming or who may claim the same, or
any part thereof or any interest therein, by, through or under Mortgagor
to the fullest extent permitted by applicable law.
(vi) Upon any such sale or sales, Mortgagee may bid for
and acquire the Mortgaged Property and, in lieu of paying cash therefor,
may make settlement for the purchase price by crediting against the Debt
the amount of the bid made therefor, after deducting therefrom the
expenses of the sale, the cost of any enforcement proceeding hereunder,
and any other sums which Mortgagee is authorized to deduct under the terms
hereof, to the extent necessary to satisfy such bid.
(vii) Upon any such sale, it shall not be necessary for
Mortgagee or any public officer acting under execution or order of court
to have present or constructively in its possession any of the Mortgaged
Property.
(f) Mortgagee's Judicial Remedies. Mortgagee may proceed by
suit or suits, at law or in equity, to enforce the payment of the Debt to
foreclose the liens and security interests of this Mortgage as against all or
any part of the Mortgaged Property, and to have all or any part of the
Mortgaged Property sold under the judgment or decree of a court of competent
jurisdiction. This remedy shall be cumulative of any other nonjudicial
remedies available to the Mortgagee under this Mortgage or the other Loan
Documents. Proceeding with a request or receiving a judgment for legal relief
shall not be or be deemed to be an election of remedies or bar any available
nonjudicial remedy of the Mortgagee.
(g) Mortgagee's Right to Appointment of Receiver. Mortgagee,
as a matter of right and (i) without regard to the sufficiency of the security
for repayment of the Debt and without notice to Mortgagor, (ii) without any
showing of insolvency, fraud, or mismanagement on the part of Mortgagor,
(iii) without the necessity of filing any judicial or other proceeding other
than the proceeding for appointment of a receiver, and (iv) without regard to
the then value of the Mortgaged Property, shall be entitled to the appointment
of a receiver or receivers for the protection, possession, control, management
and operation of the Mortgaged Property, including (without limitation), the
power to collect the Rents, enforce this Mortgage and, in case of a sale and
deficiency, during the full statutory period of redemption (if any), whether
there be a redemption or not, as well as during any further times when
Mortgagor, except for the intervention of such receiver, would be entitled to
collection of such Rents. Mortgagor hereby irrevocably consents to the
appointment of a receiver or receivers. Any receiver appointed pursuant to the
provisions of this subsection shall have the usual powers and duties of
receivers in such matters.
(h) Mortgagee's Uniform Commercial Code Remedies. The
Mortgagee may exercise its rights of enforcement under the Uniform Commercial
Code in effect in the state in which the Mortgaged Property is located.
(i) Other Rights. Mortgagee (i) may surrender the Policies
maintained pursuant to this Mortgage or any part thereof, and upon receipt
shall apply the unearned premiums as a credit on the Debt, and, in connection
therewith, Mortgagor hereby appoints Mortgagee as agent and attorney-in-fact
(which is coupled with an interest and is therefore irrevocable) for Mortgagor
to collect such premiums; and (ii) may apply the Tax and Insurance Escrow Fund,
the Replacement Reserve Fund, the Tenant Improvement/Leasing Commission Escrow
and/or the Deposit Account, Collection Account and Expense Account and any
other funds held by Mortgagee toward payment of the Debt; and (iii) shall have
and may exercise any and all other rights and remedies which Mortgagee may have
at law or in equity, or by virtue of any of the Loan Documents, or otherwise.
(j) Discontinuance of Remedies. In case Mortgagee shall have
proceeded to invoke any right, remedy, or recourse permitted under the Loan
Documents and shall thereafter elect to discontinue or abandon same for any
reason, Mortgagee shall have the unqualified right so to do and, in such event,
Mortgagor and Mortgagee shall be restored to their former positions with
respect to the Debt, the Loan Documents, the Mortgaged Property or otherwise,
and the rights, remedies, recourses and powers of Mortgagee shall continue as
if same had never been invoked.
(k) Remedies Cumulative. All rights, remedies, and recourses
of Mortgagee granted in the Note, this Mortgage and the other Loan Documents,
any other pledge of collateral, or otherwise available at law or equity: (i)
shall be cumulative and concurrent; (ii) may be pursued separately,
successively, or concurrently against Mortgagor, the Mortgaged Property, or any
one or more of them, at the sole discretion of Mortgagee; (iii) may be
exercised as often as occasion therefor shall arise, it being agreed by
Mortgagor that the exercise or failure to exercise any of same shall in no
event be construed as a waiver or release thereof or of any other right,
remedy, or recourse; (iv) shall be nonexclusive; (v) shall not be conditioned
upon Mortgagee exercising or pursuing any remedy in relation to the Mortgaged
Property prior to Mortgagee bringing suit to recover the Debt; and (vi) in the
event Mortgagee elects to bring suit on the Debt and obtains a judgment against
Mortgagor prior to exercising any remedies in relation to the Mortgaged
Property, all liens and security interests, including the lien of this
Mortgage, shall remain in full force and effect and may be exercised thereafter
at Mortgagee's option.
