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Securities and Exchange Commission
Washington, DC 20549
FORM 10-K
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number 1-12002
MARK CENTERS TRUST
(Exact name of registrant as specified in its charter)
Maryland 23-2715194
(State of incorporation) (I.R.S. employer identification no.)
600 Third Avenue, Kingston PA 18704 (717) 288-4581
(Address of principal executive offices) (Registrant's
telephone number)
Securities registered pursuant to Section 12(b) of the Act:
Common Shares of Beneficial Interest, $.001 par value
(Title of Class)
New York Stock Exchange
(Name of exchange on which registered)
Securities registered pursuant to Section 12(g) of the Act: NONE
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 and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of
this Form 10-K or any amendment to this Form 10-K.
YES X NO
The aggregate market value of the voting stock held by non-affiliates
of the Registrant was approximately $76,452,957 million based on the
closing price on the New York Stock Exchange for such stock on March
31, 1998.
The number of shares of the Registrant's Common Shares of Beneficial
Interest outstanding was 8,554,177 on March 31, 1998.
DOCUMENTS INCORPORATED BY REFERENCE
Part III - Definitive proxy statement for the Annual Meeting of
Shareholders presently scheduled to be held June 12, 1998, to be
filed pursuant to Regulation 14A.
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TABLE OF CONTENTS
Form 10-K Report
Item No. Page
PART I
1. Business 3
2. Properties 10
3. Legal Proceedings 19
4. Submission of Matters to a Vote
of Security Holders 20
PART II
5. Market for the Registrant's Common Equity and
Related Shareholder Matters 20
6. Selected Financial Data 21
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 25
8. Financial Statements and Supplementary Data 36
9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 36
PART III
10. Directors and Executive Officers of the Registrant 36
11. Executive Compensation 36
12. Security Ownership of Certain Beneficial Owners and
Management 36
13. Certain Relationships and Related Transactions 36
PART IV
14. Exhibits, Financial Statements, Schedules and
Reports on Form 8-K 37
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PART I
Item 1. Business
General
Mark Centers Trust (the "Company") was formed on March 4,
1993 as a Maryland Real Estate Investment Trust ("REIT") to
continue the business of its predecessor company, Mark
Development Group ("MDG" or the "Predecessor"). The Company is a
fully integrated, self-managed and self-administered equity REIT
which owns, acquires, develops and operates primarily
neighborhood and community shopping centers in the eastern and
southeastern United States. The Company currently owns and
operates 39 properties totalling approximately 7.3 million square
feet of gross leasable area ("GLA"), consisting of thirty-four
neighborhood and community shopping centers, three enclosed
malls, and two mixed use (retail/office) properties located in
ten states.
The Company is in the late stages of negotiation of a
significant transaction which will provide additional properties
and capital to the Company. If the transaction is completed in
its current form, assuming execution of a definitive agreement
(the "Agreement") and satisfaction of all conditions to the
transaction, including approval by the Company's shareholders,
the Company, through Mark Centers Limited Partnership, a Delaware
limited partnership through which the Company conducts
substantially all its activities ("the Operating Partnership"),
and in exchange for approximately 11 million Operating
Partnership Units ("OP Units"), will acquire substantially all of
the ownership interests in twelve retail shopping centers and
five multi-family apartment complexes controlled by a private New
York real estate company. Under the current proposal, the
Company will also receive a cash investment of $100 million in
exchange for newly issued common shares of beneficial interest
("Shares") valued at a price of $7.50 per share. Upon completion
of the transaction, it is contemplated that two senior executives
of the New York real estate company will become Chief Executive
Officer and President of the Company, respectively. Mr. Marvin
Slomowitz, the current Chairman of the Board and Chief Executive
Officer, will remain as a board member and is expected to continue
as a consultant to the Company. The two new executives will serve
on the board together with two designees of the real estate
company and two designees (in addition to Mr. Slomowitz) of the
existing board.
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The transaction is subject to the completion of final
negotiation and execution of the Agreement, receipt of a fairness
opinion from Bear, Stearns & Co. Inc. (the Company's investment
bankers), approval by the Company's Board of Trustees, evidence
of the receipt by the real estate company of the necessary funds
to make the cash investment and the completion of closing. The
transaction is a complex one involving many parties and there can
be no assurance that the Agreement will be executed or that the
closing on this transaction will be completed. The transaction
is subject to the approval by the shareholders of the Company at
a meeting to be scheduled for that purpose if and when the
Agreement is signed.
The Company conducts substantially all of its activities
through, and substantially all of its properties are owned by,
the Operating Partnership and its majority owned partnerships.
The Company currently owns an 84% interest in the Operating
Partnership as the sole general partner. Concurrently with the
consummation of the Company's initial public offering (the
"Offering") on June 1, 1993, the Operating Partnership acquired
thirty-one properties from Marvin L. Slomowitz, the founder of
MDG and the Company's Chairman and Chief Executive Officer (the
"Principal Shareholder"), or from affiliates of the Principal
Shareholder, in exchange for OP Units which are exchangeable on a
one for one basis into the Company's Shares. The properties had
been developed directly or indirectly by the Principal
Shareholder from 1964 through 1992 and were operated under MDG's
direction. The Principal Shareholder owns in excess of 99% of
the remaining 16% of the Operating Partnership in the form of OP
Units. The remaining OP Units, which represent less than 1%
ownership of the Operating Partnership, were issued by the
Company in July 1995 to an unrelated entity in consideration for
a property acquired by the Company. The Company at all times will
be the general partner of and own no less than a 51% interest in
the Operating Partnership.
The Company has transacted its affairs so as to qualify as,
and has elected to be treated as, a real estate investment trust
under sections 856 through 860 of the Internal Revenue Code of
1986, as amended (the "Code"). Under the Code, a real estate
investment trust that meets applicable requirements is not
subject to Federal income tax to the extent it distributes at
least 95% of its REIT taxable income to its shareholders.
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The Company's executive offices are located at 600 Third
Avenue, Kingston, Pennsylvania, and its telephone number is (717)
288-4581.
Business Objectives and Operating Strategy
The Company currently specializes in neighborhood and
community shopping centers strategically located in secondary
markets where basic staple merchandise is not available in
adequate supply. The Company intends to expand its operations
through leasing, property management, renovation and expansion of
existing shopping centers and through the development of new
centers and acquisition of additional centers. As previously
discussed, the Company is also in the late stages of negotiation
of a significant transaction which would provide additional
properties and capital to the Company.
Operating and administrative functions such as leasing,
property management, construction, finance and legal are provided
by Company personnel, providing for fully integrated property
management. In addition, management believes that the experience
and tenant relationships developed through in-house leasing and
property management staff enhance the Company's ability to
attract and retain high quality tenants. Property operations are
currently managed centrally at the Company's headquarters and are
augmented by regional management and leasing offices at the
Northwood Centre in Tallahassee, Florida, the Normandale Mall in
Montgomery, Alabama and in Columbia, South Carolina. The Company
also maintains property management offices at the Ledgewood Mall
in Ledgewood, New Jersey, the Northside Mall in Dothan, Alabama,
and the Searstown Mall in Titusville, Florida.
The general weakness in the retail sector has adversely
impacted the Company's cash flow and income, particularly given
the retail concentration of the Company's tenants. In a soft
retail environment tenants may experience downturns in their
business which may weaken their financial condition and,
potentially, result in their bankruptcy.
On March 28, 1997, Crafts Plus+, Inc., a 30,000 square foot
single location tenant, filed for protection under Chapter 11 of
the United Sates Bankruptcy laws. For the fiscal years ended
December 31, 1997 and 1996, rental revenues from this tenant
(including expense reimbursements) totalled $111,000 and
$110,000, respectively. The lease was rejected and in January
1998, the Company installed a replacement tenant, Beall's Outlet,
at a lower per square foot rent in the entire space.
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On July 7, 1997, Montgomery Ward & Co., Incorporated filed
for protection under Chapter 11 of the United States Bankruptcy
laws. Montgomery Ward is currently a tenant at one retail
location and related storage space in the Company's portfolio
comprising approximately 77,000 square feet in total. For the
fiscal years ended December 31, 1997 and 1996, rental revenues
(including expense reimbursements and percentage rent) for this
space totalled $154,000 and $142,000, respectively. The lease has
been neither affirmed nor rejected and the Company continues to
receive rent under its lease agreement.
On August 11, 1997, Old America Stores, Inc. filed for
protection under Chapter 11 of the United Sates Bankruptcy laws.
Old America currently is a tenant at one location in the
Company's portfolio comprising approximately 30,000 square feet.
Rental revenues for the fiscal year ended December 31, 1997
(including expense reimbursements) from this tenant totalled
$94,000. On January 21, 1998, the lease was assigned to KOB, LP
in connection with KOB, LP's acquisition of substantially all of
the assets of Old America Stores, Inc. As such, the Company
continues to receive rent under its lease agreement.
On January 2, 1998, Bruno's Inc. filed for protection under
Chapter 11 of the United Sates Bankruptcy laws. Bruno's is a
tenant at one location in the Company's portfolio comprising
approximately 48,000 square feet. For the fiscal years ended
December 31, 1997 and 1996, rental revenues (including expense
reimbursements) from this tenant totalled $231,000 and $227,000,
respectively. The lease was rejected March 18, 1998 and the
Company signed a lease with Office Depot, Inc. on March 31, 1998
for 30,000 square feet of this space at a higher per square foot
rent and is engaged in releasing efforts for the balance of the
space.
On January 5, 1998, HomePlace Stores, Inc. filed for
protection under Chapter 11 of the United States Bankruptcy laws.
Homeplace Stores is currently a tenant at one location in the
Company's portfolio comprising approximately 48,000 square feet.
For the fiscal years ended December 31, 1997 and 1996, rental
revenues (including expenses reimbursements) for this tenant
totalled $614,000 and $265,000, respectively. The lease has been
neither affirmed nor rejected and the Company continues to
receive rent under its lease agreement. The Company is currently
in negotiation with the tenant to amend the terms of the lease
which would include a reduction in rent.
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Operating Strategy
The Company believes it continued to make strides during
fiscal 1997 in recovering from the unfavorable impact of the loss
of anchor tenants at three locations following their bankruptcy
filings in 1996 (Jamesway, Rich's and Bradlees vacated a total of
approximately 220,000 square feet during 1996) as well as
contending with the unfavorable impact of the above bankruptcy
proceedings which commenced in fiscal 1997. The continuing soft
retail environments within the secondary markets in which the
Company operates has made releasing this vacant space challenging
and has required the Company to incur tenant improvements for new
tenants earlier than had been originally anticipated because of
early termination of the prior leases. The Company's ability to
overcome these challenges will remain dependent on the general
real estate uncertainties which affect the industry in general
and the Company's tenants in particular, and on the Company's
ability to finance its ongoing capital plans and tenant
improvements to maintain and increase occupancy levels.
Leasing and Expansion
The Company's leasing efforts during fiscal 1997 resulted in
the opening and commencement of rent of a 25,000 square foot
Goody's at the Wesmark Plaza, a 28,000 square foot Diversified
Records at the Normandale Mall, an 18,000 square foot Dunham's
Sporting Goods in the Valmont Plaza, a 29,000 square foot Office
Depot in the Midway Plaza and a 13,000 square foot Factory Card
Outlet in the East End Centre. In addition, the Company installed
approximately 142,000 additional square feet of small store
tenants for which rent also commenced.
The Company also has signed leases totalling approximately
74,000 square feet for which the Company anticipates the tenants
to occupy and commence paying rent during fiscal 1998.
Furthermore, the Company has entered into an agreement to
settle certain litigation with Pharmhouse Corp., a tenant at the
Ledgewood Mall, which had obtained an injunction during fiscal
1997 against the installation of Walmart in the mall based on
certain exclusive use provisions within Pharmhouse Corp.'s lease. The
Company has agreed to pay the tenant approximately $1.7 million
by May 1, 1998 after which the Company anticipates proceeding
with the installation of Walmart in approximately 120,000 square
feet. As part of this settlement, the Company has also agreed to
amend certain terms of the lease with Pharmhouse Corp. including
reductions in rent and the lease term and withdraw its appeal of
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this case in return for Pharmhouse Corp.'s withdrawal of all
legal actions against the installation of Walmart at the mall.
The Company also commenced construction to expand one of its
centers in fiscal 1997 and obtained the construction financing
and commenced construction in February 1998 to expand another.
Construction of a 52,825 square foot Redner's Supermarket at the
Mark Plaza commenced in September 1997 with completion scheduled
to occur during the second quarter of 1998. Financing has been
obtained and construction has also commenced for a 32,000 square
foot Hoyts Cinema at the Manahawkin Village Shopping Center.
Development
In fiscal 1997, the Company continued development of Phase
II of the Union Plaza located in New Castle, Pennsylvania with
the opening of Peebles Department Store on October 9, 1997,
occupying 25,000 square feet. This followed the completion of
Phase I in October 1996 and the opening of Sears and Hills
Department Stores which totalled 193,000 square feet. Upon
completion of all phases, the Union Plaza is expected to total
approximately 350,000 square feet.
Despite the unfavorable impact of the continuing soft retail
markets within the secondary markets in which the Company
operates, the Company held its portfolio occupancy stable at 86%
as of December 31, 1997, the same as that of December 31, 1996,
primarily as a result of the above development, leasing and
installation efforts. Due to space leased but not yet occupied
related primarily to anchor replacement and expansion at existing
centers, the Company's portfolio was 89% leased as of December
31, 1997.
Dispositions
As part of the ongoing strategic evaluation of its
properties, the Company sold the Newberry Plaza, located in
Newberry, South Carolina for $1.3 million in March 1997. The net
proceeds of the sale were used by the Company to supplement its
working capital. In 1995, Newberry Plaza was found to have
petroleum related soil and ground water contamination. The
Company is not obligated to reimburse the purchaser for any
remediation costs it might incur and the purchaser has waived all
claims it might have against the Company arising out of such
contamination. 8
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Financing Strategies
The Company intends to continue to finance property
development and tenant improvements with sources of capital
determined by management to be the most appropriate based on,
among other factors, availability, pricing and other commercial
and financial terms. The sources of capital may include
undistributed funds from operations (subject to provisions in the
Code concerning taxability of undistributed REIT income), the
issuance of equity and/or debt securities, the sale of
properties, and bank and other institutional borrowing. Future
borrowing by the Company may be either on a secured or unsecured
basis. The Company intends to continue its practice of managing
its exposure to floating rate debt primarily through the use of
fixed-rate debt.
Environmental Matters
Under various Federal, state and local laws, ordinances and
regulations relating to the protection of the environment, a
current or previous owner or operator of real estate may be
liable for the cost of removal or remediation of certain
hazardous or toxic substances disposed, stored, generated,
released, manufactured or discharged from, on, at, under, or in a
property. The Company believes that it is in compliance in all
material respects with all Federal, state and local ordinances
and regulations regarding hazardous or toxic substances.
Other than as disclosed below and as otherwise relating to
the Newberry Plaza (which was sold in March 1997), the Company
has not been notified by any government authority of any material
non-compliance, liability or other claim in connection with any
of the properties.
Upon conducting environmental site inspections in connection
with obtaining financing from Morgan Stanley Mortgage Capital,
Inc. ("Morgan Stanley") during fiscal 1996, certain environmental
contamination was identified at two of the properties which were
to serve as collateral for the financing: soil contamination at
the Troy Plaza in Troy, New York, and soil and ground water
contamination at the Cloud Springs Plaza in Fort Oglethorpe,
Georgia. In each case, the contamination was determined to have
originated from former tenants. The Company has entered into a
voluntary remedial agreement with the State of New York for
remediation of the Troy Plaza. Environmental consultants estimate
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that the total cost of remediation for the Troy Plaza will be
approximately $80,000. During fiscal 1997, the Company received
notification from the State of Georgia that the Cloud Springs
Plaza will not be listed on the State's Hazardous Site Inventory
because it has no reason to believe that contamination exceeding
a reportable quantity has occurred at this property. Following
this notification, Morgan Stanley released $375,000 previously
held in escrow for the Cloud Springs Plaza. As of December 31,
1997, Morgan Stanley held $228,000 in escrow for the Troy Plaza
which is to be released upon final environmental remediation.
Competition
There are numerous commercial developers and real estate
companies that compete with the Company in seeking land for
development, properties for acquisition and tenants for their
properties. There are numerous shopping facilities that compete
with the Company's properties in attracting retailers to lease
space. In addition, retailers at the Company's properties face
increasing competition from outlet malls, discount shopping
clubs, direct mail and telemarketing.
Employees
At December 31, 1997, the Company employed 61 persons, 32 of
whom were located at the Company's headquarters in Kingston,
Pennsylvania and the remainder were located in the Company's
regional offices. The Company believes that its relationships
with its employees are good.
Item 2. Properties
Shopping Center Properties
The Company currently owns and operates 39 properties
totalling approximately 7.3 million square feet of GLA,
consisting of thirty-four neighborhood and community shopping
centers, three enclosed malls, and two mixed-use
(retail/office) properties located in ten states. The Company's
shopping centers offer day to day necessities and value-oriented
merchandise rather than high priced luxury items. The Company
currently specializes in neighborhood and community shopping
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centers strategically located in underserved, secondary markets.
The shopping centers are diverse in size, ranging from
approximately 45,000 to 507,000 square feet with an average size
of 186,000 square feet. The Company's portfolio was approximately
86% occupied and 89% leased at December 31, 1997.
The Company's shopping centers are typically anchored by a
national or regional discount department store and/or
supermarket. Typical department store tenants at the Company's
properties are Kmart (nine), Ames (five), Hills (five), Sears
(two), Marshalls (two), and one of each of the following:
Bradlees, Montgomery Wards, Sports Authority, J.C. Penney, Sterns
and Walmart. At December 31, 1997, twenty-three of the Company's
properties were anchored by supermarkets including Price Chopper
(six), BiLo (four), Acme (two), Weis Markets (two), and one of
each of the following: P&C Foods, Winn-Dixie, Shaw's, Gerrity's,
Publix, Shoprite, Bargain Town, Food Lion, and Kroger's. Penn
Traffic owns and operates all the BiLo and P&C Foods grocery
stores.
The Company currently has 562 leases of which approximately
64% are with national or regional tenants. A substantial portion
of the income from the properties consists of rent received under
long term leases. Most of these leases provide for the payment
of fixed minimum rent monthly in advance and for the payment by
tenants of a pro-rata share of the real estate taxes, insurance,
utilities and common area maintenance of the shopping centers.
Certain of the tenant leases permit tenants to exclude some or
all of these expenses from their rental obligations. Minimum
rents and expense reimbursements accounted for approximately 93%
of the Company's rental revenues for the year ended December 31,
1997.
Approximately 57% of the Company's existing leases also
provide for the payment of percentage rents either in addition to
or in place of minimum rents. These arrangements generally
provide for payment to the Company of a certain percentage of a
tenant's gross sales in excess of a stipulated annual amount.
Percentage rents accounted for approximately 7% of the total 1997
rental revenue of the Company.
In 1997, approximately 11.3% of the Company's total rents
were derived from current leases of office space and specialized
computer facilities with two agencies of the State of Florida at
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the Northwood Centre in Tallahassee, Florida; the Florida
Department of Health and Rehabilitative Services (6.7%) and the
Florida Department of Business Professional Regulation (4.6%).
Leases with these Florida agencies contain customary conditions,
required under Florida law, permitting state agency tenants to
cancel their leases upon six months' notice in the event that
state-owned office facilities in the same county become
available. These leases do not provide for early termination
penalties. The exercise by either of these state agencies of
these cancellation provisions would have an unfavorable impact on
the Company's revenues unless the Company could successfully
relet the space once vacated. The Company is unaware of any such
state owned facility currently available which would result in
either of these agencies cancelling their leases. Furthermore,
the State of Florida tenants increased their leased space at the
Northwood Centre during fiscal 1997 by approximately 19,000
square feet. The Florida Department of Health and Rehabilitative
Services lease term expires July 31, 1999, and it has five two-
year renewal options. The Florida Department of Business and
Professional Regulation lease term expires April 30, 1999. The
Company would be adversely affected in the event that any current
state agency tenants do not renew their leases or negotiate a new
lease. During fiscal 1997, the Company also received
approximately 10.0% of its total rents under leases with the
Kmart Corporation at nine locations. The Company received no
more than 5.5% of its total rents from any other single tenant.
Six of the Company's shopping center properties are subject
to long-term ground leases in which a third party owns and has
leased the underlying land to the Company. The Company pays rent
for the use of the land and is responsible for all costs and
expenses associated with the building and improvements.
The following sets forth more specific information with
respect to each of the Company's properties at December 31, 1997:
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<TABLE>
<CAPTION>
MARK CENTERS TRUST PROPERTY LIST
YEAR LEASABLE % ANCHOR TENANTS
SHOPPING CENTER CONSTRUCTED(C) OWNERSHIP LAND AREA AREA LEASED(4) CURRENT LEASE EXPIR
PROPERTY LOCATION ACQUIRED(A) INTEREST (ACRES) SQ FT 12/31/97 LEASE OPTION EXPIR
<S> <C> <C> <C> <C> <C> <C> <C>
PENNSYLVANIA
AMES PLAZA SHAMOKIN 1966(C) FEE 17.6 98,210 92% Ames 2000/2013
MARK PLAZA EDWARDSVILLE 1968(C) LI(1) 20.2 216,406 100% Kmart 1999/2049
Redner's Markets Inc(6)
MONROE PLAZA STROUDSBURG 1964(C) FEE(1) 7.8 130,569 100% Ames 1999/2019
Shoprite 2005/2023
VALMONT PLAZA WEST HAZLETON 1985(A) FEE 26.0 200,164 98% Hills 2007/2027
BiLo 2008/2027
CIRCLE PLAZA SHAMOKIN DAM 1978(C) FEE 21.0 92,171 100% Kmart 2004/2054
DUNMORE PLAZA DUNMORE 1975(A) FEE(5) 6.0 45,380 100% Price Chopper 2000/2020
Eckerd Drug 2004/2019
LUZERNE STREET SCRANTON 1983(A) FEE 4.6 57,715 100% Price Chopper 2004/2024
SHOPPING CENTER Eckerd Drug 2004/2019
TIOGA WEST TUNKHANNOCK 1965(C) FEE 17.2 122,338 100% BiLo 2014/2024
Ames 2000/2015
BLACKMAN PLAZA WILKES-BARRE 1968(C) FEE(2) 9.7 121,206 97% Kmart 1999/2049
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<CAPTION>
MARK CENTERS TRUST PROPERTY LIST
YEAR LEASABLE % ANCHOR TENANTS
SHOPPING CENTER CONSTRUCTED(C) OWNERSHIP LAND AREA AREA LEASED(4) CURRENT LEASE EXPIR
PROPERTY LOCATION ACQUIRED(A) INTEREST (ACRES) SQ FT 12/31/97 LEASE OPTION EXPIR
<S> <C> <C> <C> <C> <C> <C> <C>
PENNSYLVANIA
BIRNEY MALL MOOSIC 1968(C) FEE 28.3 193,899 100% Kmart 1999/2049
Consolidated Stores
2003/2008
PLAZA 15 LEWISBURG 1995(A) FEE 16.4 113,530 98% Weis Market 2001/2021
Ames 2001/2021
GREEN RIDGE SCRANTON 1986(C) FEE 16.1 197,622 100% Hills 2007/2037
PLAZA BiLo 2008/2017
EAST END CENTRE WILKES-BARRE 1986(C) FEE 40.3 304,754 95% Hills 2007/2037
PharMor 2003/2017
Price Chopper 2008/2028
Dunham's Sporting Goods
2007/2017
MOUNTAINVILLE ALLENTOWN 1983(A) FEE 11.4 114,801 97% Acme 1999/2028
SHOPPING CENTER Klings Handyman
1999/2009
PLAZA 422 LEBANON 1972(C) FEE 13.4 154,791 95% Hills 2001/2021
KINGSTON PLAZA KINGSTON 1982(C) FEE 13.7 64,824 100% Price Chopper 2006/2026
25TH STREET EASTON 1993(A) FEE 16.2 131,477 100% CVS Inc.
SHOPPING CENTER 2005/2010
BRADFORD TOWNE TOWANDA 1993(C) FEE 48.0 257,319 97% Kmart 2019/2069
CENTRE P&C Foods 2014/2024
JC Penney 2009/2044
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<CAPTION>
MARK CENTERS TRUST PROPERTY LIST
YEAR LEASABLE % ANCHOR TENANTS
SHOPPING CENTER CONSTRUCTED(C) OWNERSHIP LAND AREA AREA LEASED(4) CURRENT LEASE EXPIR
PROPERTY LOCATION ACQUIRED(A) INTEREST (ACRES) SQ FT 12/31/97 LEASE OPTION EXPIR
<S> <C> <C> <C> <C> <C> <C> <C>
PENNSYLVANIA
SHILLINGTON READING 1994(A) FEE 20.3 150,742 100% Kmart 1999/2049
PLAZA Weis Market 1999/2019
ROUTE 6 MALL HONESDALE 1994(C) FEE 23.0 175,482 100% Kmart 2020/2070
Eckerd Drug 2011/2025
PITTSTON PLAZA PITTSTON 1994(C) FEE 10.2 79,568 97% BiLo 2015/2025
UNION PLAZA NEW CASTLE 1996(C) FEE 118.0 217,992 100% Sears 2011/2031
Hills 2017/2026
Peebles 2018/2026
FLORIDA
SEARSTOWN MALL TITUSVILLE 1984(A) FEE 28.5 263,609 76% Sears 1998/2013
United Artist 2005/2015
NEW SMYRNA BEACH NEW SMYRNA 1983(A) FEE 9.6 100,430 85% DeMarsh Theater
SHOPPING CENTER BEACH 2005/2015
NORTHWOOD CENTRE TALLAHASSEE 1985(A) FEE 34.1 499,636 90% FL Dept of HRS 1999/2009
FL Dept of Business and
Professional Regulation
1999
Publix 2005/2025
ALABAMA
NORMANDALE CENTRE MONTGOMERY 1985(A) FEE 30.0 295,591 42% Winn Dixie 2008/2033
MIDWAY PLAZA OPELIKA 1984(A) FEE 21.6 207,538 74% Office Depot 2007/2022
Carmike Cinema 2005/2015
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<CAPTION>
MARK CENTERS TRUST PROPERTY LIST
YEAR LEASABLE % ANCHOR TENANTS
SHOPPING CENTER CONSTRUCTED(C) OWNERSHIP LAND AREA AREA LEASED(4) CURRENT LEASE EXPIR
PROPERTY LOCATION ACQUIRED(A) INTEREST (ACRES) SQ FT 12/31/97 LEASE OPTION EXPIR
<S> <C> <C> <C> <C> <C> <C> <C>
ALABAMA
NORTHSIDE MALL DOTHAN 1986(A) FEE(1) 36.2 382,498 93% Wal-Mart 1999/2029
Montgomery Ward (7)
1999/2014
Goody's 2003/2018
SOUTH CAROLINA
MARTINTOWN PLAZA N. AUGUSTA 1985(A) LI(1) 18.8 133,878 97% Belk's Store 2004/2024
Bargain Town 1999
WESMARK PLAZA SUMTER 1986(A) FEE 26.0 215,198 78% Staples 2005/2015
Old America Store
2007/2012
NEW YORK
NEW LOUDON LATHAM 1982(A) FEE 26.1 251,725 70% Price Chopper 2015/2035
CENTER HomePlace Stores (7)
2011/2026
Marshalls 2004
TROY PLAZA TROY 1982(A) FEE 12.3 128,479 93% Ames 2001/2016
Price Chopper 1999/2014
NEW JERSEY
LEDGEWOOD MALL LEDGEWOOD 1983(A) FEE 46.0 507,080 89% Marshalls 2002/2017
Pharmhouse 1999/2014
The Sports' Authority
2007/2037
Stern's 2005/2030
MANAHAWKIN VILLAGE MANAHAWKIN 1993(A) FEE 20.6143,737 95% Kmart 2019/2069
SHOPPING CENTER
16
<PAGE>
<CAPTION>
MARK CENTERS TRUST PROPERTY LIST
YEAR LEASABLE % ANCHOR TENANTS
SHOPPING CENTER CONSTRUCTED(C) OWNERSHIP LAND AREA AREA LEASED(4) CURRENT LEASE EXPIR
PROPERTY LOCATION ACQUIRED(A) INTEREST (ACRES) SQ FT 12/31/97 LEASE OPTION EXPIR
<S> <C> <C> <C> <C> <C> <C> <C>
NEW JERSEY
BERLIN SHOPPING BERLIN 1994(A) FEE 22.0 187,296 85% Kmart 1999/2049
CENTER Acme 2005/2015
MASSACHUSETTS
CRESCENT PLAZA BROCKTON 1984(A) FEE(3) 22.5 216,095 99% Bradlees (7) 2009/2027
Shaws 2012/2042
VIRGINIA
KINGS FAIRGROUND DANVILLE 1992(A) LI(1) 15.2 118,535 100% Schewel Furniture
2001/2011
The Kroger Co 2002/2012
GEORGIA
CLOUD SPRINGS FT. OGELTHORPE 1985(A) FEE 12.2 113,367 96% Food Lion 2011/2031
PLAZA Consolidated Stores
2000/2005
Badcock Furniture
2000/2010
MAINE
AUBURN PLAZA AUBURN 1994(A) LI(1) 28.4 259,218 61% Hoyt Cinema 2005/2020
(Partial) Service Merchandise
FEE 2011/2090
T.J. Maxx 2000/2015
TOTAL OPERATING PROPERTIES 7,264,870 89%
17
<PAGE>
<FN>
<F1>
(1) The Company is ground lessee under long-term ground leases having at least 60 years remaining in
term (including options) at existing rental rates.
<F2>
(2) The Company's interest in the land has been leased to, and a fee interest in the improvements is
held by, an industrial development authority for the benefit of an affiliated entity subject
to a mortgage to a third party. The Company's interest in the land is also subject to that
mortgage. The Company manages the property and, after making debt service payments and paying a fixed fee to said
entity, retains all remaining cash flow as ground rent. In accordance with the terms of the
ground lease, the Company receives and accounts for most of its income from this property as percentage
rent.
<F3>
(3) During the term of its lease, Bradlees has a right of first refusal in the event that the Company sells all
or a portion of Crescent Plaza giving it the right to purchase on the same terms as a bona fide
offer from a third party.
<F4>
(4) Includes space leased for which rent is being paid but which is not presently occupied or space that is leased but
rent has not commenced.
<F5>
(5) The Company holds a fee interest in a portion of Dunmore Plaza and an equitable interest in the land on the
remaining portion. The fee for this remaining portion is held by an industrial development authority and the
equitable interest in the building on such remaining portion is held by an unrelated entity. The Company receives
and accounts for most of its income from this property as percentage rent.
<F6>
(6) Leased premises is currently under construction.
<F7>
(7) The tenant is currently operating under Chapter 11 of the United States Bankruptcy laws and has neither affirmed nor
rejected the lease.
</FN>
</TABLE>
18
<PAGE>
Item 3. Legal Proceedings
On November 20, 1995, Jack Wertheimer, the former President
of the Company, filed a complaint against the Company, its
Trustees including the Principal Shareholder, and the Company's
former in-house General Counsel and current Chief Financial
Officer in the United States District Court for the Middle
District of Pennsylvania. The complaint, which was filed in
connection with the termination of Mr. Wertheimer's employment,
includes many of the allegations raised in a state court
proceeding commenced by Mr. Wertheimer in November 1994. The
Federal court complaint also includes a civil RICO action in
which Mr. Wertheimer alleges that the Board of Trustees of the
Company conspired with the Principal Shareholder to terminate Mr.
Wertheimer's employment as part of the Principal Shareholder's
breach of his duty of good faith and fair dealing. Further, Mr.
Wertheimer alleges that the above defendants engaged in
securities fraud in connection with the Offering and that the
Principal Shareholder has defrauded or overcharged the Company in
corporate transactions. The Federal complaint seeks treble
damages under RICO, as well as damages arising from Mr.
Wertheimer's alleged termination of employment, invasion of
privacy, intentional infliction of emotional distress, fraud and
misrepresentation. The Company and all defendants filed motions
to dismiss the RICO and tort claims which the court, on December
9, 1996, granted in part and denied in part. Specifically, the
court dismissed Mr. Wertheimer's claims for wrongful discharge,
fraud and negligence misrepresentation, but declined to dismiss
the remainder of the claims at this time. On January 23, 1997,
the defendants filed an answer to Mr. Wertheimer's complaint. In
the answer, the defendants denied all allegations of wrongdoing,
and intend to vigorously defend against all of the counts. The
Company and the Principal Shareholder have also filed
counterclaims against Mr. Wertheimer alleging Mr. Wertheimer made
material misrepresentations in connection with his hiring and
breached his employment contract and fiduciary duties to the
Company.
The Company is involved in other various matters of
litigation arising in the normal course of business. While the
Company is unable to predict with certainty the amounts involved,
the Company's management and counsel are of the opinion that,
when such litigation is resolved, the Company's resulting
liability, if any, will not have a significant effect on the
Company's consolidated financial position.
19
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders
through the solicitation of proxies or otherwise during the
fourth quarter of 1997.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Shareholder Matters
(a) Market Information
The following table shows, for the period indicated, the
high and low sales price for the Shares as reported on the New
York Stock Exchange (the "NYSE"), and cash dividends paid during
the two years ended December 31, 1997 and 1996.
Dividend
Quarter Ended High Low Per Share
1997
March 31, 1997 11 3/4 10 1/8 $.36
June 30, 1997 10 7/8 8 7/8 .20
September 30, 1997 9 9/16 8 15/16 .20
December 31, 1997 9 7/16 8 3/4 (1)
1996
March 31, 1996 12 3/4 10 1/2 .36
June 30, 1996 11 9 3/4 .36
September 30, 1996 11 3/4 10 .36
December 31, 1996 11 1/4 9 3/4 .36
(1) To be determined by the Trustees in 1998
At March 31, 1998, there were 239 holders of record of the
Shares.
(b) Dividends
The Company has determined that 34.50% and 35.06% of the
total dividends distributed to shareholders in fiscal years 1997
and 1996, respectively, represented ordinary income, while the
remaining 65.50% and 64.94%, respectively, represented return of
capital. The Company's cash flow is affected by a number of
factors, including the revenues received from rental properties,
the operating expenses of the Company, the interest expense on
its borrowings, the ability of lessees to meet their obligations
20
<PAGE>
(b) Dividends, continued
to the Company and unanticipated capital expenditures. Future
dividends paid by the Company will be at the discretion of the
Trustees and will depend on the actual cash flows of the Company,
its financial condition, capital requirements, the annual
distribution requirements under the REIT provisions of the Code
and such other factors as the Trustees deem relevant. In the
event that the transaction described in Item 1 is consummated,
the Company's dividend policy would likely be affected.