(l) Election of Remedies. Mortgagee may release, regardless of
consideration, any part of the Mortgaged Property without, as to the remainder,
in any way impairing, affecting, subordinating, or releasing the lien or
security interests evidenced by this Mortgage or the other Loan Documents or
affecting the obligations of Mortgagor or any other party to pay the Debt. For
payment of the Debt, Mortgagee may resort to any collateral securing the
payment of the Debt in such order and manner as Mortgagee may elect. No
collateral taken by Mortgagee shall in any manner impair or affect the lien or
security interests given pursuant to the Loan Documents, and all collateral
shall be taken, considered, and held as cumulative.
(m) Bankruptcy Acknowledgment. In the event the Mortgaged
Property or any portion thereof or any interest therein becomes property of any
bankruptcy estate or subject to any state or federal insolvency proceeding,
then Mortgagee shall immediately become entitled, in addition to all other
relief to which Mortgagee may be entitled under this Mortgage, to obtain (i) an
order from the Bankruptcy Court or other appropriate court granting immediate
relief from the automatic stay pursuant to Section 362 of the Bankruptcy Code
so to permit Mortgagee to pursue its rights and remedies against Mortgagor as
provided under this Mortgage and all other rights and remedies of Mortgagee at
law and in equity under applicable state law, and (ii) an order from the
Bankruptcy Court prohibiting Mortgagor's use of all "cash collateral" as
defined under Section 363 of the Bankruptcy Code. In connection with such
Bankruptcy Court orders, Mortgagor shall not contend or allege in any pleading
or petition filed in any court proceeding that Mortgagee does not have
sufficient grounds for relief from the automatic stay. Any bankruptcy petition
or other action taken by the Mortgagor to stay, condition, or inhibit Mortgagee
from exercising its remedies are hereby admitted by Mortgagor to be in bad
faith and Mortgagor further admits that Mortgagee would have just cause for
relief from the automatic stay in order to take such actions authorized under
state law.
(n) Application of Proceeds. The proceeds from any sale,
lease, or other disposition made pursuant to this Mortgage, or the proceeds
from the surrender of any insurance policies pursuant hereto, or any Rents
collected by Mortgagee from the Mortgaged Property, or the Tax and Insurance
Escrow Fund, the Replacement Reserve Fund or the Tenant Improvement/Leasing
Commission Escrow or sums received pursuant to Section 7 hereof, or proceeds
from insurance which Mortgagee elects to apply to the Debt pursuant to
Section 3 hereof, shall be applied by Mortgagee to the Debt in the following
order and priority: (i) to the payment of all expenses of advertising,
selling, and conveying the Mortgaged Property or part thereof, and/or
prosecuting or otherwise collecting Rents, proceeds, premiums or other sums
including reasonable attorneys' fees; (ii) to that portion, if any, of the Debt
with respect to which no person or entity has personal or entity liability for
payment (the "Exculpated Portion"), and with respect to the Exculpated Portion
as follows: first, to accrued but unpaid interest, second, to matured
principal, and third, to unmatured principal in inverse order of maturity;
(iii) to the remainder of the Debt as follows: first, to the remaining accrued
but unpaid interest, second, to the matured portion of principal of the Debt,
and third, to prepayment of the unmatured portion, if any, of principal of the
Debt applied to installments of principal in inverse order of maturity; (iv)
the balance, if any or to the extent applicable, remaining after the full and
final payment of the Debt to the holder or beneficiary of any inferior liens
covering the Mortgaged Property, if any, in order of the priority of such
inferior liens (Mortgagee shall hereby be entitled to rely exclusively on a
commitment for title insurance issued to determine such priority); and (v) the
cash balance, if any, to the Mortgagor. The application of proceeds of sale or
other proceeds as otherwise provided herein shall be deemed to be a payment of
the Debt like any other payment. The balance of the Debt remaining unpaid, if
any, shall remain fully due and owing in accordance with the terms of the Note
and the other Loan Documents.