Item 6. Selected Financial Data
The following table sets forth, on a historical basis,
selected financial data for the Company and MDG which, for
accounting purposes only, is considered the Predecessor entity to
the Company. This information should be read in conjunction with
the audited consolidated financial statements of the Company and
Management's Discussion and Analysis of Financial Condition and
Results of Operations appearing elsewhere in this Form 10-K.
21
<PAGE>
<TABLE>
<CAPTION>
MARK CENTERS TRUST MARK DEVELOPMENT
GROUP
Seven Five
Year Ended Year Ended Year Ended Year Ended Months Ended Months Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 5/31/93
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenue:
Minimum rents $33,669 $33,695 $32,740 $27,543 $12,971 $ 9,267
Percentage rents 3,183 2,795 3,340 2,505 1,644 1,147
Expense reimbursements 6,632 6,559 6,431 5,220 2,629 1,687
Other 1,014 747 821 1,065 961 72
------- ------- ------- ------- ------- -------
Total revenue 44,498 43,796 43,332 36,333 18,205 12,173
------- ------- ------- ------- ------- -------
Operating expenses 17,055 18,260 16,374 14,797 7,718 5,182
Interest and other
financing expense 15,444 12,733 10,598 5,763 2,094 5,172
Depreciation and
amortization 13,768 13,398 11,820 9,066 3,945 2,934
------- ------- ------- ------- ------- -------
46,267 44,391 38,792 29,626 13,757 13,288
------- ------- ------- ------- ------- -------
(Loss) income before
gain on sale,
reorganization costs,
extraordinary items
and minority interest (1,769) (595) 4,540 6,707 4,448 (1,115)
(Loss) gain on sale of land (12) 21 93 305 -- --
Reorganization costs -- -- -- -- (2,629) --
Extraordinary items -- (190) -- -- 194 --
------- ------- ------- ------- ------- -------
(Loss) income before
minority interest (1,781) (764) 4,633 7,012 2,013 (1,115)
Minority interest 217 40 (833) (1,222) (321) 39
------- ------- ------- ------- ------- -------
Net (loss) income $(1,564) $ (724) $ 3,800 $ 5,790 $ 1,692 $(1,076)
======= ======= ======= ======= ======= =======
22
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
MARK CENTERS TRUST MARK DEVELOPMENT
GROUP
Seven Five
Year Ended Year Ended Year Ended Year Ended Months Ended Months Ended
12/31/97 12/31/96 12/31/95 12/31/94 12/31/93 5/31/93
<S> <C> <C> <C> <C> <C> <C>
Net (loss) income per
Common Share
- basic and diluted $(0.18) $(.08) $0.44 $0.68 $0.20
======= ======= ======= ======= =======
Weighted average number of
Common Shares outstanding
- basic 8,551,930 8,546,553 8,540,631 8,533,688 8,445,493
========= ========= ========= ========= =========
- diluted (1) 8,551,930 8,546,553 8,563,466 8,563,529 8,490,114
========= ========= ========= ========= =========
Funds from
Operations (2) $10,827 $12,372 $15,281 $14,831 $8,262
======= ======= ======= ======= =======
Funds from Operations per
share(3) $ 1.06 $ 1.22 $ 1.50 $ 1.46 $ 0.81
======= ======= ======= ======= =======
BALANCE SHEET DATA:
Real estate before
accumulated
depreciation $311,688 $307,411 $291,157 $278,611 $210,133 $163,095
Total assets 254,500 258,517 249,515 242,483 180,083 127,968
Total mortgage
indebtedness 183,943 172,823 151,828 124,410 61,578 150,392
Minority interest-
Operating Partnership 9,244 10,752 13,228 14,827 16,049 --
Total equity (deficit) 48,800 56,806 69,779 78,183 84,606 (32,993)
23
<PAGE>
<FN>
<F1>
(1) Due to a net loss for the years ended December 31, 1997 and 1996, the weighted average number of shares
outstanding on a diluted basis is not presented as the inclusion of additional shares is anti-
dilutive.
<FN2>
(2) The Company, along with most industry analysts, consider funds from operations("FFO") as defined by the National
Association of Real Estate Investment Trusts ("NAREIT") as an appropriate supplemental measure of operating
performance. However, FFO does not represent cash generated from operations as defined by generally accepted
accounting principles and is not indicative of cash available to fund cash needs. It should not be considered
as an alternative to net income for the purpose of evaluating the Company's performance or to cash flows as a
measure of liquidity. Generally, NAREIT defines FFO as net income (loss) before gains (losses) on sales of
property, non-recurring charges and extraordinary items, adjusted for certain non-cash charges, primarily
depreciation and amortization of capitalized leasing costs.
<FN3>
(3) Includes OP units
</FN>
24
</TABLE>
<PAGE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion should be read in conjunction with
the consolidated financial statements of the Company (including
the related notes thereto) appearing elsewhere in this Form 10-K.
The Company effectively commenced its operations on June 1, 1993
with the completion of its initial public offering.
Certain statements made in this report may constitute
"forward-looking statements" within the meaning of the federal
securities laws. Such statements are inherently subject to risk
and uncertainties which may cause the actual results to differ
materially from the future results implied by such forward-
looking statements. Factors which might cause such differences
include general economic conditions, adverse changes in the real
estate markets in general and in the geographic regions in which
the Company's properties are located, changes in interest rates,
potential bankruptcy of tenants and environmental requirements.
RESULTS OF OPERATIONS
Comparison of the year ended December 31, 1997 ("1997") to the
year ended December 31, 1996 ("1996").
Total revenue increased $702,000, or 2%, to $44.5 million in
1997 compared to $43.8 million in 1996.
In total, minimum rents of $33.7 million for 1997 were
essentially unchanged from 1996. Increases in minimum rents of
$757,000 and $102,000 were achieved in 1997 following the
completion of the development of Phase I of the Union Plaza and
completion of the initial lease-up of the Pittston Plaza
following its construction in 1996, respectively. A $680,000
increase in minimum rents was realized throughout the remaining
portfolio, except at those properties as noted below, primarily
from rents received following the installation of new tenants in
excess of rents lost due to vacating tenants. These increases
were, however, offset by declines in minimum rent for 1997 of
(i)$1.1 million at the Ledgewood Mall and Auburn Plaza following
the loss of two anchor tenants during 1996 as well as certain
remaining tenants at these two centers paying percentage rent in
lieu of minimum rent pursuant to anchor cotenancy requirements,
(ii)$338,000 at the Normandale Mall primarily as a result of the
25
<PAGE>
State of Alabama Department of Public Health vacating its leased
space following the expiration of its leases in April 1997 and
(iii)$155,000 following the sale of the Newberry Plaza in March
1997.
Percentage rents increased $388,000, or 14%, to $3.2 million
for 1997 compared to $2.8 million for 1996 primarily as a result
of tenants paying percentage rent in lieu of minimum rents at the
Ledgewood Mall and Auburn Plaza as previously discussed.
Expense reimbursements of $6.6 million for 1997, which
represent the pass-through of certain property expenses to the
tenants, were essentially unchanged from 1996. Increases
relating to the pass-through of higher real estate taxes in 1997
were offset by a decline in expense reimbursements as a result of
a decrease in other property operating expenses in 1997, and by a
decrease in expense reimbursements following the loss of anchor
tenants at the Ledgewood Mall and Auburn Plaza as previously
discussed.
Other income increased $267,000, or 36%, to $1.0 million for
1997 compared to $747,000 for 1996 primarily as a result of an
increase in interest earned on mortgage escrows in connection
with financings with Morgan Stanley Mortgage Capital, Inc. and
Nomura Asset Capital Corporation.
Total 1997 operating expenses decreased $443,000, or 1%, to
$30.8 million compared to $31.3 million in 1996.
Property operating expenses decreased $759,000, or 8%, to
$9.0 million for 1997 from $9.8 million for 1996, primarily due
to the establishment of a $425,000 reserve in 1996 for estimated
environmental remediation costs and related consulting fees
related to two properties (See "Business-Environmental Matters")
and a decrease in winter related costs due to the comparatively
mild winter experienced in the Northeast during 1997.
Real estate taxes increased $406,000, or 8%, to $5.7 million
for 1997 from $5.3 million for 1996 primarily due to the
expiration of a ten-year development abatement at the Greenridge
Plaza and increases in assessed property values as a result of
recent development and expansion activities.
26
<PAGE>
Depreciation and amortization increased $370,000, or 3%, to
$13.8 million for 1997 from $13.4 million for 1996 primarily due
to an increase in depreciation expense following the completion
of the development of Phase I of the Union Plaza in October 1996.
General and administrative expense decreased $460,000, or
16%, to $2.4 million for 1997 from $2.8 million for 1996
primarily due to the write-off during 1996 of non-recurring costs
totalling $492,000 as a result of the Company's decision to
terminate certain acquisition and development activities.
Net interest expense increased $2.7 million, or 21%, to
$15.4 million in 1997, compared to $12.7 million in 1996 due to
higher borrowing levels primarily associated with development and
tenant replacement activities.
The loss before minority interest for 1997 was $1.8 million,
representing an increased loss of $1.0 million compared to the
loss before minority interest of $764,000 for 1996 due to the
above items, as well as a $392,000 loss in 1996 on the reduction
in the carrying value of certain property held for sale and
$190,000 in extraordinary expense for 1996 related to certain
1996 refinancings.
RESULTS OF OPERATIONS
Comparison of the year ended December 31, 1996 ("1996") to the
year ended December 31, 1995 ("1995").
Total revenue increased $464,000, or 1% to $43.8 million in
1996 compared to $43.3 million in 1995. This increase was
attributable to increases in minimum rents and expense
reimbursements partially offset by decreases in percentage rents
and other income.
Minimum rents increased $955,000, or 3%, in 1996 primarily
as a result of the inclusion of a full year of results from the
acquisition of the Plaza 15 Shopping Center in July 1995 and the
development of the Route 6 Mall opened in April 1995, and from
the development of the Pittston Plaza completed in June 1996 and
completion of Phase I of development at the Union Plaza.
27
<PAGE>
Expense reimbursements, which represent the pass-through of
certain property expenses to the tenants, increased $128,000, or
2%, from $6.4 million in 1995 to $6.5 million in 1996. The
increase was primarily due to increases in property operating
expenses and real estate taxes.
Percentage rents, representing the Company's participation
in tenants' gross sales above predetermined thresholds, decreased
$545,000, or 16%, to $2.8 million in 1996 compared to $3.3
million in 1995. This decrease was primarily attributable to
timing differences effecting the period that tenant sales figures
were received and percentage rent recognized.
Additionally, 1996 revenues were unfavorably impacted by the
loss of two anchor tenants during 1996 as a result of
bankruptcies (Jamesway at the Ledgewood Mall, for which a
replacement anchor tenant has been signed, and Rich's at the
Auburn Plaza) which resulted in a decline in total revenues at
the two properties totalling $984,000.
Total 1996 operating expenses, including depreciation and
amortization increased $3.1 million, or 11%, to $31.3 million
compared to $28.2 million in 1995. Of this increase, a $1.4
million increase in depreciation expense was related to increased
investments in properties as a result of acquisition, development
and expansion activities. The remaining $1.7 million increase
was a result of several factors including: (i) a $496,000
increase in real estate taxes due primarily to acquisition,
development and expansion activities, (ii) increased winter
related costs of $469,000 due to the extremely harsh winter
experienced in the Northeast during the first quarter of 1996,
(iii) the establishment of a $425,000 reserve for estimated
environmental remediation costs and related consulting fees
related to two properties (See "Business-Environmental Matters")
and (iv) a $253,000 increase in bad debt expense primarily as a
result of certain tenant bankruptcies offset by repair work
completed at certain properties below initial insurance
estimates.
Net interest expense and financing fees increased $2.1
million, or 20%, to $12.7 million in 1996, compared to $10.6
million in 1995 primarily due to higher borrowing levels
associated with acquisition, development, expansion and tenant
replacement activities.
28
<PAGE>
As a result of the foregoing, and in addition to a $392,000
reduction in the carrying value of certain property held for sale
in 1996 (See Note 13 to the consolidated financial statements)
and extraordinary expenses of $190,000 related to the write-off
of deferred financing costs in 1996, the loss before minority
interest for 1996 was $764,000, representing a decrease of $5.4
million from income before minority interest of $4.6 million for
1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company is in the late stages of negotiation of a
significant transaction which will provide additional properties
and capital to the Company. If the transaction as described in
Item 1 is completed as anticipated in the current negotiations,
the Company's liquidity and capital resources would be
significantly impacted.
During 1997, the Company invested $11.8 million in its
property portfolio (of which $3.3 million was included in
accounts payable as of December 31, 1996), including $6.5 million
for new development, $3.5 million for renovation and tenant
replacement at existing centers, $1.2 million for deferred
leasing and other charges and $624,000 for non-revenue generating
capital expenditures at the properties. As a significant portion
of the Company's funds from operations are distributed to
shareholders, the principal sources of funding for the Company's
investment activity has historically been through permanent debt
financing as well as short-term construction and line of credit
borrowing from various lenders.
Total debt outstanding at December 31, 1997 and 1996 was
$183.9 million and $172.8 million, respectively. The $11.1
million increase in debt was primarily a result of funding the
1997 investment activity. At December 31, 1997, $174.2 million,
or 95%, of the outstanding debt was carried at a fixed rate and
the remaining $9.7 million, or 5%, at variable rates. Of the
total outstanding debt, $100.6 million will mature by December
31, 2000, with scheduled maturities of $2.8 million in 1998, $2.9
million in 1999 and $94.9 million in 2000. As the Company
currently does not anticipate having sufficient cash on hand to
repay such indebtedness, it will need to refinance this
indebtedness or select other alternatives based on market
29
<PAGE>
conditions at that time. The Company believes that the current
loan-to-value ratios on the collateral properties are at levels
which would allow it to fully refinance these loans on
commercially competitive terms.
On September 18, 1997, the Company closed on a $5.5 million
construction loan with Firstrust Savings Bank ("Firstrust") which
refinanced and expanded the Company's existing $2.0 million
credit facility with Firstrust. This construction loan, which is
for the expansion of the Mark Plaza in Edwardsville,
Pennsylvania, bears interest, payable monthly, at the Firstrust
commercial reference rate plus 1% and matures in March 1999.
On March 4, 1997, the Company closed on $23.0 million of
fixed rate financing from Nomura Asset Capital Corporation. The
loan, which matures in March 2022, is secured by a mortgage on
one of the Company's properties, bears interest at 9.02% and
requires monthly payments of interest and principal amortized
over 25 years. Approximately $10.2 million of the proceeds were
used to retire existing debt with Fleet Bank of Massachusetts,
NA, $673,000 was used to pay financing costs, $3.0 million was
deposited in escrows, and the remaining proceeds were used for
working capital. The Company is subject to certain affirmative
and negative covenants relating to this facility.
At December 31, 1997, other mortgage notes payable
aggregated $158.1 million and were collateralized by 35
properties and related tenant leases. Interest rates ranged from
7.7% to 9.11%. Mortgage payments are due in monthly installments
of principal and/or interest and mature at various dates through
2021. The loan agreements contain customary representations,
covenants and events of default. Certain loan agreements require
the Company to comply with certain affirmative and negative
covenants, including the maintenance of certain debt service
coverage ratios. Additionally, the Principal Shareholder has
personally guaranteed the repayment of mortgage loans with an
aggregate balance of $41.0 million at December 31, 1997 without
consideration from the Company.
At December 31, 1997, the Company's capitalization consisted
of $183.9 million of debt and $91.6 million of market equity
(based on a December 31, 1997 market price of $9.00 per share).
As part of the Company's ongoing strategic evaluation and
realignment of its property portfolio, the Company completed the
30
<PAGE>
sale of the Newberry Plaza on March 5, 1997 for $1.3 million,
collecting $1.2 million in net sales proceeds after closing costs
and adjustments. The proceeds were used to supplement working
capital.
The Company currently estimates that capital outlays for
tenant improvements, related renovations and other property
improvements will require $12.4 million during 1998. Certain
tenant improvement costs are being incurred earlier than
anticipated because of early termination of leases due to tenant
bankruptcies. Of these outlays, $1.4 million is reflected in
accounts payable as of December 31, 1997. Furthermore, the
Company has entered into an agreement whereby it has agreed to
pay a tenant at the Ledgewood Mall $1.7 million to settle certain
litigation (see "Business-Leasing and Expansion") so as to
proceed with the installation of Walmart at the mall.
The Company anticipates that cash flow from operating
activities will continue to provide adequate capital for all debt
service payments, recurring capital improvements, as well as
dividend payments in accordance with REIT requirements. However,
the Company may experience a cash shortfall in 1998 if there are
delays in obtaining construction financing to fund the above
capital outlays. Any delays in construction financing will
increase the Company's short term reliance on cash from
operations to meet these commitments.
In order to meet part of its 1998 capital requirements, the
Company obtained $3.5 million in construction financing on
January 28, 1998 with Royal Bank of Pennsylvania for the
construction of a theater at the Manahawkin Village Shopping
Center. The loan, which is secured by the center, requires
monthly payment of interest only at the lender's prime rate plus
150 basis points and matures in February 1999 with additional
extension periods available through February 2000. In addition,
certain amounts currently escrowed with lenders as well as other
debt and equity financing alternatives are expected to provide
the necessary capital to fund the installation of tenants and
achieve continued future growth.