25. Security Agreement. This Mortgage is both a real property
mortgage or deed of trust and a "security agreement" within the meaning of the
Uniform Commercial Code. The Mortgaged Property includes both real and
personal property and all other rights and interests, whether tangible or
intangible in nature, of Mortgagor in the Mortgaged Property. Mortgagor by
executing and delivering this Mortgage has granted and hereby grants to
Mortgagee, as security for the Debt, a security interest in the Mortgaged
Property to the full extent that the Mortgaged Property may be subject to the
Uniform Commercial Code (said portion of the Mortgaged Property so subject to
the Uniform Commercial Code being called in this section the "Collateral").
Mortgagor hereby agrees with Mortgagee to execute and deliver to Mortgagee, in
form and substance satisfactory to Mortgagee, such financing statements and
such further assurances as Mortgagee may from time to time, reasonably consider
necessary to create, perfect, and preserve Mortgagee's security interest herein
granted. This Mortgage shall also constitute a "fixture filing" for the
purposes of the Uniform Commercial Code. All or part of the Mortgaged Property
are or are to become fixtures. Information concerning the security interest
herein granted may be obtained from the parties at the addresses of the parties
set forth in the first paragraph of this Mortgage. If an Event of Default
shall occur and be continuing, Mortgagee, in addition to any other rights and
remedies which it may have, shall have and may exercise immediately and without
demand, any and all rights and remedies granted to a secured party upon default
under the Uniform Commercial Code, including, without limiting the generality
of the foregoing, the right to take possession of the Collateral or any part
thereof, and to take such other measures as Mortgagee may deem necessary for
the care, protection and preservation of the Collateral. Upon request or
demand of Mortgagee after the occurrence of an Event of Default, Mortgagor
shall at its expense assemble the Collateral and make it available to Mortgagee
at a convenient place acceptable to Mortgagee. Mortgagor shall pay to
Mortgagee on demand any and all expenses, including legal expenses and
attorneys' fees, incurred or paid by Mortgagee in protecting the interest in
the Collateral and in enforcing the rights hereunder with respect to the
Collateral. Any notice of sale, disposition or other intended action by
Mortgagee with respect to the Collateral sent to Mortgagor in accordance with
the provisions hereof at least ten (10) days prior to such action, shall
constitute commercially reasonable notice to Mortgagor. The proceeds of any
disposition of the Collateral, or any part thereof, may be applied by Mortgagee
to the payment of the Debt in such priority and proportions as Mortgagee in its
discretion shall deem proper. In the event of any change in name, identity or
structure of Mortgagor, Mortgagor shall notify Mortgagee thereof and promptly
after request shall execute, file and record such Uniform Commercial Code forms
as are necessary to maintain the priority of Mortgagee's lien upon and security
interest in the Collateral, and shall pay all expenses and fees in connection
with the filing and recording thereof. If Mortgagee shall require the filing
or recording of additional Uniform Commercial Code forms or continuation
statements, Mortgagor shall, promptly after request, execute, file and record
such Uniform Commercial Code forms or continuation statements as Mortgagee
shall deem necessary, and shall pay all expenses and fees in connection with
the filing and recording thereof, it being understood and agreed, however, that
no such additional documents shall increase Mortgagor's obligations under the
Note, this Mortgage and the other Loan Documents. Mortgagor hereby irrevocably
appoints Mortgagee as its attorney-in-fact, coupled with an interest, to file
with the appropriate public office on its behalf, but only after providing the
Mortgagor notice and the opportunity to do so, any financing or other
statements signed only by Mortgagee, as Mortgagor's attorney-in-fact, in
connection with the Collateral covered by this Mortgage. Notwithstanding the
foregoing, Mortgagor shall appear and defend in any action or proceeding which
affects or purports to affect the Mortgaged Property and any interest or right
therein, whether such proceeding affects title or any other rights in the
Mortgaged Property (and in conjunction therewith, Mortgagor shall fully
cooperate with Mortgagee in the event Mortgagee is a party to such action or
proceeding).
26. Right of Entry. In addition to any other rights or remedies
granted under this Mortgage, Mortgagee and its agents shall have the right to
enter and inspect the Mortgaged Property at any reasonable time upon prior
notice during the term of the Loan. The cost of such inspections or audits
shall be borne by Mortgagor should an Event of Default exist, including the
cost of all follow up or additional investigations or inquiries deemed
reasonably necessary by Mortgagee. The cost of such inspections, if not paid
for by Mortgagor following demand, may be added to the principal balance of the
sums due under the Note and this Mortgage and shall bear interest thereafter
until paid at the Default Rate.