The Company, along with most industry analysts, consider
funds from operations("FFO") as defined by the National
Association of Real Estate Investment Trusts ("NAREIT")as an
appropriate supplemental measure of operating performance.
However, FFO does not represent cash generated from operations as
31
<PAGE>
defined by generally accepted accounting principles and is not
indicative of cash available to fund cash needs. It should not be
considered as an alternative to net income for the purpose of
evaluating the Company's performance or to cash flows as a
measure of liquidity. Generally, NAREIT defines FFO as net income
(loss) before gains (losses) on sales of property, non-recurring
charges and extraordinary items, adjusted for certain non-cash
charges, primarily depreciation and amortization of capitalized
leasing costs.
32
<PAGE>
MARK CENTERS TRUST
FUNDS FROM OPERATIONS
For the Years Ended December 31, 1997 and 1996
(in thousands except per share data)
For the year ended December 31,
1997 1996
Revenue
Minimum rents(a) $33,360 $33,396
Percentage rents 3,183 2,795
Expense reimbursements 6,632 6,559
Other 1,014 747
------- -------
Total revenue 44,189 43,497
------- -------
Expenses
Property operating(b) 9,113 9,181
Real estate taxes 5,691 5,285
General and administrative 2,339 2,796
------- -------
Total operating expenses 17,143 17,262
------- -------
Operating income 27,046 26,235
Interest expense 15,444 12,733
Amortization of deferred
financing costs 567 915
Depreciation of non-real
estate assets 208 215
------- -------
Funds from operations $10,827 $12,372
======= =======
Funds from operations
per share (c) $ 1.06 $ 1.22
======= =======
Reconciliation of funds from operations to net income
determined in accordance with Generally Accepted
Accounting Principles(GAAP)
Funds from operations above $10,827 $12,372
Depreciation of real estate and
amortization of leasing costs (12,993) (12,268)
Straight-line rents and
related write-offs (net) 176 164
(Loss) gain on sale of land (12) 21
Adjustment (reserve) for
environmental remediation costs 245 (425)
Adjustment to carrying value of
property held for sale -- (392)
Extraordinary item, write-off of
deferred financing costs -- (190)
Minority interest 217 40
Other non-cash adjustments (24) (46)
------- -------
Net loss $(1,564) $ (724)
======= =======
Net loss per share
- basic and diluted (d) $ (0.18) $(0.08)
======= =======
33
<PAGE>
(a) Excludes income from straight-lining of rents.
(b) Represents all expenses other than depreciation,
amortization, write-off of unbilled rent receivables
recognized on a straight-line basis and the non-cash charge
for compensation expense related to the Company's restricted
share plan.
(c) Assumes full conversion of 1,623,000 OP Units into common
shares of the Company for the years ended December 31, 1997
and 1996, respectively, for a total of 10,177,177 and
10,171,817 shares, respectively.
(d) Net loss per share (basic and diluted) is computed based on
the weighted average number of shares outstanding for the
years ended December 31, 1997 and 1996 of 8,551,930 and
8,546,553, respectively.
Historical Cash Flow
The following discussion of historical cash flow compares
the Company's cash flows for the year ended December 31, 1997
("1997") with the year ended December 31, 1996 ("1996").
Net cash provided by operating activities decreased $815,000
to $13.2 million in 1997 from $14.1 million in 1996. This
decrease was primarily attributable to a $1.3 million decrease in
cash provided by net income as adjusted for non-cash expenses
including depreciation, amortization, property carrying value
adjustment and the write-off of deferred financing costs. This
was offset by a $525,000 increase in cash provided by changes in
operating assets, primarily an increase in accounts payable
related to operations in 1997.
Investing activities used $10.5 million during 1997, a
decrease of $9.5 million from $20.0 million for 1996 due
primarily to greater development costs paid associated with the
Union Plaza in New Castle, Pennsylvania in 1996.
Net cash used in financing activities was $5.4 million for
1997, representing a $12.2 million decrease from net cash
provided by financing activities of $6.8 million for 1996. This
decrease is primarily attributable to a decrease in borrowings
related to property investment in 1997.
34
<PAGE>
Inflation
The Company's long-term leases contain provisions designed
to mitigate the adverse impact of inflation on the Company's net
income. Such provisions include clauses enabling the Company to
receive percentage rents based on tenants' gross sales, which
generally increase as prices rise, and/or, in certain cases,
escalation clauses, which generally increase rental rates during
the terms of the leases. Such escalation clauses are often
related to increases in the consumer price index or similar
inflation indexes. In addition, many of the Company's leases are
for terms of less than 10 years, which permit the Company to seek
to increase rents upon re-rental at market rates if rents are
below the then existing market rates. Most of the Company's
leases require the tenants to pay their share of operating
expenses, including common area maintenance, real estate taxes,
insurance and utilities, thereby reducing the Company's exposure
to increases in costs and operating expenses resulting from
inflation.
Recently Issued Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 131,
"Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 131 establishes standards for
publicly-held business enterprises to report information about
operating segments in annual financial statements and requires
that these enterprises report selected information about
operating segments in interim financial reports issued to
shareholders. SFAS 131 is effective for financial statements for
years beginning after December 15, 1997. The Company plans to
adopt SFAS 131 in 1998.
Year 2000 Compliance
The Company is in the process of evaluating its major
information systems to verify that they are Year 2000 compliant.
If these systems are not compliant, the appropriate upgrades will
be purchased. The cost of any required upgrades are not
anticipated to be significant. In addition, the Company is
communicating with its customers, suppliers and service providers
to determine whether they are actively involved in projects to
ensure that their products and business systems will be Year 2000
compliant. The Company is not aware of any significant Year 2000
issues involving its customers, suppliers or service providers.
35
<PAGE>
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data listed in items
14(a)(1) and 14(a)(2) hereof are incorporated herein by
reference.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure
None
PART III
Item 10. Directors and Executive Officers of the Company
This item is incorporated by reference from the definitive
proxy statement for the Annual Meeting of Shareholders presently
scheduled to be held on June 12, 1998, to be filed pursuant to
Regulation 14A.
Item 11. Executive Compensation
This item is incorporated by reference from the definitive
proxy statement for the Annual Meeting of Shareholders presently
scheduled to be held on June 12, 1998, to be filed pursuant to
Regulation 14A.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
This item is incorporated by reference from the definitive
proxy statement for the Annual Meeting of Shareholders presently
scheduled to be held on June 12, 1998, to be filed pursuant to
Regulation 14A.
Item 13. Certain Relationships and Related Transactions
This item is incorporated by reference from the definitive
proxy statement for the Annual Meeting of Shareholders presently
scheduled to be held on June 12, 1998, to be filed pursuant to
Regulation 14A.
36
<PAGE>
PART IV
Item. 14. Exhibits, Financial Statements, Schedules and Reports
on Form 8-K
(a) 1. Financial Statements - Form 10-K
The following consolidated financial Report Page
information is included as a separate
section of this annual report on
Form 10-K
MARK CENTERS TRUST
INDEX OF FINANCIAL STATEMENTS
Report of Independent Auditors F-2
Consolidated Balance Sheets as of
December 31, 1997 and 1996 F-3
Consolidated Statements of Operations for the
years ended December 31, 1997, 1996 and 1995 F-4
Consolidated Statements of Shareholders'
Equity for the years ended December 31, 1997,
1996 and 1995 F-5
Consolidated Statements of Cash Flows for
the years ended December 31, 1997, 1996 and 1995 F-7
Notes to Consolidated Financial Statements F-10
2. Financial Statement Schedules
Schedule III - Real Estate and
Accumulated Depreciation F-31
All other schedules are omitted since
the required information is not present
or is not present in amounts sufficient
to require submission of the schedule.
3. Exhibits
Exhibit No.
3.1 Declaration of Trust Incorporated by reference
of the Company, as to the copy thereof filed as
amended an exhibit to the Company's
Form 10-K filed for the fiscal
year ended December 31, 1994
3.2 By-Laws of the Company Incorporated by reference to
the copy thereof filed as an
exhibit to the Company's Form
S-11 (File No.33-60008)
("Form S-11")
37
<PAGE>
10.1 Agreement of Limited Incorporated by reference to
Partnership of Mark the copy thereof filed as an
Centers Limited exhibit to Amendment No. 3 to
Partnership the Company's Form S-11
10.2 Loan Agreement Incorporated by reference to
between the Company the copy thereof filed as
and Metropolitan exhibit to Amendment No. 3
Life Insurance to the Company's Form S-11
Company
10.3(a) Loan Agreement Incorporated by reference to
between the Company the copy thereof filed as an
and Fleet Bank of exhibit to Amendment No. 3
Massachusetts, N.A. to the Company's Form S-11
10.3(b) First Amended and Incorporated by reference to
Restated Loan Agreement the copy thereof filed as an
between the Company and exhibit to the Company's Form
Fleet National Bank 10-K filed for the fiscal
dated May 30, 1995 year ended December 31, 1995
10.3(c) Amendment Number One to Incorporated by reference to
the First Amended and the copy thereof filed as an
Restated Assumption, exhibit to the Company's Form
Extension and Loan 10-K filed for the fiscal
Agreement between the year ended December 31, 1995
Company and Fleet
National Bank dated
December 6, 1995
10.3(d) Amendment Number Two Incorporated by reference to
To the First Amended the copy thereof filed as an
and Restated Assumption, exhibit to the Company's Form
Extension and Loan 10-Q filed for the quarter
Agreement between the ended September 30, 1996
Company and Fleet
National Bank
38
<PAGE>
10.3(e) Amendment Number Three Incorporated by reference to
to the First Amended the copy thereof filed as an
and Restated Assumption, exhibit to the Company's Form
Extension and Loan 10-Q filed for the quarter
Agreement between the ended June 30, 1997
Company and Fleet
National Bank
10.4 Acquisition Option Incorporated by reference to
Agreement between the copy thereof filed as an
the Company and exhibit to Amendment No. 3
Marvin L. Slomowitz to the Company's Form S-11
10.5(a) Option Agreement Incorporated by reference
between the Company to the copy thereof filed
and the Principal as an exhibit to Amendment
Shareholder allowing No. 3 to the Company's Form
the Company to acquire S-11
certain properties
from the Principal
Shareholder
10.5(b) Amendment to the Option Incorporated by reference
Agreement between the to the copy thereof filed as
Company and the an exhibit to the Company's
Principal Shareholder Form 10-K filed for the fiscal
year ended December 31, 1993
10.5(c) Agreement of Sale and Incorporated by reference to
Purchase (Hudson, New the copy thereof filed as an
York) between the exhibit to the Company's
Company and Marvin L. Form 10-K filed for the fiscal
Slomowitz dated year ended December 31, 1995
February 27, 1996
10.5(d) Agreement of Sale and Incorporated by reference to
Purchase (New Castle, the copy thereof filed as an
Pennsylvania) between exhibit to the Company's
the Company and Form 10-K filed for the fiscal
Marvin L. Slomowitz year ended December 31, 1995
dated February 19, 1996
10.5(e) Termination of Option Incorporated by reference to
Agreements between the the copy thereof filed as an
Company and the exhibit to the Company's Form
Principal Shareholder 10-Q filed for the quarter
to acquire certain ended June 30, 1996
properties
39
<PAGE>
10.5(f) Option Agreement Incorporated by reference to
between the Company the copy thereof filed as an
and the Principal exhibit to the Company's Form
Shareholder allowing 10-Q filed for the quarter
the Company to acquire ended June 30, 1996
a certain property from
the Principal Shareholder
10.5(g) First Amendment to Incorporated by reference to
Agreement of Sale and the copy thereof filed as an
Purchase (Hudson, NY) exhibit to the Company's Form
between the Company 10-Q filed for the quarter
and Marvin L. Slomowitz ended June 30, 1996
10.5(h) Option Purchase Agreement
between the Company
and the Principal
Shareholder allowing
the Company to acquire
a certain property from
the Principal Shareholder
10.5(i) Termination of Option
to Purchase (Lewisburg)
between the Company and
the Principal Shareholder
*10.6(a) Share Option Plan Incorporated by reference to
the copy thereof filed as an
exhibit to Amendment No. 3 to
the Company's Form S-11
*10.6(b) Mark Centers Trust Incorporated by reference to
1994 Share Option the copy thereof filed as an
Plan exhibit to the Company's
Form S-8 filed August 17,
1995
*10.6(c) Mark Centers Trust Incorporated by reference to
1994 Non-Employee the copy thereof filed as an
Trustees' Share exhibit to the Company's Form
Option Plan S-8 filed August 17, 1995
40
<PAGE>
*10.7 Restricted Share Plan Incorporated by reference to
the copy thereof filed as an
exhibit to Amendment No. 3 to
the Company's Form S-8 filed
June 15, 1994
*10.8 Noncompetition Incorporated by reference
Agreement between to the copy thereof filed as
Marvin L. Slomowitz an exhibit to Amendment No. 3
and the Company to the Company's Form S-11
*10.9 Form of Severance Incorporated by reference
Agreement between the to the copy thereof filed
Company and certain as an exhibit to Amendment
executive officers No. 3 to the Company's
Form S-11
10.10 Form of Lock-Up Incorporated by reference
Agreement between the to the copy thereof filed as
Company and its an exhibit to Amendment No. 3
Trustees and to the Company's Form S-11
executive officers
10.11 Form of Agreement Incorporated by reference
of Purchase and Sale to the copy thereof filed as
for the properties an exhibit to Amendment No. 3
to the Company's Form S-11
10.12 Form of Lease for Incorporated by reference to
headquarters the copy thereof filed as an
exhibit to Amendment No. 3
to the Company's Form S-11
10.13(a) Management Agreements Incorporated by reference to
the copy thereof filed as an
exhibit to Amendment No. 3
to the Company's Form S-11
10.13(b) Termination of Incorporated by reference to
Management Agreements the copy thereof filed as an
exhibit to the Company's Form
10-Q filed for the quarter
ended June 30, 1996
41
<PAGE>
10.14 Form of Registration Incorporated by reference
Rights Agreement to the copy thereof filed as
an exhibit to Amendment No. 4
to the Company's Form S-11
10.15 Agreement of Purchase Incorporated by reference
and Sale between Mark to the copy thereof filed as
Centers Limited an exhibit to the Company's
Partnership, Form 8-K filed on
a Delaware limited December 30, 1993
partnership and
Manahawkin Route 72 L.P.
dated November 23, 1993
10.16 Agreement of Purchase Incorporated by reference
and Sale between Mark to the copy thereof filed as
Centers Limited an exhibit to the Company's
Partnership, a Form 8-K filed on
Delaware limited December 30, 1993
partnership, and
Twenty-Fifth
Street Associates, L.P.
dated November 23, 1993
10.17(a) Loan Agreement Incorporated by reference
between the Company to the copy thereof filed as
and Mellon Bank, N.A. an exhibit to the Company's
Form 10-K filed for the fiscal
year ended December 31, 1994
10.17(b) First Amendment to Incorporated by reference
Revolving Credit Loan to the copy thereof filed as
Agreement between the an exhibit to the Company's
Company and Mellon Form 10-K filed for the fiscal
Bank, N.A. dated year ended December 31, 1995
November 15, 1995
10.17(c) Second Amendment to Incorporated by reference
Revolving Credit Loan to the copy thereof filed as
Agreement between the an exhibit to the Company's
Company and Mellon Form 10-K filed for the fiscal
Bank, N.A. dated year ended December 31, 1995
February 29, 1996
42
<PAGE>
10.17(d) Third Amendment To Incorporated by reference to
Revolving Credit Loan the copy thereof filed as an
Agreement between the exhibit to the Company's Form
Company and Mellon 10-Q filed for the quarter
Bank, N.A. ended September 30, 1996
10.17(e) Fourth Amendment to Incorporated by reference to
Revolving Credit Loan the copy thereof filed as an
Agreement between the exhibit to the Company's Form
Company and Mellon 10-Q filed for the quarter
Bank, N.A. ended June 30, 1997
10.17(f) Fifth Amendment to
Revolving Credit Loan
Agreement between the
Company and Mellon
Bank, N.A.
10.18 Form of Loan Agreement Incorporated by reference
together with Form of to the copy thereof filed as
First Mortgage and an exhibit to the Company's
Security Agreement Form 10-K filed for the fiscal
between the Company and year ended December 31, 1995
John Hancock Mutual Life
Insurance Company dated
March 15, 1995
10.19 Construction Loan Incorporated by reference
Agreement between the to the copy thereof filed as
Company and Mellon Bank, an exhibit to the Company's
N.A. dated November 15, Form 10-K filed for the fiscal
1995 year ended December 31, 1995
10.20(a) Loan Agreement between Incorporated by reference
the Company and to the copy thereof filed as
Firstrust Bank dated an exhibit to the Company's
December 21, 1995 Form 10-K filed for the fiscal
year ended December 31,1995
10.20(b) Amendment to Mortgage Incorporated by reference to
and Assignments of the copy thereof filed as an
Rents and Leases between exhibit to the Company's Form
the Company and 10-Q filed for the quarter
Firstrust Bank ended June 30, 1996
43
<PAGE>
10.20(c) Construction and/or Incorporated by reference to
Development Loan the copy thereof filed as an
Agreement between exhibit to the Company's Form
the Company and 10-Q filed for the quarter
Firstrust Bank ended September 30, 1997
10.20(d) Open End Fee and Incorporated by reference to
Leasehold Mortgage the copy thereof filed as an
between the Company exhibit to the Company's Form
and Firstrust Bank 10-Q for the quarter
ended September 30, 1997
10.21(a) Promissory Note Incorporated by reference to
Agreement between the the copy thereof filed as an
Company and First exhibit to the Company's Form
Federal Savings Bank 10-Q filed for the quarter
of New Smyrna ended June 30, 1996
10.21(b) Mortgage Deed and Incorporated by reference to
Security Agreement the copy thereof filed as an
between the Company and exhibit to the Company's Form
First Federal Savings 10-Q filed for the quarter
Bank of New Smyrna ended June 30, 1996
10.22(a) Indenture of Mortgage, Incorporated by reference to
Deed of Trust, Security the copy thereof filed as an
Agreement, Financing exhibit to the Company's Form
Statement, Fixture 10-Q filed for the quarter
Filing and Assignment ended September 30, 1996
of Leases, Rents and
Security Deposits
between the Company
and Morgan Stanley
Mortgage Capital, Inc.