27. Actions and Proceedings. Mortgagee has the right to appear in
and defend any action or proceeding brought with respect to the Mortgaged
Property and to bring any action or proceeding, in the name and on behalf of
Mortgagor, which Mortgagee, in its discretion, decides should be brought to
protect its interest in the Mortgaged Property. Mortgagee shall, at its
option, be subrogated to the lien of any mortgage or other security instrument
discharged in whole or in part by the Debt, and any such subrogation rights
shall constitute additional security for the payment of the Debt.
28. Waiver of Setoff and Counterclaim, Marshalling, Statute of
Limitations, Automatic or Supplemental Stay, Etc. (a) All amounts due
under this Mortgage, the Note and the other Loan Documents shall be payable
without setoff, counterclaim or any deduction whatsoever. Mortgagor hereby
waives the right to assert a setoff, counterclaim or deduction in any action or
proceeding in which Mortgagee is a participant, or arising out of or in any way
connected with this Mortgage, the Note, any of the other Loan Documents, or the
Debt.
(b) Mortgagor hereby expressly, irrevocably, and
unconditionally waives and releases, to the extent permitted by law (i) the
benefit of all appraisement, valuation, stay, extension, reinstatement and
redemption laws now or hereafter in force and all rights of marshalling, sale
in the inverse order of alienation, or any other right to direct in any manner
the order or sale of any of the Mortgaged Property in the event of any sale
hereunder of the Mortgaged Property or any part thereof or any interest
therein; (ii) any and all rights of redemption from sale under any order or
decree of foreclosure of this Mortgage on behalf of Mortgagor, and on behalf of
each and every person acquiring any interest in or title to the Mortgaged
Property subsequent to the date of this Mortgage and on behalf of all persons
to the extent permitted by applicable law; (iii) all benefits that might accrue
to Mortgagor by virtue of any present or future law exempting the Mortgaged
Property from attachment, levy or sale on execution or providing for any
appraisement, valuation, stay of execution, exemption from civil process,
redemption, or extension of time for payment; and (iv) all notices of any Event
of Default except as expressly provided herein.
(c) To the extent permitted by applicable law, Mortgagee's
rights hereunder shall continue even to the extent that a suit for collection
of the Debt, or part thereof, is barred by a statute of limitations. Mortgagor
hereby expressly waives and releases to the fullest extent permitted by law,
the pleading of any statute of limitations as a defense to payment of the Debt.
(d) In the event of the filing of any voluntary or involuntary
petition under the U.S. Bankruptcy Code (the "Bankruptcy Code") by or against
Mortgagor (other than an involuntary petition filed by or joined in by
Mortgagee), the Mortgagor shall not assert, or request any other party to
assert, that the automatic stay under Section 362 of the Bankruptcy Code shall
operate or be interpreted to stay, interdict, condition, reduce or inhibit the
ability of Mortgagee to enforce any rights it has by virtue of this Mortgage,
or any other rights that Mortgagee has, whether now or hereafter acquired,
against any guarantor of the Debt. Further, Mortgagor shall not seek a
supplemental stay or any other relief, whether injunctive or otherwise,
pursuant to Section 105 of the Bankruptcy Code or any other provision therein
to stay, interdict, condition, reduce or inhibit the ability of Mortgagee to
enforce any rights it has by virtue of this Mortgage against any guarantor of
the Debt. The waivers contained in this section are a material inducement to
Mortgagee's willingness to enter into this Mortgage and Mortgagor acknowledges
and agrees that no grounds exist for equitable relief which would bar, delay or
impede the exercise by Mortgagee of Mortgagee's rights and remedies against
Mortgagor or any guarantor of the Debt.
29. Contest of Certain Claims. Notwithstanding the provisions of
Section 4 and Subsection 22(i) hereof, Mortgagor shall not be in default for
failure to pay or discharge Taxes, Other Charges or mechanic's or materialman's
lien asserted against the Mortgaged Property if, and so long as, (a) Mortgagor
shall have notified Mortgagee of same within ten (10) days of obtaining
knowledge thereof; (b) Mortgagor shall diligently and in good faith contest the
same by appropriate legal proceedings which shall operate to prevent the
enforcement or collection of the same and the sale of the Mortgaged Property or
any part thereof, to satisfy the same; (c) Mortgagor shall have furnished to
Mortgagee a cash deposit, or an indemnity bond satisfactory to Mortgagee with a
surety satisfactory to Mortgagee, in the amount of the Taxes, Other Charges or
mechanic's or materialman's lien claim, plus a reasonable additional sum to pay
all costs, interest and penalties that may be imposed or incurred in connection
therewith, to assure payment of the matters under contest and to prevent any
sale or forfeiture of the Mortgaged Property or any part thereof; (d) Mortgagor
shall promptly upon final determination thereof pay the amount of any such
Taxes, Other Charges or claim so determined, together with all costs, interest
and penalties which may be payable in connection therewith; (e) the failure to
pay the Taxes, Other Charges or mechanic's or materialman's lien claim does not
constitute a default under any other deed of trust, mortgage or security
interest covering or affecting any part of the Mortgaged Property; and (f)
notwithstanding the foregoing, Mortgagor shall immediately upon request of
Mortgagee pay (and if Mortgagor shall fail so to do, Mortgagee may, but shall
not be required to, pay or cause to be discharged or bonded against) any such
Taxes, Other Charges or claim notwithstanding such contest, if the Mortgaged
Property or any part thereof or interest therein is in immediate danger of
being sold, forfeited, foreclosed, terminated, canceled or lost. Mortgagee may
pay over any such cash deposit or part thereof to the claimant entitled thereto
at any time when, in the judgment of Mortgagee, the entitlement of such
claimant is established.
30. Recovery of Sums Required to Be Paid. Mortgagee shall have the
right from time to time to take action to recover any sum or sums which
constitute a part of the Debt as the same become due, without regard to whether
or not the balance of the Debt shall be due, and without prejudice to the right
of Mortgagee thereafter to bring an action of foreclosure, or any other action,
for a default or defaults by Mortgagor existing at the time such earlier action
was commenced.
31. Handicapped Access. (a) Mortgagor agrees that the Mortgaged
Property shall at all times comply in all material respects with applicable
requirements of the Americans with Disabilities Act of 1990, the Fair Housing
Amendments Act of 1988, all state and local laws and ordinances related to
handicapped access and all rules, regulations, and orders issued pursuant
thereto including, without limitation, the Americans with Disabilities Act
Accessibility Guidelines for Buildings and Facilities (collectively "Access
Laws").
(b) Notwithstanding any provisions set forth herein or in any
other document regarding Mortgagee's approval of alterations of the Mortgaged
Property, Mortgagor shall not alter the Mortgaged Property in any manner which
would increase Mortgagor's responsibilities for compliance with the applicable
Access Laws without the prior written approval of Mortgagee. The foregoing
shall apply to tenant improvements constructed by Mortgagor or by any of its
tenants. Mortgagee may condition any such approval upon receipt of a
certificate from an architect, engineer, or other person acceptable to
Mortgagee of compliance with Access Laws.
(c) Mortgagor agrees to give prompt notice to Mortgagee of the
receipt by Mortgagor of any complaints related to violation of any Access Laws
and of the commencement of any proceedings or investigations which relate to
compliance with applicable Access Laws.
32. Indemnification. Unless caused solely by an Indemnified Party's
willful misconduct or gross negligence AND REGARDLESS OF WHETHER CAUSED BY AN
INDEMNIFIED PARTY'S ORDINARY NEGLIGENCE, Mortgagor shall protect, defend,
indemnify and save harmless the Indemnified Parties from and against all
liabilities, obligations, claims, damages, penalties, causes of action, costs
and expenses (including without limitation reasonable attorneys' fees and
expenses), imposed upon or incurred by or asserted against any Indemnified
Party by reason of (a) ownership of the Mortgage, the Mortgaged Property or any
interest therein or receipt of any rents; (b) any accident, injury to or death
of persons or loss of or damage to property occurring in, on or about the
Mortgaged Property or any part thereof or on the adjoining sidewalks, curbs,
adjacent property or adjacent parking areas, streets or ways; (c) any use,
nonuse or condition in, on or about the Mortgaged Property or any part thereof
or on the adjoining sidewalks, curbs, adjacent property or adjacent parking
areas, streets or ways; (d) performance of any labor or services or the
furnishing of any materials or other property in respect of the Mortgaged
Property or any part thereof; (e) any actions taken by any Indemnified Party in
the enforcement of this Mortgage and the other Loan Documents; (f) any failure
to act on the part of any Indemnified Party hereunder; (g) the payment or
nonpayment of any brokerage commissions to any party in connection with the
transaction contemplated hereby; and (h) the failure of Mortgagor to file
timely with the Internal Revenue Service an accurate Form 1099-B, Statement for
Recipients of Proceeds from Real Estate, Broker and Barter Exchange
Transactions, which may be required in connection with this Agreement, or to
supply a copy thereof in a timely fashion to the recipient of the proceeds of
the transaction in connection with which this Agreement is made. Any amounts
payable to an Indemnified Party by reason of the application of this section
shall become immediately due and payable and shall bear interest at the Default
Rate from the date loss or damage is sustained by such Indemnified Party until
paid.