10.22(b) Mortgage Note between Incorporated by reference to
the Company and Morgan the copy thereof filed as an
Stanley Mortgage exhibit to the Company's Form
Capital, Inc. 10-Q for the quarter
ended September 30, 1996
10.23(a) Construction Loan Incorporated by reference to
Agreement between the the copy thereof filed as an
Company and First exhibit to the Company's Form
Western Bank 10-Q filed for the quarter
ended September 30, 1996
44
<PAGE>
10.23(b) Mortgage Note between Incorporated by reference to
the Company and First the copy thereof filed as an
Western Bank exhibit to the Company's Form
10-Q filed for the quarter
ended September 30, 1996
10.24(a) Open-End Mortgage, Incorporated by reference
Security Agreement, to the copy thereof filed as
Future Filing, Financing an exhibit to the Company's
Statement and Assignment Form 10-K filed for the fiscal
of Leases and Rents year ended December 31, 1996
between the Company
and Anchor National Life
Insurance Company
10.24(b) Promissory Note between Incorporated by reference
the Company and Anchor to the copy thereof filed as
National Life Insurance an exhibit to the Company's
Company Form 10-K filed for the fiscal
year ended December 31, 1996
10.25 Agreement of Sale Incorporated by reference
of Newberry Plaza to the copy thereof filed as
between Mark Centers an exhibit to the Company's
Limited Partnership, Form 10-K filed for the fiscal
a Delaware limited year ended December 31, 1996
partnership, and
Ronnie W. Cromer,
William B. Rush,
Earl H. Berger, Jr.
Rodney S. Griffin and
William W. Reiser, Jr.
10.26(a) Loan Agreement dated Incorporated by reference
March 4, 1997 by and to the copy thereof filed a
between Mark Northwood an exhibit to the Company's
Associates, Limited Form 10-K filed for the fiscal
Partnership, a Florida year ended December 31, 1996
limited partnership,
and Nomura Asset
Capital Corporation
45
<PAGE>
10.26(b) Promissory Note dated Incorporated by reference
March 4, 1997 between to the copy thereof filed
Mark Northwood as an exhibit to the Company's
Associates, Limited Form 10-K filed for the fiscal
Partnership, a Florida year ended December 31, 1996
limited partnership,
and Nomura Asset Capital
Corporation
10.26(c) Leasehold Mortgage, Incorporated by reference
Assignment of Rents, to the copy thereof filed
Security Agreement and as an exhibit to the Company's
Fixture Filing by Mark Form 10-K filed for the fiscal
Northwood Associates, year ended December 31, 1996
Limited Partnership, a
Florida limited partnership,
to Nomura Asset Capital
Corporation dated March
4, 1997
10.27(a) Mortgage and Security
Agreement between the
Company and Royal Bank
of Pennsylvania
10.27(b) Promissory Note between
the Company and Royal
Bank of Pennsylvania
21 List of Subsidiaries Incorporated by reference to
of Mark Centers Trust the copy thereof filed as an
exhibit to the Company's
Form 10-K filed for the fiscal
year ended December 31, 1996
23 Consent of Independent
Auditors to Form S-3
and Form S-8
27 Financial Data Schedule
(EDGAR filing only)
* Constitutes a compensatory plan or arrangement required
to be filed as an exhibit to this Form.
46
<PAGE>
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company for the quarter
ended December 31, 1997.
47
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereto duly authorized.
MARK CENTERS TRUST
(Registrant)
By: /s/ Marvin L. Slomowitz
Marvin L. Slomowitz
Chief Executive Officer
Dated: April 13, 1998
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated.
Signature Title Date
/s/Marvin L. Slomowitz Chief Executive Officer April 13, 1998
(Marvin L. Slomowitz)and Trustee (Principal
Executive Officer)
/s/Joshua Kane Senior Vice President April 13, 1998
(Joshua Kane) Chief Financial Officer
and Treasurer (Principal
Financial and Accounting
Officer)
/s/Harvey Shanus Trustee April 13, 1998
(Harvey Shanus)
/s/Marvin J. Levine Trustee April 13, 1998
(Marvin J. Levine Esq)
/s/Joseph L. Castle,II Trustee April 13, 1998
(Joseph L. Castle, II)
/s/John Vincent Weber Trustee April 13, 1998
(John Vincent Weber)
/s/Lawrence J. Longua Trustee April 13, 1998
(Lawrence J. Longua)
48
<PAGE>
EXHIBIT INDEX
The following is an index to all exhibits filed with the
Annual Report on Form 10-K other than those incorporated by
reference herein:
Exhibit Number Description Page
10.5(h) Option Purchase Agreement
between the Company
and the Principal
Shareholder allowing
the Company to acquire
a certain property from
the Principal Shareholder
10.5(i) Termination of Option
to Purchase (Lewisburg)
between the Company and
the Principal Shareholder
10.17 (f) Fifth Amendment to
Revolving Credit Loan
Agreement between the
Company and Mellon
Bank, N.A.
10.27(a) Mortgage and Security
Agreement between the
Company and Royal Bank
of Pennsylvania
10.27(b) Promissory Note between
the Company and Royal
Bank of Pennsylvania
23 Consent of Independent
Auditors to Form S-3
and Form S-8
27 Financial Data Schedule
(EDGAR filing only)
49
<PAGE>
MARK CENTERS TRUST
INDEX TO FINANCIAL STATEMENTS
I. MARK CENTERS TRUST
Report of Independent Auditors F-2
Consolidated Balance Sheets as of
December 31, 1997 and 1996 F-3
Consolidated Statements of Operations
for the years ended December 31, 1997,
1996 and 1995 F-4
Consolidated Statements of Shareholders'
Equity for the years ended December 31, 1997,
1996 and 1995 F-5
Consolidated Statements of Cash Flows for
the years ended December 31, 1997, 1996
and 1995 F-7
Notes to Consolidated Financial Statements F-10
Schedule III - Real Estate and Accumulated
Depreciation F-31
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Trustees of
Mark Centers Trust
We have audited the accompanying consolidated balance sheets of
Mark Centers Trust (a Maryland Trust) and subsidiaries (the
"Company") as of December 31, 1997 and 1996, and the related
consolidated statements of operations, shareholders' equity and
cash flows for each of the three years in the period ended
December 31, 1997. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These
financial statements and the schedule are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Mark Centers Trust and subsidiaries as of
December 31, 1997 and 1996, and the consolidated results of their
operations and their cash flows for each of the three years in
the period ended December 31, 1997 in conformity with generally
accepted accounting principles. Also, in our opinion, the
related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents
fairly, in all material respects, the information set forth
therein.
/s/ ERNST & YOUNG LLP
New York, New York
April 8, 1998
F-2
<PAGE>
MARK CENTERS TRUST
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
December 31,
ASSETS 1997 1996
------- --------
Rental property, at cost:
Land $ 30,855 $ 31,084
Buildings and improvements 274,165 271,423
Property under development 6,668 4,904
-------- --------
311,688 307,411
Less: accumulated depreciation 83,326 72,956
-------- --------
Net rental property 228,362 234,455
Cash and cash equivalents 1,287 3,912
Cash in escrow 7,906 3,603
Rents receivable 4,802 4,956
Prepaid expenses 1,241 1,421
Due from related parties 177 203
Deferred charges, net 9,710 9,034
Other assets 1,015 933
-------- --------
$254,500 $258,517
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Mortgage notes payable $183,943 $160,168
Lines of credit -- 12,655
Accounts payable and accrued
expenses 7,553 9,397
Distributions payable -- 3,662
Note payable to Principal Shareholder 3,050 3,050
Other liabilities 1,910 2,027
-------- --------
Total liabilities 196,456 190,959
-------- --------
Minority interest 9,244 10,752
-------- --------
Commitments and contingencies
<PAGE>
Shareholders' equity:
Common stock, $.001 par value,
authorized 50,000,000 shares,
issued and outstanding, 8,554,177
and 8,548,817 shares,
respectively 9 9
Additional paid-in capital 51,073 57,521
Deficit (2,282) (724)
-------- --------
Total shareholders' equity 48,800 56,806
-------- --------
$254,500 $258,517
======== ========
See accompanying notes
F-3
<PAGE>
MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Year ended December 31,
1997 1996 1995
-------- -------- --------
Revenue
Minimum rents $ 33,669 $ 33,695 $ 32,740
Percentage rents 3,183 2,795 3,340
Expense reimbursements 6,632 6,559 6,431
Other 1,014 747 821
-------- -------- --------
Total revenue 44,498 43,796 43,332
-------- -------- --------
Operating expenses
Property operating 9,013 9,772 8,834
Real estate taxes 5,691 5,285 4,789
Depreciation and amortization 13,768 13,398 11,820
General and administrative 2,351 2,811 2,751
-------- -------- --------
Total operating expenses 30,823 31,266 28,194
-------- -------- --------
Operating income 13,675 12,530 15,138
Interest expense (15,444) (12,733) (10,598)
(Loss) gain on sale of land (12) 21 93
Adjustment to carrying value
of property held for sale -- (392) --
-------- -------- --------
(Loss) income before
extraordinary item and
minority interest (1,781) (574) 4,633
Extraordinary item - write-off
of deferred financing costs -- (190) --
-------- -------- --------
(1,781) (764) 4,633
Minority interest 217 40 (833)
-------- -------- --------
Net (loss) income $ (1,564) $ (724) $ 3,800
======== ======== ========
Basic and diluted net (loss) income per common share:
(Loss) income before
extraordinary item $ (.18) $ (.06) $ .44
Extraordinary item -- (.02) --
-------- -------- --------
Basic and diluted net (loss)
income per common share $ (.18) $ (.08) $ .44
======== ======== ========
See accompanying notes
F-4
<PAGE>
<TABLE>
<CAPTION>
MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except per share amounts)
Shares of Retained Total
Common Common Additional Paid Earnings Shareholders'
Stock Stock in Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994 8,536,765 9 78,174 -- 78,183
Issuance of shares pursuant to
the Company's restricted share
plan 6,687 -- 93 -- 93
Issuance of Operating Partnership
Units in connection with the
acquisition of property -- -- (20) -- (20)
Income before minority interest -- -- -- 4,633 4,633
Distributions paid to limited
partners of the Operating
Partnership -- -- -- (2,452) (2,452)
Dividends paid from accumulated
earnings ($0.16 per share) -- -- -- (1,348) (1,348)
Dividends paid in excess of
accumulated earnings
($1.28 per share) -- -- (10,949) -- (10,949)
Minority interest's equity -- -- 2,472 (833) 1,639
---------- --- ------- ------- -------
Balance, December 31, 1995 8,543,452 9 69,770 -- 69,779
Issuance of shares pursuant to
the Company's restricted share
plan 5,365 -- 57 -- 57
Loss before minority interest -- -- -- (764) (764)
Distributions paid or declared
to limited partners of the
Operating Partnership -- -- (2,435) -- (2,435)
F-5
<PAGE>
<CAPTION>
MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(In thousands, except per share amounts)
Shares of Retained Total
Common Common Additional Paid Earnings Shareholders'
Stock Stock in Capital (Deficit) Equity
<S> <C> <C> <C> <C> <C>
Dividends paid or declared in
excess of accumulated earnings
($1.44 per share) -- -- (12,306) -- (12,306)
Minority interest's equity -- -- 2,435 40 2,475
---------- --- ------- ------- -------
Balance, December 31, 1996 8,548,817 9 57,521 (724) 56,806
Issuance of shares pursuant to
the Company's restricted share
plan 5,360 -- 52 -- 52
Adjustment to minority interest -- -- -- 6 6
Loss before minority interest -- -- -- (1,781) (1,781)
Distributions paid to limited
partners of the
Operating Partnership -- -- (1,285) -- (1,285)
Dividends paid in
excess of accumulated earnings
($0.76 per share) -- -- (6,500) -- (6,500)
Minority interest's equity -- -- 1,285 217 1,502
---------- --- ------- ------- -------
Balance, December 31, 1997 8,554,177 $ 9 $51,073 $(2,282) $48,800
========== === ======= ======= =======
See accompanying notes
F-6
<PAGE>
<CAPTION>
MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share amounts)
YEAR ENDED DECEMBER 31,
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)income $(1,564) $ (724) $ 3,800
Adjustments to reconcile net (loss) income
to net cash provided by operating activities:
Loss (gain) on sale of land 12 (21) (93)
Depreciation and amortization of leasing costs 13,201 12,483 10,993
Amortization of deferred financing costs 567 915 827
Write-off of deferred financing costs -- 190 --
Adjustment to carrying value of property held for sale -- 392 --
Minority interest (217) (40) 833
Provision for bad debts 833 972 721
Other 52 57 93
------- ------- -------
12,884 14,224 17,174
Changes in assets and liabilities:
Rents receivable (679) (580) (1,846)
Prepaid expenses 180 (69) (387)
Due from related parties 26 31 408
Other assets (290) 641 (959)
Accounts payable and accrued expenses 1,233 (756) 1,656
Other liabilities (117) 561 51
------- ------- -------
Net cash provided by operating activities 13,237 14,052 16,097
------- ------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Expenditures for real estate and improvements, inclusive of
payables related to construction activity (10,558) (16,642) (21,671)
Payment to Principal Shareholder for acquisition of land -- -- (1,500)
Payment of deferred leasing charges (1,205) (3,399) (1,650)
Proceeds from sale of property 1,288 22 105
------- ------- -------
Net cash used in investing activities (10,475) (20,019) (24,716)
------- ------- -------
F-7
<PAGE>
<CAPTION>
MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share amounts)
YEAR ENDED DECEMBER 31,
1997 1996 1995
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net funding of escrows (4,303) (688) (2,014)
Principal payments on mortgages (14,835) (40,622) (49,491)
Payment of deferred finance costs (757) (2,415) (770)
Proceeds received on mortgage notes 25,955 61,617 75,690
Dividends paid (9,577) (9,229) (12,297)
Distributions paid to Principal Shareholder (1,870) (1,852) (2,452)
------- ------- -------
Net cash (used in) provided by financing activities (5,387) 6,811 8,666
------- ------- -------
(Decrease) increase in cash and cash equivalents (2,625) 844 47
Cash and cash equivalents, beginning of period 3,912 3,068 3,021
------- ------- -------
Cash and cash equivalents, end of period $ 1,287 $ 3,912 $ 3,068
======= ======= =======
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for interest, net of amounts
capitalized of $569, $897, and $978, respectively $15,502 $12,950 $10,172
======= ======= =======
F-8
<PAGE>
<CAPTION>
MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, except per share amounts)
In connection with the exercise of the Company's options to acquire and develop certain properties and the subsequent
transactions as a result of certain resolutions with the Principal Shareholder, the following assets and liabilities were
recorded:
YEAR ENDED DECEMBER 31,
1997 1996 1995
<S> <C> <C> <C>
Contingent liability due to Principal Shareholder $ -- $(6,156) $(8,133)
Establishment of note payable to the Principal Shareholder -- 3,031 --
------- ------ -------
Net decrease in cost of property acquired $ -- $(3,125) $(8,133)
======= ======= =======
<CAPTION>
In connection with the acquisition of the Plaza 15 Shopping Center, the following assets and liabilities were recorded:
<S> <C> <C> <C>
Assumption of mortgage $ -- $ -- $1,219
Application of balance due the Company under the ground lease -- -- 196
Operating Partnership Units issued -- -- 20
Cash received -- -- (46)
------- ------- -------
Cost of property acquired $ -- $ -- $1,389
======= ======= =======
See accompanying notes
F-9
</TABLE>
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
1. Organization, Basis of Presentation and Summary of Significant
Accounting Policies
Mark Centers Trust (the "Company") was formed as a Maryland Real
Estate Investment Trust on March 4, 1993 by Marvin L. Slomowitz
(the "Principal Shareholder"), the principal owner of Mark
Development Group (the "Predecessor"), to continue the business
of the Predecessor in acquiring, developing, renovating, owning
and operating shopping center properties. The Company
effectively commenced operations on June 1, 1993 with the
completion of its initial public offering, whereby it issued
8,350,000 common shares (the "Offering"). The proceeds from the
Offering were used to repay certain property-related
indebtedness, for costs associated with the Offering and the
transfer of the properties to the Company and for working
capital. The acquisition of the properties was recorded by the
Company at the historical cost reflected in the Predecessor's
financial statements since these transactions were conducted with
entities deemed to be related parties. The Company currently
owns and operates 39 properties consisting of 34 neighborhood and
community shopping centers, three enclosed malls and two mixed-
use (retail/office space) properties. All of the Company's
assets are held by, and all of its operations are conducted
through Mark Centers Limited Partnership (the "Operating
Partnership") and its majority owned partnerships. The Company
as of December 31, 1997 controlled, as the sole general partner,
84% of the Operating Partnership. The Company will at all times
be the sole general partner of, and owner of a 51% or greater
interest in, the Operating Partnership. In excess of 99% of the
minority interest in the Operating Partnership is owned by the
Principal Shareholder who is the principal limited partner of the
Operating Partnership.
Principles of Consolidation
The consolidated financial statements of Mark Centers Trust
include the accounts of the Company and its majority owned
partnerships, including the Operating Partnership. All
significant intercompany balances and transactions have been
eliminated in consolidation.
F-10
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Use of Estimates
The preparation of the financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
Properties
Real estate assets are stated at cost less accumulated
depreciation. Such carrying amounts would be adjusted, if
necessary, to reflect any impairment in the value of the assets.
Expenditures for acquisition, development construction and
improvement of properties, as well as significant renovations are
capitalized. Interest costs are capitalized until construction
is substantially complete. Depreciation is computed on the
straight-line method over estimated useful lives of thirty to
forty years for buildings and the shorter of the useful life or
lease term of improvements, furniture, fixtures and equipment.
Expenditures for maintenance and repairs are charged to
operations as incurred.
In accordance with Financial Accounting Standards Board Statement
No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of", the Company records
impairment losses on long-lived assets used in operations when
events and circumstances indicate that the assets might be
impaired and the undiscounted cash flows estimated to be
generated by those assets are less than the carrying amounts of
those assets. During 1997 market events and circumstances and
the requirement for significant capital expenditures indicated
that $35,412 of real estate assets might be impaired. However,
the Company's estimate of undiscounted cash flows indicated that
such carrying amounts were expected to be recovered.
Nonetheless, it is reasonably possible that the estimate of
undiscounted cash flows may change in the near term resulting in
the need to write-down those assets to fair value.
F-11
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Acquisition of Properties
On July 14, 1995, the Company acquired the equitable interest in
the building and other improvements constituting the Plaza 15
Shopping Center, located in Lewisburg, Pennsylvania. The
equitable interest in the land had already been assigned to the
Company by the Principal Shareholder in the Offering in exchange
for Operating Partnership Units ("OP Units"). The Company paid
$1,389 for the equitable interest in the building and
improvements held by an unrelated third party under an industrial
development authority installment sales agreement through the
issuance of 2,000 OP Units, the assumption of $1,219 of mortgage
debt and the application of other amounts due the Company.
In May 1995, the Company and Principal Shareholder agreed to
terminate an acquisition option which was obtained concurrent
with the Offering to acquire property in New Castle,
Pennsylvania. In lieu of the option the Company purchased the
property from the Principal Shareholder in February 1996 for
$4,495.
Sale of Property
On March 5, 1997, the Company completed the sale of the Newberry
Plaza for $1,300. A $392 reduction in carrying value had been
recorded as of December 31, 1996 to reflect the property at a
fair value equal to the contract sales price less direct selling
costs.
Deferred Costs
Fees and costs incurred in the successful negotiation of leases
have been deferred and are being amortized on a straight-line
basis over the terms of the respective leases. Fees and costs
incurred in connection with obtaining financing have been
deferred and are being amortized over the term of the related
debt obligation.
Revenue Recognition
Leases with tenants are accounted for as operating leases.
Minimum rents are recognized on a straight-line basis over the
term of the respective leases. As of December 31, 1997 and 1996,
unbilled rents receivable relating to straight-lining of rents
were $1,652 and $1,476, respectively. Percentage rents, which
are additional rents based on tenants' sales, are accrued based
on historical tenant sales. Certain tenants pay percentage rent
F-12
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Revenue Recognition, continued
in lieu of minimum rent pursuant to their leases. Reimbursements
from tenants for real estate taxes, insurance and other property
operating expenses are recognized as revenue in the period the
expenses are incurred.
An allowance for doubtful accounts has been provided against
certain tenant accounts receivable which are estimated to be
uncollectible. Rents receivable at December 31, 1997 and 1996
are shown net of an allowance for doubtful accounts of $972 and
$544, respectively.
Cash and Cash Equivalents
The Company considers all highly liquid investments with an
original maturity of three months or less to be cash and cash
equivalents.
Cash in Escrow
Cash in escrow consists principally of cash held for real estate
taxes, property maintenance, insurance, lease renewals,
environmental remediation and minimum occupancy requirements at
specific properties as required by certain loan agreements.
Minority Interest
In excess of 99% of the minority interest represents the
Principal Shareholder's 16% interest as a limited partner of the
Operating Partnership. Such interest is held in the form of OP
Units which are exchangeable on an equivalent basis with common
shares. The remaining interest is the result of the issuance of
OP Units to an unrelated third party in consideration for the
acquisition of a property.
Income Taxes
The Company has made an election to be taxed, and believes it
qualifies as a real estate investment trust ("REIT") under
Sections 856 through 860 of the Internal Revenue Code of 1986, as
amended. A REIT will generally not be subject to federal income
taxation on that portion of its income that qualifies as REIT
taxable income to the extent that it distributes at least 95% of
F-13
<PAGE>
MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Income Taxes, continued
its taxable income to its shareholders and complies with certain
other requirements. Accordingly, no provision has been made for
federal income taxes for the Company in the accompanying
consolidated financial statements. The Company is subject to
state income or franchise taxes in certain states in which some
of its properties are located. These state taxes, which in total
are not significant, are recorded as general and administrative
expenses in the accompanying consolidated financial statements.
Earnings Per Common Share
In 1997, the Financial Accounting Standards Board issued
Statement No. 128 (SFAS 128), Earnings Per Share. SFAS 128
replaced the calculation of primary and fully diluted earnings
per share with basic and diluted earnings per share. Unlike
primary earnings per share, basic earnings per share excludes any
dilutive effects of options, warrants and convertible securities.
Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share (which were not
separately presented historically as they were either anti-
dilutive or not materially dilutive). All earnings per share
amounts for all periods have been presented, and where
appropriate, restated to conform to the SFAS 128 requirements.
For the years ended December 31, 1997, 1996 and 1995, basic
earnings per share was determined by dividing net income (loss)
applicable to common shareholders for the year by the weighted
average number of common shares of beneficial interest ("Common
Shares") outstanding during each year.
Diluted earnings per share reflects the potential dilution that
could occur if securities or other contracts to issue Common
Shares were exercised or converted into Common Shares or
resulted in the issuance of Common Shares that then shared in the
earnings of the Company. For the years ended December 31, 1997
and 1996 no additional shares were reflected as the impact would
be anti-dilutive due to the net loss in such periods. For the
year ended December 31, 1995 diluted earnings per share was
determined by dividing net income applicable to common
F-14
<PAGE>
MARK CENTERS TRUST
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
Earnings Per Common Share, continued
shareholders for the year by the total of the weighted average
number of shares of common stock outstanding plus the dilutive
effect of the Company's nonvested restricted shares (which
amounted to 22,835 additional shares). The Company's outstanding
stock options were not considered for the purpose of computing
diluted earnings
per share because their assumed conversion is antidilutive.
Segment Reporting
In June, 1997 the Financial Accounting Standards Board issued
Statement No. 131 (SFAS 131), Disclosure About Segments of an
Enterprise and Related Information, which is effective for
financial statements issued for periods beginning after December
15, 1997. SFAS 131 requires disclosures about segments of an
enterprise and related information regarding the different types
of business activities in which an enterprise engages and the
different economic environments in which it operates. The
Company does not believe that the implementation of SFAS 131 will
have a material impact on its financial statements.
Reclassifications
Certain 1996 and 1995 amounts were reclassified to conform with
the 1997 presentation.
2. Deferred Charges
Deferred charges consist of the following as of December 31, 1997
and 1996:
1997 1996
Deferred financing costs $6,382 $5,822
Deferred leasing and other costs 8,054 7,063
------ ------
14,436 12,885
Accumulated amortization (4,726) (3,851)
------ ------
$9,710 $9,034
====== ======
F-15
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
3. Mortgage Loans
Mortgage Notes Payable
At December 31, 1997, mortgage notes payable aggregated $183,943
and were collateralized by 37 properties and related tenant
leases. Interest rates ranged from 7.7% to 9.50%. Mortgage
payments are due in monthly installments of principal and/or
interest and mature on various dates through 2022. The loan
agreements contain customary representations, covenants and
events of default. Certain loan agreements require the Company
to comply with certain affirmative and negative covenants,
including the maintenance of certain debt service coverage and
leverage ratios. Additionally, the Principal Shareholder has
personally guaranteed the repayment of mortgage loans with an
aggregate balance of $41,000 at December 31, 1997 without
consideration from the Company.
On September 18, 1997, the Company closed on a $5,500
construction loan with Firstrust Savings Bank ("Firstrust") which
refinanced and expanded the Company's existing $2,000 credit
facility with Firstrust. This construction loan, which is for
the expansion of the Mark Plaza in Edwardsville, Pennsylvania,
bears interest, payable monthly, at the Firstrust commercial
reference rate plus 1% (9.5% as of December 31, 1997) and matures
in March 1999.
On March 4, 1997, the Company closed on $23,000 of fixed rate
financing from Nomura Asset Capital Corporation. The loan, which
matures in March 2022, is secured by a mortgage on one of the
Company's properties, bears interest at 9.02% and requires
monthly payments of interest and principal amortized over 25
years. Approximately $10,155 of the proceeds were used to retire
existing debt with Fleet Bank of Massachusetts, NA, $673 were
used to pay financing costs, $3,015 was deposited in escrows, and
the remaining proceeds were used for working capital. The
Company is subject to certain affirmative and negative covenants
related to this facility.
F-16
<PAGE>
<TABLE>
<CAPTION>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
3. Mortgage Loans, continued
The following table summarizes lines of credit and mortgage indebtedness as of December 31, 1997 and 1996:
Monthly
December 31, December 31, Interest Maturity Properties Payment
1997 1996 Rate Encumbered Terms
<S> <C> <C> <C> <C> <C> <C>
Lines of credit-variable rate
Fleet Bank of
Massachusetts, NA $ -- $10,155
Firstrust Savings Bank -- 2,500
------- -------
Total-lines of credit -- 12,655
------- -------
Construction loans-variable rate
Firstrust Savings Bank 2,954 -- Prime + 1% March 1999 (1) (11)
First Western Bank, NA 4,000 4,000 Prime + 1% March 2013 (2) (11)
Mortgage notes payable-variable rate
Mellon Bank, NA 2,759 3,396 LIBOR + 200 basis April 1998 (3) (12)
points/Prime+1/2%
Mortgage notes payable-fixed rate
Metropolitan Life
Insurance Company 41,000 41,000 7.750% June 2000 (4) (11)
Morgan Stanley Mortgage Capital 45,312 45,845 8.840% November 2021 (5) $380 (12)
Anchor National Life
Insurance Company 4,028 4,100 7.930% January 2004 (6) $33 (12)
Northern Life Insurance Company 3,627 3,829 7.700% December 2008 (7) $41 (12)
Bankers Security Life 2,501 2,641 7.700% December 2008 (7) $28 (12)
John Hancock Mutual
Life Insurance Co. 54,922 55,357 9.110% April 2000 (8)(9) $455 (12)
Nomura Asset Capital
Corporation 22,840 -- 9.020% March 2022 (10) $193 (12)
------- -------
Total-mortgage notes payable 183,943 160,168
------- -------
$183,943 $172,823
======== ========
F-17
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands)
3. Mortgage Loans, continued
<S> <C> <C>
Notes:
(1) Mark Plaza (5) Midway Plaza (6) Pittston Plaza
Northside Mall
(2) Union Plaza New Smyrna Beach (7) Manahawkin Shopping Center
Cloud Springs Plaza
(3) Auburn Plaza Troy Plaza (8) New Loudon Centre
Martintown Plaza Ledgewood Mall
(4) Valmont Plaza Kings Fairgrounds Plaza 422
Luzerne Street Plaza Shillington Plaza Berlin Shopping Center
Green Ridge Plaza Dunmore Plaza Route 6 Mall
Crescent Plaza Kingston Plaza Tioga West
East End Centre Twenty Fifth Street Shopping Center Bradford Towne Centre
Circle Plaza
Mountainville Plaza (9) The following two properties
Plaza 15 are encumbered related to an
Birney Plaza outstanding letter of credit
Monroe Plaza held by the lender:
Ames Plaza Wesmark Plaza
Searstown Mall
(10) Northwood Centre
(11) Interest only monthly
(12) Monthly principal and
interest
F-18
</TABLE>
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
3. Mortgage Loans, continued
The scheduled maturities of all mortgage indebtedness as of
December 31, 1997 are as follows:
1998 $ 4,506
1999 4,858
2000 96,423
2001 1,638
2002 1,784
Thereafter 74,734
--------
$183,943
========
4. Related Party Transactions
As of December 31, 1997 and 1996 amounts due from related parties
consisted of the following:
December 31,
1997 1996
Accrued ground rent and management fees
due from Blackman Plaza Partners $202 $232
Other net amounts due to
Principal Shareholder (25) (29)
---- ----
$177 $203
==== ====
Included in other income are management fees earned on properties
owned by the Principal Shareholder or affiliates which for the
years ended December 31, 1997, 1996 and 1995 aggregated $19, $36
and $166, respectively.
Included in rental income for the year ended December 31, 1995 is
$140 of rent earned pursuant to a ground lease on Blackman Plaza
with Blackman Plaza Partners, a limited partnership ("Lessee") in
which the Principal Shareholder is the sole general partner
(owning a one percent economic interest). The Company has not
recognized rental income for the years ended December 31, 1997
and 1996 due to the Lessee's inability to pay the ground rent as
a result of insufficient cash flow from the property. The lease,
which expires in the year 2051, provides the Company ("Lessor")
with an option, exercisable between January 2, 1997 and August 2,
2001, to purchase the Lessee's interests in the shopping center.
F-19
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
Related Party Transactions, continued
In the event the Lessor's option is not exercised prior to August
2, 2001, the Lessee may, until and including December 1, 2002,
require the Lessor to purchase its interest in the shopping
center, thereby terminating the ground lease. In addition, the
ground lease provides the Lessee with an option, exercisable at
any time, to purchase the leased premises from the Lessor. The
purchase price with respect to each of the above options is
defined in the lease and is no less than the fair market value of
the premises (See Note 16).
In 1996, the Company issued a note payable to the Principal
Shareholder for $3,030 for the purchase of the Union Plaza,
located in New Castle, Pennsylvania. The note, which bears
interest payable monthly at a rate equal to that charged on the
Mellon Bank, N.A. facility, is payable in full the earlier of (i)
two years following the date the Union Plaza is completed or (ii)
on June 12, 1999. The note payable balance in the accompanying
balance sheet also reflects $20 of accrued interest as of
December 31, 1997 and 1996.
The Company leases office space from the Principal Shareholder
under the terms of a noncancellable ten year operating triple net
lease which provides for annual rent of $104 for the first five
years with annual escalations thereafter based on increases in
the consumer price index. Rent expense was $104 for each of the
years ended December 31, 1997, 1996 and 1995.
The Principal Shareholder is a member of the Board of Directors
of a tenant which leases space in 12 of the properties. Rental
income from this tenant for the years ended December 31, 1997,
1996 and 1995 aggregated $885, $909 and $929, respectively, of
which $100, $86 and $32 are receivable as of December 31, 1997,
1996 and 1995, respectively. Additionally, for the year ended
December 31, 1995, the Company paid $1,050 for tenant
improvements as provided by the respective lease agreements, at
three properties for this tenant.
F-20
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
5. Tenant Leases
Space in the shopping centers and other properties is leased to
various tenants under operating leases which usually grant
tenants renewal options and generally provide for additional
rents based on certain operating expenses as well as tenants'
sales volume.
Minimum future rentals to be received under noncancelable leases
as of December 31, 1997 are summarized as follows:
1998 $ 27,213
1999 24,507
2000 21,146
2001 19,044
2002 17,271
Thereafter 115,717
--------
$224,898
========
Minimum future rentals above include a total of $7,016 for six
tenants which have filed for bankruptcy protection. None of
these leases have been rejected or affirmed.
During the years ended December 31, 1997, 1996 and 1995, rental
income representing 10% or more of total revenues was earned from
various governmental agencies of the State of Florida. These
agencies have the right, under certain conditions, to cancel
their leases upon three to six months written notice and are
therefore not included in the above table of minimum future
rentals. Rentals earned under these leases during the years
ended December 31, 1997, 1996 and 1995 were $4,890, $4,735, and
$4,389, respectively. During the year ended December 31, 1996,
the Company also earned greater than 10% of its rental income
from the Kmart Corporation at nine locations totaling $4,733.
Rents from Kmart were less than 10% of total revenues for the
years ended December 31, 1997 and 1995, totalling $4,348 and
$4,180, respectively.
6. Lease Obligations
The Company leases land at six of its shopping centers which are
accounted for as operating leases and generally provide the
Company with renewal options. One of the leases terminates in
2088, with no renewal options and a purchase option for $1,600,
F-21
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
6. Lease Obligations, continued
that expires in 1999. Six of the leases terminate during the
years 2006 to 2033 and provide the Company with options to renew
the leases for additional terms aggregating from 20 to 60 years.
Another ground lease which has no remaining renewal options,
terminates in 2066. Additionally, the Company leases office
space from the Principal Shareholder under a non-cancelable lease
agreement for a term of ten years. Future minimum rental
payments required for leases having remaining non-cancelable
lease terms in excess of one year are as follows:
1998 $ 313
1999 313
2000 313
2001 313
2002 313
Thereafter 13,520
------
$15,085
=======
7. Share Option Plan
On November 10, 1994, the Company terminated the original
incentive and nonqualified share option plan and adopted two new
share option plans effective as of that date, authorizing the
issuance of 500,000 share options to employees and 100,000 share
options to non-employee trustees, respectively.