33. Reserved.
34. Notices. Any notice, demand, statement, request or consent made
hereunder shall be in writing, addressed to the address, as set forth above, of
the party to whom such notice is to be given, or to such other address as
Mortgagor or Mortgagee, as the case may be, shall designate in writing, and
shall be deemed to be received by the addressee on (i) the day such notice is
personally delivered to such addressee, (ii) the third (3rd) day following the
day such notice is deposited with the United States postal service first class
certified mail, return receipt requested, (iii) the day following the day on
which such notice is delivered to a nationally recognized overnight courier
delivery service, or (iv) the day facsimile transmission is confirmed after
transmission of such notice by telecopy to such telecopier number as Mortgagor
or Mortgagee, as the case may be, shall have previously designated in writing.
35. Authority. (a) Mortgagor (and the undersigned representative
of Mortgagor, if any) has full power, authority and right to execute, deliver
and perform its obligations pursuant to this Mortgage, and to mortgage, give,
grant, bargain, sell, alien, enfeoff, convey, confirm, warrant, pledge,
hypothecate and assign the Mortgaged Property pursuant to the terms hereof and
to keep and observe all of the terms of this Mortgage on Mortgagor's part to be
performed; and (b) Mortgagor represents and warrants that Mortgagor is not a
"foreign person" within the meaning of Section 1445(f)(3) of the Internal
Revenue Code of 1986, as amended and the related Treasury Department
regulations.
36. ERISA. (a) As of the date hereof and throughout the term of
the Loan, (i) Mortgagor is not and will not be an "employee benefit plan" as
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), which is subject to Title I of ERISA, and (ii) the assets
of Mortgagor do not and will not constitute "plan assets" of one or more such
plans for purposes of Title I of ERISA; and
(b) As of the date hereof and throughout the term of the Loan
(i) Mortgagor is not and will not be a "governmental plan" within the meaning
of Section 3(3) of ERISA and (ii) transactions by or with Mortgagor are not and
will not be subject to state statutes applicable to Mortgagor regulating
investments of and fiduciary obligations with respect to governmental plans.
37. Waiver of Notice. Mortgagor shall not be entitled to any
notices of any nature whatsoever from Mortgagee except with respect to matters
for which this Mortgage specifically and expressly provides for the giving of
notice by Mortgagee to Mortgagor and except with respect to matters for which
Mortgagee is required by applicable law to give notice, and Mortgagor hereby
expressly waives the right to receive any notice from Mortgagee with respect to
any matter for which this Mortgage does not specifically and expressly provide
for the giving of notice by Mortgagee to Mortgagor.
38. Remedies of Mortgagor. In the event that a claim or
adjudication is made that Mortgagee has acted unreasonably or unreasonably
delayed acting in any case where by law or under the Note, this Mortgage or the
other Loan Documents, it has an obligation to act reasonably or promptly,
Mortgagee shall not be liable for any monetary damages, and Mortgagor's
remedies shall be limited to injunctive relief or declaratory judgment.
39. Sole Discretion of Mortgagee. Whenever pursuant to this
Mortgage, Mortgagee exercises any right given to it to approve or disapprove,
or any arrangement or term is to be satisfactory to Mortgagee, the decision of
Mortgagee to approve or disapprove or to decide that arrangements or terms are
satisfactory or not satisfactory shall be in the sole discretion of Mortgagee
and shall be final and conclusive, except as may be otherwise expressly and
specifically provided herein.
40. Non-Waiver. The failure of Mortgagee to insist upon strict
performance of any term hereof shall not be deemed to be a waiver of any term
of this Mortgage. Mortgagor shall not be relieved of Mortgagor's obligations
hereunder by reason of (a) the failure of Mortgagee to comply with any request
of Mortgagor or Guarantor to take any action to foreclose this Mortgage or
otherwise enforce any of the provisions hereof or of the Note or other Loan
Documents, (b) the release, regardless of consideration, of the whole or any
part of the Mortgaged Property, or of any person liable for the Debt or any
portion thereof, or (c) any agreement or stipulation by Mortgagee extending the
time of payment or otherwise modifying or supplementing the terms of the Note,
this Mortgage, or the other Loan Documents. Mortgagee may resort for the
payment of the Debt to any other security held by Mortgagee in such order and
manner as Mortgagee, in its discretion, may elect. Mortgagee may take action
to recover the Debt, or any portion thereof, or to enforce any covenant hereof
without prejudice to the right of Mortgagee thereafter to foreclosure this
Mortgage. The rights and remedies of Mortgagee under this Mortgage shall be
separate, distinct and cumulative and none shall be given effect to the
exclusion of the others. No act of Mortgagee shall be construed as an election
to proceed under any one provision herein to the exclusion of any other
provision. Mortgagee shall not be limited exclusively to the rights and
remedies herein stated but shall be entitled to every right and remedy now or
hereafter afforded at law or in equity.