The Company has issued 200,000 share options to the Principal
Shareholder and 64,500 to employees of the Company which vested
20% on the grant date and 20% for each of the four remaining
years. The options are exercisable at the average fair market
value as of the date preceding the grant date ($11.19 to $12.69
per share) for a period of ten years. The Company has also
issued a total of 65,000 share options to non-employee trustees
which vested 20% on the grant date and 20% for each of the four
remaining years, and are exercisable at the average fair market
price as of the date preceding the grant date ($10.13 to $12.75
per share) for a period of ten years. In addition, each trustee
is entitled to 1,000 share options on each January 1, subsequent
to the initial grant date of November 10, 1994.
F-22
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
7. Share Option Plan, continued
The Company elected Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"), and related
interpretations in accounting for its employee stock options.
Under APB 25, no compensation expense is recognized because the
exercise price of the Company's employee stock options equals the
market price of the underlying stock on the date of grant. The
alternative fair value accounting provided for under SFAS 123,
Accounting for Stock-Based Compensation, is not applicable
because it requires use of option valuation models that were not
developed for use in valuing employee stock options.
Proforma information regarding net income and earnings per share
is required by SFAS 123, and has been determined as if the
Company had accounted for its employee stock options under the
fair value method. The fair value for these options was
estimated at the date of the grant using a Black-Scholes option
pricing model with the following weighted-average assumptions:
risk free interest rates ranging from 6.14% to 6.49%, expected
dividend yield of 8.95%, volatility factor of the expected market
price of the Company's common stock based on historical results
of .137; and an expected life of 4 years.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting
restrictions and are fully transferable. In addition, option
valuation models require the input of highly subjective
assumptions including expected stock price volatility. Because
the Company's employee stock options have characteristics
significantly different from those of traded options, and changes
in the subjective input assumptions can materially affect the
fair value estimate, management believes the existing models do
not necessarily provide a reliable single measure of the fair
value of its employee stock options. The Company has elected not
to present proforma information because the impact on the
reported net income and earnings per share is immaterial.
F-23
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
7. Share Option Plan, continued
Changes in the number of shares under all option arrangements are
summarized as follows:
Year ended December 31,
1997 1996 1995
Outstanding at beginning
of period 217,000 234,500 234,500
Granted 152,500 5,000 5,000
Option price per share
granted $10.13-$11.19 $11.38 $12.75
Cancelled 40,000 22,500 5,000
Exercisable at end
of period 181,100 127,200 92,800
Exercised -- -- --
Expired -- -- --
Outstanding at end
of period 329,500 217,000 234,500
Option prices per
share outstanding $10.13-$12.75 $11.38-$12.75 $12.75
As of December 31, 1997 the outstanding options had a weighted
average remaining contractual life of approximately 7.8 years and
a weighted average exercise price of $12.66.
8. Restricted Share Plan
The Company has established a restricted share plan which
originally granted to employees 47,722 restricted common shares.
Restricted common shares aggregating 3,800 and 10,718 were
granted, but not vested, as of December 31, 1997 and 1996,
respectively. The restricted shares which were granted vest and
are issued 20% per year over a five year period which began June
1, 1994. Each plan participant is entitled to receive additional
compensation on a quarterly basis equal to the dividend declared
on their respective restricted shares granted under the plan
until such plan participants' restricted shares are vested. For
the years ended December 31, 1997, 1996 and 1995, compensation
expense related to such restricted shares vested in such periods
amounted to $24, $46 and $68, respectively.
9. Employee 401(k) Plan
The Company maintains a 401(k) plan for employees under which the
Company matches 50% of a plan participant's contribution. A plan
F-24
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
9. Employee 401(k) Plan, continued
participant may contribute up to a maximum of 15% of their
compensation but not in excess of $9.5 for the year ended
December 31, 1997. The Company contributed $67, $67 and $64 for
the years ended December 31, 1997, 1996 and 1995, respectively.
10. Distributions payable
On November 14, 1996, the Trustees declared a cash distribution
of $0.36 per common share and OP Unit which was subsequently paid
on January 31, 1997.
The Company has determined that the cash distributed to the
shareholders is characterized as follows for federal income tax
purposes:
1997 1996 1995
Ordinary income 34% 35% 64%
Return of capital 66% 65% 36%
--- --- ---
100% 100% 100%
==== ==== ====
11. Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107 "Disclosures
About Fair Value of Financial Instruments", requires disclosure
on the fair value of financial instruments. Certain of the
Company's assets and liabilities are considered financial
instruments. Fair value estimates, methods and assumptions are
set forth below.
Cash and Cash Equivalents, Accounts Receivable, Accounts Payable
and Accrued Expenses
The carrying amount of these assets and liabilities approximates
fair value due to the short-term nature of such accounts.
Mortgage Notes Payable
As of December 31, 1997 and 1996, the Company has determined the
estimated fair value of its mortgage notes payable are
approximately $206,491 and $153,668, respectively, by discounting
future cash payments utilizing a discount rate equivalent to the
rate at which similar mortgage notes payable would be originated
under conditions then existing.
F-25
<PAGE>
<TABLE>
<CAPTION>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
13. Summary of Quarterly Financial Information (unaudited)
The separate results of operations of the Company for the years ended December 31, 1997 and 1996 are as follows:
March 31, 1997 June 30, 1997 Sept 30,1997 Dec 31, 1997 Total for Year
<S> <C> <C> <C> <C> <C>
Revenue $11,124 $11,128 $10,874 $11,372 $44,498
Loss before minority interest (487) (260) (544) (490) (1,781)
Net loss (416) (242) (472) (434) (1,564)
Net loss per share-
basic and diluted $ (0.05) $ (0.03) $ (0.06) $ (0.04) $ (0.18)
Cash dividends declared
per share $ 0.36 $ 0.20 $ 0.20 $ 0.00 (a) $ 0.76
Weighted average shares outstanding
- basic and diluted (1) 8,548,817 8,550,466 8,554,177 8,554,177 8,551,930
(a) To be determined by the Trustees in 1998.
<CAPTION>
March 31, 1996 June 30, 1996 Sept 30,1996 Dec 31, 1996 Total for Year
<S> <C> <C> <C> <C> <C>
Revenue $11,235 $10,719 $10,497 $11,345 $43,796
Income (loss) before gain from
sale, extraordinary item, and
minority interest 186 18 (204) (595) (595)
Net income (loss) 134 (4) (179) (675) (724)
Net income (loss) per share-
basic and diluted $ 0.02 $ 0.00 $ (0.02) $ (0.08) $ (0.08)
Cash dividends declared
per share $ 0.36 $ 0.36 $ 0.36 $ 0.36 $ 1.44
Weighted average shares outstanding
- basic 8,543,452 8,544,985 8,548,717 8,548,717 8,546,553
- diluted (1) 8,563,053 8,544,985 8,548,717 8,548,717 8,546,553
(1) Due to a net loss for the last three quarters in fiscal 1996 and all quarters in fiscal 1997, the weighted average
number of shares on a diluted basis does not include additional incremental shares as they would be anti-dilutive.
F-26
</TABLE>
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
14. Legal Proceedings
On November 20, 1995, Jack Wertheimer, the former President of
the Company, filed a complaint against the Company, its Trustees
including the Principal Shareholder, and the Company's former in-
house General Counsel and current Chief Financial Officer in the
United States District Court for the Middle District of
Pennsylvania. The complaint, which was filed in connection with
the termination of Mr. Wertheimer's employment, includes many of
the allegations raised in a state court proceeding commenced by
Mr. Wertheimer in November 1994. The Federal court complaint
also includes a civil RICO action in which Mr. Wertheimer alleges
that the Board of Trustees of the Company conspired with the
Principal Shareholder to terminate Mr. Wertheimer's employment as
part of the Principal Shareholder's breach of his duty of good
faith and fair dealing. Further, Mr. Wertheimer alleges that the
above defendants engaged in securities fraud in connection with
the Offering and that the Principal Shareholder has defrauded or
overcharged the Company in corporate transactions. The Federal
complaint seeks treble damages under RICO, as well as damages
arising from Mr. Wertheimer's alleged termination of employment,
invasion of privacy, intentional infliction of emotional
distress, fraud and misrepresentation. The Company and all
defendants filed motions to dismiss the RICO and tort claims
which the court, on December 9, 1996, granted in part and denied
in part. Specifically, the court dismissed Mr. Wertheimer's
claims for wrongful discharge, fraud and negligence
misrepresentation, but declined to dismiss the remainder of the
claims at this time. On January 23, 1997, the defendants filed
an answer to Mr. Wertheimer's complaint. In the answer, the
defendants denied all allegations of wrongdoing, and intend to
vigorously defend against all of the counts. The Company and the
Principal Shareholder have also filed counterclaims against Mr.
Wertheimer alleging Mr. Wertheimer made material
misrepresentations in connection with his hiring and breached his
employment contract and fiduciary duties to the Company.
The Company is involved in other various matters of litigation
arising in the normal course of business. While the Company is
unable to predict with certainty the amounts involved, the
Company's management and counsel are of the opinion that, when
such litigation is resolved, the Company's resulting liability,
if any, will not have a significant effect on the Company's
consolidated financial position.
F-27
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
15. Contingencies
Upon conducting environmental site inspections in connection with
obtaining the Morgan Stanley financing during October 1996,
certain environmental contamination was identified at two of the
collateral properties: soil contamination at the Troy Plaza in
Troy, New York and soil and ground water contamination at the
Cloud Springs Plaza in Fort Oglethorpe, Georgia. In each case,
the contamination was determined to have originated from a former
tenant. The Company has entered into a voluntary remedial
agreement with the State of New York for the remediation of the
Troy Plaza. Environmental consultants estimate that the total
cost of such remediation will be approximately $80 for which the
Company has recorded a reserve for as of December 31, 1997 and
for which Morgan Stanley holds $228 in escrow to be released upon
final environmental remediation at this property. The Company has
received notification from the State of Georgia that the Cloud
Springs Plaza will not be listed on the State's Hazardous Site
Inventory because it has no reason to believe that contamination
exceeding a reportable quantity has occurred at this property. As
such, there is no reserve for remediation costs at this site
recorded as of December 31, 1997.
Management is not aware of any other environmental liability that
they believe would have a material adverse impact on the
Company's financial position or results of operations.
Management is unaware of any instances in which it would incur
significant environmental costs if any or all properties were
sold, disposed of or abandoned.
16. Subsequent Events
On January 7, 1998, the Company exercised its option to purchase
the Lessee's interests in the Blackman Plaza (See Note 4) with a
closing date anticipated to occur during fiscal 1998.
On January 28, 1998, the Company completed a closing on a
construction loan with Royal Bank of Pennsylvania in the maximum
amount of $3,500. The loan, which is secured by one of the
Company's properties, requires monthly payment of interest only
at the lender's prime rate plus 150 basis points and matures in
February 1999 with additional extension periods through February
2000.
F-28
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
16. Subsequent Events, continued
On January 31, 1998, the Company entered into an agreement with
Pharmhouse Corp. (the "Tenant") to settle certain litigation.
During 1997, the Tenant had obtained an injunction against the
installation of Walmart in the Ledgewood Mall based on certain
exclusive use provisions within the Tenant's lease. The Company
has agreed to pay the Tenant $1,675 on or before May 1, 1998,
amend certain terms of the Tenant's lease including rent and the
lease expiration date, and withdraw its appeal of this case in
return for the Tenant's withdrawal of all legal actions against
the installation of Walmart at the mall.
On March 16, 1998, the Company and the Principal Shareholder
agreed to terminate the option to purchase certain land owned by
the Principal Shareholder in Lewisburg, Pennsylvania.
16.1 Event (Unaudited) Subsequent To Date of Report of
Independent Auditors
The Company is in the late stages of negotiation of a significant
transaction which will provide additional properties and capital
to the Company. If the transaction is completed in its current
form, assuming execution of a definitive agreement (the
"Agreement") and satisfaction of all conditions to the
transaction, including approval by the Company's shareholders,
the Company, through Mark Centers Limited Partnership, a Delaware
limited partnership through which the Company conducts
substantially all of its activities, and in exchange for
approximately 11 million Operating Partnership Units, will
acquire substantially all of the ownership interests in twelve
retail shopping centers and five multi-family apartment complexes
controlled by a private New York real estate company. Under the
current proposal, the Company will also receive a cash investment
of $100 million in exchange for newly issued common shares of
beneficial interest valued at a price of $7.50 per share. Upon
completion of the transaction, it is contemplated that two senior
executives of the New York real estate company will become
Chief Executive Officer and President of the Company, respectively.
Mr. Marvin Slomowitz, the current Chairman of the Board and Chief
Executive Officer, will remain as a board member and is expected to
continue as a consultant to the Company. The two new executives will
serve on the board together with two designees of the real estate company
and two designees (in addition to Mr. Slomowitz) of the existing board.
F-29
<PAGE>
MARK CENTERS TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
16.1 Event (Unaudited) Subsequent To Date of Report of
Independent Auditors, continued
The transaction is subject to the completion of final negotiation
and execution of the Agreement, receipt of a fairness opinion
from Bear, Stearns & Co. Inc. (the Company's investment bankers),
approval by the Company's Board of Trustees, evidence of the
receipt by the real estate company of the necessary funds to make
the cash investment and the completion of closing. The
transaction is a complex one involving many parties and there can
be no assurance that the Agreement will be executed or that the
closing on this transaction will be completed. The transaction
is subject to the approval by the shareholders of the Company at
a meeting to be scheduled for that purpose if and when the
Agreement is signed.
F-30
<TABLE>
<CAPTION>
MARK CENTERS TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
INITIAL COST TO COMPANY GROSS AMOUNTS AT WHICH CARRIED AT CLOSE OF PERIOD
Costs Capitalized Date of
Building & Subsequent Building & Accumulated Acquisition(A)
Description Encumbrances Land Improvements to Acquis Land Improvements Total Depreciation Construction(C)
Shopping Centers
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Circle Plaza (1) $ -- $3,435 $ 13 $ 2 $ 3,446 $3,448 $1,206 1978(C)
Shamokin Dam,PA
Martintown Plaza (1) -- 4,625 1,252 -- 5,877 5,877 1,981 1985(A)
N.Augusta,SC
Midway Plaza (1) 196 1,647 2,650 196 4,297 4,493 1,700 1984(A)
Opelika,AL
Northside Mall (1) 1,604 7,080 1,721 1,604 8,801 10,405 3,206 1986(A)
Dothan,AL
Searstown Mall (2) 491 4,854 3,155 491 8,009 8,500 3,529 1984(A)
Titusville,FL
New Smyrna Beach
Shopping Center (1) 247 2,219 3,136 247 5,355 5,602 1,933 1983(A)
New Smyrna Beach,FL
Wesmark Plaza (2) 380 3,419 1,447 370 4,876 5,246 1,704 1986(A)
Sumter,SC
Kings
Fairground (1) -- 1,426 171 -- 1,597 1,597 279 1992(A)
Danville,VA
Cloud Springs
Plaza (1) 159 2,712 1,189 159 3,901 4,060 1,334 1985(A)
Ft. Oglethorpe,GA
Crescent
Plaza 12,000 1,147 7,425 481 1,147 7,906 9,053 2,479 1984(A)
Brocton,MA
New Loudon
Center (3) 505 4,161 9,630 505 13,791 14,296 3,229 1982(A)
Latham,NY
Ledgewood Mall (3) 619 5,434 25,472 619 30,906 31,525 10,755 1983(A)
Ledgewood,NJ
Troy Plaza (1) 479 1,976 812 479 2,788 3,267 1,359 1982(A)
Troy,NY
Birney Mall (1) 210 2,979 931 210 3,910 4,120 3,193 1968(C)
Moosic,PA
Dunmore Plaza (1) 100 506 182 100 688 788 296 1975(A)
Dunmore,PA
F-31
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
MARK CENTERS TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
INITIAL COST TO COMPANY GROSS AMOUNTS AT WHICH CARRIED AT CLOSE OF PERIOD
Costs Capitalized Date of
Building & Subsequent Building & Accumulated Acquisition(A)
Description Encumbrances Land Improvements to Acquis Land Improvements Total Depreciation Construction(C)
Shopping Centers
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mark Plaza 2,954 -- 4,268 999 -- 5,267 5,267 3,312 1968(C)
Edwardsville,PA
Kingston Plaza (1) 305 1,745 473 305 2,218 2,523 1,228 1982(C)
Kingston,PA
Luzerne St.