41. Liability. If Mortgagor consists of more than one person, the
obligations and liabilities of each such person hereunder shall be joint and
several. Subject to the provisions hereof requiring Mortgagee's consent to
certain transfers of the Mortgaged Property, this Mortgage shall be binding
upon and inure to the benefit of Mortgagor and Mortgagee and their respective
successors and assigns forever.
42. Inapplicable Provisions. If any term, covenant or condition of
this Mortgage is held to be invalid, illegal or unenforceable in any respect,
this Mortgage shall be construed without such provision.
43. Headings, Etc. The headings and captions of various sections of
this Mortgage are for convenience of reference only and are not to be construed
as defining or limiting, in any way, the scope or intent of the provisions
hereof.
44. Counterparts. This Mortgage may be executed in any number of
counterparts each of which shall be deemed to be an original but all of which
when taken together shall constitute one agreement.
45. Definitions. Unless the context clearly indicates a contrary
intent or unless otherwise specifically provided herein, words used in this
Mortgage may be used interchangeably in singular or plural form and the word
"Mortgagor" shall mean "each Mortgagor and any subsequent owner or owners of
the Mortgaged Property or any part thereof or any interest therein," the word
"Mortgagee" shall mean "Mortgagee and any subsequent holder of the Note," the
word "Debt" shall mean "the Note and any other evidence of indebtedness secured
by this Mortgage," the word "person" shall include an individual, corporation,
partnership, trust, unincorporated association, government, governmental
authority, and any other entity, and the words "Mortgaged Property" shall
include any portion of the Mortgaged Property and any interest therein and the
words "attorneys' fees" shall include any and all attorneys' fees, paralegal
and law clerk fees, including, but not limited to, fees at the pre-trial, trial
and appellate levels incurred or paid by Mortgagee in protecting its interest
in the Mortgaged Property and Collateral and enforcing its rights hereunder.
Whenever the context may require, any pronouns used herein shall include the
corresponding masculine, feminine or neuter forms, and the singular form of
nouns and pronouns shall include the plural and vice versa.
46. Homestead. Mortgagor hereby waives and renounces all homestead
and exemption rights provided by the constitution and the laws of the United
States and of any state, in and to the Premises as against the collection of
the Debt, or any part hereof.
47. Assignments. Mortgagee shall have the right to assign or
transfer its rights under this Mortgage and the other Loan Documents without
limitation, including, without limitation, the right to assign or transfer its
rights to a servicing agent. Any assignee or transferee shall be entitled to
all the benefits afforded Mortgagee under this Mortgage and the other Loan
Documents.
48. Survival of Obligations; Survival of Warranties and
Representations. Each and all of the covenants and obligations of Mortgagor
(other than warranties and representations contained herein) shall survive the
execution and delivery of the Loan Documents and shall continue in full force
and effect until the Debt shall have been paid in full, provided, however, that
nothing contained in this Section 48 shall limit the obligations of Mortgagor
except as otherwise set forth herein. In addition, any and all warranties and
representations of Mortgagor contained herein shall survive the execution and
delivery of the Loan Documents and shall survive for a period of one (1) year
following any release of this Mortgage executed by Mortgagee and satisfaction
of the loan evidenced by the Loan Documents, the transfer or assignment of this
Mortgage, the entry of a judgment of foreclosure or sale of the Mortgaged
Property by non judicial foreclosure or deed in lieu of foreclosure (including,
without limitation, any transfer of the Mortgage by Mortgagee of any of its
rights, title and interest in and to the Mortgaged Property to any party,
whether or not affiliated with Mortgagee).
49. Covenants Running with the Land. All covenants, conditions,
warranties, representations and other obligations contained in this Mortgage
and the other Loan Documents are intended by Mortgagor and Mortgagee to be, and
shall be construed as, covenants running with the Mortgaged Property until the
lien of this Mortgage has been fully released by Mortgagee.
50. Governing Law; Jurisdiction. THIS MORTGAGE AND THE OTHER LOAN
DOCUMENTS SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE IN WHICH THE MORTGAGED PROPERTY IS LOCATED (WITHOUT REGARD TO ANY
CONFLICT OF LAWS PRINCIPLES) AND THE APPLICABLE LAWS OF THE UNITED STATES OF
AMERICA. MORTGAGOR AND MORTGAGEE HEREBY IRREVOCABLY SUBMIT TO THE JURISDICTION
OF ANY COURT OF COMPETENT JURISDICTION LOCATED IN THE STATE IN WHICH THE
MORTGAGED PROPERTY IS LOCATED IN CONNECTION WITH ANY PROCEEDING OUT OF OR
RELATING TO THIS MORTGAGE.
51. Time. Time is of the essence in this Mortgage and the other
Loan Documents.
52. No Third-Party Beneficiaries. The provisions of this Mortgage
and the other Loan Documents are for the benefit of Mortgagor and Mortgagee and
shall not inure to the benefit of any third party (other than any successor or
assignee of Mortgagee). This Mortgage and the other Loan Documents shall not
be construed as creating any rights, claims or causes of action against
Mortgagee or any of its officers, directors, agents or employees in favor of
any party other than Mortgagor, including, but not limited to, any claims to
any sums held in the Tax and Insurance Escrow Fund, the Replacement Reserve
Fund or the Tenant Improvement/Leasing Commission Escrow.
53. Relationship of Parties. The relationship of Mortgagee and
Mortgagor is solely that of debtor and creditor, and Mortgagee has no fiduciary
or other special relationship with the Mortgagor, and no term or condition of
any of the Loan Documents shall be construed to be other than that of debtor
and creditor. Mortgagor represents and acknowledges that the Loan Documents do
not provide for any shared appreciation rights or other equity participation
interest.
54. Exculpation.
Notwithstanding anything to the contrary contained herein,
Borrower's liability hereunder shall be limited as set forth in Section 12 of
the Note.
55. Investigations. Any and all representations, warranties,
covenants and agreements made in this Mortgage (and/or in other Loan Documents)
shall survive any investigation or inspection made by or on behalf of
Mortgagee.
56. Assignment of Leases and Rents. Mortgagor acknowledges and
confirms that it has executed and delivered to Mortgagee an Assignment of
Leases and Rents of even date (as the same may be amended, restated,
supplemented, or otherwise modified from time to time, the "Assignment of
Leases and Rents"), intending that such instrument create a present, absolute
assignment to Mortgagee of the Leases and Rents. Without limiting the intended
benefits or the remedies provided under the Assignment of Rents and Leases,
Mortgagor hereby assigns to Mortgagee, as further security for the Debt and the
Obligations, the Leases and Rents. While any Event of Default exists,
Mortgagee shall be entitled to exercise any or all of the remedies provided in
the Assignment of Leases and Rents and in Section 24 hereof, including, without
limitation, the right to have a receiver appointed. If any conflict or
inconsistency exists between the assignment of the Leases and the Rents in this
Mortgage and the absolute assignment of the Leases and the Rents in the
Assignment of Rents and Leases, the terms of the Assignment of Rents and Leases
shall control.
57. WAIVER OF RIGHT TO TRIAL BY JURY. MORTGAGOR AND MORTGAGEE
HEREBY AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY
JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH
RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS MORTGAGE OR THE OTHER
LOAN DOCUMENTS, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN
CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY
AND VOLUNTARILY BY MORTGAGOR AND MORTGAGEE, AND IS INTENDED TO ENCOMPASS
INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY
JURY WOULD OTHERWISE ACCRUE. EITHER PARTY IS HEREBY AUTHORIZED TO FILE A COPY
OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY
MORTGAGOR AND MORTGAGEE.
[Signature page follows]<PAGE>
IN WITNESS WHEREOF, Mortgagor has executed this instrument the day
and year first above written.
WITNESS: [MORTGAGOR]:
____________________________________
__________________________________ a __________________________________
By: /s/ Robert H. Dennis
________________________________
Name: Robert H. Dennis
Title: Vice President
<PAGE>
ACKNOWLEDGMENTS
(TO BE ATTACHED)
<PAGE>
EXHIBIT A
Legal Description
<TABLE> <S> <C>
<ARTICLE> 5
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<PERIOD-TYPE> 9-MOS
<CASH> 6,940,000
<SECURITIES> 0
<RECEIVABLES> 11,305,000
<ALLOWANCES> 1,337,000
<INVENTORY> 0
<CURRENT-ASSETS> 3,626,000
<PP&E> 582,872,000
<DEPRECIATION> 56,320,000
<TOTAL-ASSETS> 554,173,000
<CURRENT-LIABILITIES> 10,760,000
<BONDS> 350,531,000
<COMMON> 120,655,000
0
70,781,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 554,173,000
<SALES> 0
<TOTAL-REVENUES> 51,094,000
<CGS> 0
<TOTAL-COSTS> 30,680,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,014,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,400,000
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.52
</TABLE>