Shopping Center 2,000 35 315 1,150 35 1,465 1,500 704 1983(A)
Scranton,PA
Blackman Plaza -- 120 -- -- 120 -- 120 -- 1968(C)
Wilkes-Barre,PA
East End Centre 14,200 1,086 8,661 3,164 1,086 11,825 12,911 4,367 1986(C)
Wilkes-Barre,PA
Green Ridge Plaza 6,700 1,335 6,314 595 1,335 6,909 8,244 2,373 1986(C)
Scranton,PA
Plaza 15 (1) 171 81 1,481 171 1,562 1,733 302 1976(C)
Lewisburg,PA
Plaza 422 (3) 190 3,004 429 190 3,433 3,623 1,866 1972(C)
Lebanon,PA
Tioga West (3) 48 1,238 3,414 48 4,652 4,700 1,849 1965(C)
Tunkhannock,PA
Mountainville (1) 420 2,390 491 420 2,881 3,301 1,324 1983(A)
Shopping Center
Allentown,PA
Monroe Plaza (1) 70 2,083 67 70 2,150 2,220 903 1964(C)
Stroudsburg,PA
Ames Plaza (1) 57 1,958 219 57 2,177 2,234 1,615 1966(C)
Shamokin,PA
Route 6 Mall (3) -- -- 12,696 1,664 11,032 12,696 1,121 1995(C)
Honesdale,PA
Pittston Plaza 4,028 -- -- 7,167 1,521 5,646 7,167 398 1995(C)
Pittston,PA
Valmont Plaza 6,100 522 5,591 1,027 522 6,618 7,140 2,444 1985(A)
W. Hazleton,PA
Manahawkin
Village 6,128 2,400 9,396 260 2,400 9,656 12,056 1,066 1993(A)
Shopping Center
Manahawkin,NJ F-32
<PAGE>
</TABLE>
<TABLE>
<CAPTION>
MARK CENTERS TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1997
(Dollars in Thousands)
INITIAL COST TO COMPANY GROSS AMOUNTS AT WHICH CARRIED AT CLOSE OF PERIOD
Costs Capitalized Date of
Building & Subsequent Building & Accumulated Acquisition(A)
Description Encumbrances Land Improvements to Acquis Land Improvements Total Depreciation Construction(C)
Shopping Centers
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
25th St.
Shopping Center (1) 2,280 9,276 184 2,280 9,460 11,740 1,331 1993(A)
Easton,PA
Berlin Shopping (3) -- -- 6,887 1,332 5,555 6,887 678 1994(A)
Center
Berlin,NJ
Auburn Plaza 2,759 -- -- 13,287 2,644 10,643 13,287 1,153 1994(A)
Auburn,ME
Shillington Plaza (1) -- -- 4,109 809 3,300 4,109 362 1994(A)
Reading,PA
Union Plaza 4,000 -- -- 20,241 5,426 14,815 20,241 505 1996(C)
New Castle,PA
Bradford Towne (3) -- -- 16,087 816 15,271 16,087 1,806 1994(C)
Centre
Towanda,PA
Mixed Use
Properties
Northwood 22,840 1,209 6,204 18,519 1,188 24,744 25,932 11,620 1985(A)
Centre
Tallahassee,FL
Normandale Centre -- 287 2,584 4,154 287 6,738 7,025 2,816 1985(A)
Montgomery,AL
Construction -- -- -- 6,668 -- 6,668 6,668 --
in Progress
------------------------------------------------------------------------------------------------
$183,943 $16,672 $119,006 $176,010 $30,855 $280,833 $311,688 $83,326
================================================================================================
See accompanying notes
F-33
</TABLE>
<PAGE>
MARK CENTERS TRUST
NOTES TO SCHEDULE III
DECEMBER 31, 1997
(Dollars in thousands)
1. These seventeen properties serve as collateral for the
financing with Morgan Stanley Mortgage Capital, Inc.
2. These two properties serve as collateral for a letter of
credit with Fleet Bank.
3. These seven properties serve as collateral for the financing
with John Hancock Life Insurance.
4. Depreciation of investments in buildings and improvements
reflected in the statements of operations is calculated over
the estimated useful lives of the assets as follows:
Buildings 30 to 40 years
Improvements Shorter of lease term
or useful life
5. The aggregate gross cost of property included above for
Federal income tax purposes was $326,412 as of December 31,
1997.
6.(a)Reconciliation of Real Estate Properties:
The following reconciles the real estate properties from
January 1, 1995 to December 31, 1997:
Year ended December 31,
1997 1996 1995
Balance at beginning
of period $307,411 $291,157 $278,611
Additions during period
Acquisitions through
purchase -- -- --
Acquisition through
exercise of purchase
option -- -- 1,446
Acquisitions and
adjustments related to
development options
and establishment of
note payable to the
Principal Shareholder -- (3,125) (8,133)
Other improvements 7,480 19,380 19,242
Fully depreciated assets
written off (998) -- --
Sale of property (2,205) (1) (9)
-------- -------- --------
Balance at end of
period $311,688 $307,411 $291,157
======== ======== ========
F-34
<PAGE>
MARK CENTERS TRUST
NOTES TO SCHEDULE III
DECEMBER 31, 1997
(Dollars in thousands)
(b) Reconciliation of accumulated depreciation:
The following table reconciles accumulated depreciation from
January 1, 1995 to December 31, 1997:
1997 1996 1995
Balance at beginning
of period $72,956 $61,269 $51,002
Sale of property (905) -- --
Fully depreciated assets
written off (998) -- --
Depreciation related
to real estate 12,273 11,687 10,267
------- ------- -------
Balance at end
of period $83,326 $72,956 $61,269
======= ======= =======
F-35
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000899629
<NAME> MARK CENTERS TRUST
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,287
<SECURITIES> 0
<RECEIVABLES> 5,774
<ALLOWANCES> 972
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 311,688
<DEPRECIATION> 83,326
<TOTAL-ASSETS> 254,500
<CURRENT-LIABILITIES> 0
<BONDS> 183,943
0
0
<COMMON> 0
<OTHER-SE> 48,791
<TOTAL-LIABILITY-AND-EQUITY> 254,500
<SALES> 0
<TOTAL-REVENUES> 44,498
<CGS> 0
<TOTAL-COSTS> 30,823
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,444
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,552)
<DISCONTINUED> (12)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,564)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
<PAGE> 1
Kelly Township
Union County, Pennsylvania
OPTION TO PURCHASE AGREEMENT
This Option to Purchase Agreement made as of the 16th day of
March, 1998, by and between MARVIN L. SLOMOWITZ, an individual
(the "Optionor"), and MARK CENTERS LIMITED PARTNERSHIP, a
Delaware limited partnership ("Optionee").
BACKGROUND:
A. Optionor is the optionor and Optionee is the optionee
under a certain Option Agreement dated May 21, 1996 ("Prior
Option Agreement") under which Optionee has the option to acquire
approximately 26.6 acres of vacant land owned by Optionor (the
"Prior Option Property") in the Township of Kelly, County of
Union, Commonwealth of Pennsylvania, for a purchase price of One
Million Three Hundred Twenty-Five Thousand Dollars ($1,325,000).
B. Optionee is the owner of a property located contiguous
to the Prior Option Property. In connection with the proposed
expansion of the shopping center constructed on such contiguous
property, Optionee has determined that it will only require
approximately two acres of the Prior Option Property. Optionee
is desirous of terminating the Prior Option Agreement and
acquiring an option on only a two acre portion of the Prior
Option Property, and Optionor has agreed to grant Optionee an
option to Purchase such two acre portion of the Prior Option
Property which is depicted on the Sketch Plan attached as Exhibit
"A" hereto, to be further defined by a subdivision plan to be
prepared by Optionee and approved by Optionor (the "Premises")
and to terminate the Prior Option Agreement.
C. At the May 28, 1997 Board Meeting of Optionee the Board
of Optionee authorized Optionee to terminate the Prior Option
Agreement and to enter into a new option to acquire the Premises,
for a one-year term, subject to the following conditions: (i)
that Optionee grant to Optionor an easement for ingress and
egress over the Premises if Optionor acquires the Premises and
(ii) the purchase price for the Premises would be Fifty-Five
Thousand Dollars ($55,000) per acre, unless Optionor were to
receive a bona fide offer from a third party to purchase all or
part of the Prior Option Property prior to Optionee's
<PAGE> 2
exercise of its option to purchase the Premises, in which event,
the Optionee would have a right of first refusal for ninety (90)
days to match the offer on a per acre price with respect to the
Prior Option Property, or otherwise forfeit its option with
respect to the Premises. A copy of the relevant portion of the
Minutes of the May 28, 1997 Board Meeting of Optionee is attached
hereto as Exhibit "B".
NOW, THEREFORE, in consideration of the foregoing and of the
mutual promises contained herein, and intending to be legally
bound, Optionor and Optionee agree as follows:
1. Grant of Option; Termination of Prior Option Agreement.
(a) Grant of Option. For and in consideration of the
payments described in Paragraph 3 below, Optionor grants to
Optionee, and Optionee takes from Optionor, the option to
purchase the Premises (the "Purchase Option") at any time during
the term of this Agreement by giving written notice to Optionor
the term of this Agreement by giving written notice to Optionor
(the "Exercise Notice") of its election to exercise the Purchase
Option.
(b) Termination of Prior Option Agreement. The Prior
Option Agreement is hereby terminated and rendered null and void.
Contemporaneous with the execution of this Agreement, Optionor
and Optionee are executing and will record a termination
agreement in the form attached hereto as Exhibit "C".
2. Term.
(a) Term. the term of this Agreement shall commence
as of the date hereof and shall end as of 11.59 p.m. on March 13,
1999 (the "Term").
(b) Termination. Optionee may terminate the term of
this Agreement at any time and for any reason whatsoever by
giving written notice of such election to Optionor, in which
event this Agreement shall become null and void and neither party
shall have any further obligations or liabilities to the other.
3. Option Payments. Optionee has been credited with
payments made to Optionor under the Prior Option Agreement in
the amount of Five Thousand Dollars ($5,000) in consideration of
<PAGE> 3
Optionor's grant of the Purchase Option to Optionee.
4. Agreement of Sale. Upon the date the Optionee
exercises the Purchase Option (the "Exercise Date"), this
Agreement shall constitute an agreement of sale between Optionor
and Optionee, whereby Optionor agrees to sell and Optionee agrees
to purchase the Premises upon the following terms and conditions:
(a) Closing. Closing for the purchase of the Premises
shall be held within the later of: (i) sixty (60) days after the
Exercise Date, or (ii) after subdivision is final and
nonappealable under Paragraph 5 below at such time, date
("Closing Date") and place as shall be sent forth in a notice
from Optionee to Optionor after the Exercise Date. The Closing
Date shall not be earlier than (15) days after the Exercise Date.
(b) Purchase Price. The purchase price for the
Premises shall be One Hundred Ten Thousand Dollars ($110,000),
provided, however, that the purchase price shall be reduced by
(i) the total amount of the Option Payments made by Optionee
described in subparagraph 3(a) above, (ii) the amount of any lien
on the Premises plus accrued and unpaid interest thereon as of
the Closing Date and (iii) the total of any award or other
proceeds received by Optionor at any time from the date of this
Agreement until Closing with respect to the taking or
condemnation of any portion of the Premises. At Closing, the
purchase price shall be paid by Optionee to Optionor by
Optionee's delivery of a Note to Optionor providing for interest
only payments due monthly, with a maturity date of one year and
otherwise be in a form reasonably acceptable to Optionor and
Optionee.
(c) Adjustments. All transfer taxes, documentary
stamps and recording charges necessary to record the Deed (as
defined in subparagraph (d) below shall be split between Optionor
and Optionee. Optionee shall bear the cost of the title
insurance described in subparagraph 4(d) below, but Optionor
shall bear all costs in the form of abatement of the purchase
price associated with placing such title in the condition
required by such subparagraph. Real estate taxes and water and
sewer rents and charges (if any) shall be apportioned pro rata on
a per diem basis as of the Closing Date.
<PAGE> 4
(d) Condition of Title. At closing, Optionor shall
convey to Optionee good and marketable fee simple title to the
Premises by delivery of a special warranty deed, in recordable
form (the "Deed"), such title to be free and clear of all liens,
leases, encroachments, easements, restrictions of record or,
title company objections, and other encumbrances, except for
those approved by Optionee, in its sole discretion. Optionee's
title shall be insurable as aforesaid at ordinary rates by any
reputable title company of Optionee's choice (the "Title
Company") pursuant to an ALTA Owner's Policy of Title Insurance -
1970 - Form B - Amended October 17, 1970, with such endorsements
thereto as Optionee shall request.
(e) Title Affidavits, Etc. Optionor agrees that it
shall execute any instruments, agreements, affidavits or other
documentation reasonably required by the title company insuring
Optionee's title in order to effectuate the transaction
contemplated hereby, and Optionor further agrees to execute any
and all affidavits required by such title company as a condition
to its insuring such title as aforesaid.
(f) Failure of Title. If title to any part of the
Premises shall not be in accordance with the requirements of
subparagraph 4(d) above, Optionee shall have the option of taking
such title to the Premises as Optionor can give with an
appropriate abatement of the purchase price for liens of a fixed
or ascertainable amount and/or of terminating this Agreement.
(g) FIRPTA Certification. Optionor agrees to sign and
deliver at closing a certification in form reasonably acceptable
to Optionee in compliance with the Foreign Interest in Real
Property Transfer Act.
(h) Automatic Extension of Term. Optionee's delivery
to Optionor of an Exercise Notice shall automatically extend the
term of this Agreement for a sufficient period of time beyond the
then-applicable expiration date to accommodate the time periods
provided in this Paragraph 4.
(i) Easement. At closing, Optionee shall execute and
deliver an easement for ingress and egress which shall benefit
the remaining portion of the Prior Option Property and burden the
premises in the form to be reasonably agreed to between Optionor
and Optionee.
<PAGE> 5
5. Subdivision Approval.
(a) Following delivery of the Exercise Notice, the
Optionee shall be responsible for receiving final and
unappealable Subdivision Approval from Kelly Township
("Township") for the subdivision of the Premises from the Prior
Option Property in accordance with a Subdivision Plan (x)
prepared by Optionee at Optionee's expense, (y) which is
satisfactory to the Optionee and (z) subject to the Optionee's
right to apply for certain variances, and complies in all
respects with the Township Zoning Ordinance. Optionor shall
cooperate, at Optionee's expense, with Optionee to complete such
subdivision and sign any documents as may be incidental thereto.
(b) At Optionee's request, following delivery of the
Exercise Notice, Optionor, at Optionee's expense, shall cooperate
with and assist Optionee in obtaining any permits or other
approvals required for expansion of its existing shopping center
onto the Premises (including without limitation, any permits or
other approvals described in Paragraph 9 below). Optionor
consents to Optionee's procurement of such permits or other
approvals with respect to the Premises.
6. Operations Prior to Closing. Between the date of this
Agreement and the earlier of its termination or the Closing Date:
(a) The Premises shall be maintained substantially in
the same quality and condition on the Closing Date as on the date
hereof.
(b) Except as contemplated under paragraph 14 below,
Optionor shall not enter into any contract for, or on behalf of,
or affecting the Premises, which shall not terminate by its terms
on or before closing or which cannot be terminated at closing
without cost, penalty or premium, and shall not enter into any
new lease, or any amendment, modification or termination of any
existing lease.
(c) All payments required to be made to contractors,
subcontractors, mechanics, materialmen and all other persons in
connection with work done or services performed with respect to
the Premises shall be made by Optionor as and when due, but in
any event prior to the Closing Date, and as of the Closing Date
there shall be no basis for the filing of any mechanics' or
materialmens' liens against the Premises or any part thereof on
the basis of any work done or services performed with respect to
<PAGE> 6
the Premises.
(d) Optionor shall promptly deliver to Optionee a copy
of any tax bill, notice or assessment, or notice of change in a
tax rate or assessment, affecting the Premises or any part
thereof, any notice or claim of violation of any law, any notice
of any taking or condemnation affecting or relating to the
Premises or any part thereof, or any other notice affecting or
relating to the Premises or any part thereof.
7. Representations and Warranties. Optionor, to induce
Optionee to enter into this Agreement, represents and warrants to
Optionee as follows:
(a) Optionor has full power and legal right and
authority to enter into and perform its obligations under this
Agreement, and the execution and delivery of this Agreement
requires no further action or approval in order to make this
Agreement a binding and enforceable obligation of Optionor.
(b) No individuals or entities other than Optionor
have any legal, equitable or other claim or right with respect to
the Premises or any part thereof.
(c) Neither the entering into of this Agreement, the
consummation of the sale, if any, nor the prior conveyance of the
Premises to Optionor, has or will constitute a violation or
breach of any of the terms of any contract or other instrument to
which Optionor is a party or to which he is subject or by which
any of his assets or properties may be affected.
(d) No consent of any third party is required by
Optionor to enter into this Agreement or to consummate the terms
of this Agreement, were Optionee to exercise the Purchase Option.
(e) There is no action, suit or proceeding pending or,
to the knowledge of Optionor, threatened against or affecting
Optionor or the Premises or any portion thereof in any court or
before or by any federal, state or local entity.
(f) There are no violations of any federal, state or
local law, ordinance, order, regulation or requirement affecting
any portion of the Premises and no written notice of any such
violation has been issued by any governmental authority.
<PAGE> 7
Optionor shall cure, prior to closing, any such violation of
which Optionor or Optionee receives notice prior to the closing
date.
(g) There are no leases, tenancies, licenses or other
rights of occupancy or use for any portion of the Premises, and
no other contracts or agreements with respect to or affecting any
portion of the Premises.
(h) No portion of the Premises is the subject of any
abatement, reduction, deferral or "rollback" with regard to real
estate taxes nor any agreement or arrangement whereby the
Premises or any part thereof may be subject to the imposition of
real property taxes after the closing date on account of periods
of time prior to the closing date.
8. Environmental Matters. Optionor represents and
warrants that, to the best of his knowledge, there is no
contamination present on the Premises or any part thereof. For
purposes of this paragraph, the term "contamination" shall mean
the uncontained presence of hazardous substances at the Premises
or any part thereof, or arising from the Premises or any part
thereof, which may require remediation under any applicable law.
"Hazardous substances" shall mean any and/or all of the
following: "hazardous substances", "pollutant or contaminant" as
defined pursuant to the Comprehensive Environmental Response,
Compensation and Liability Act, as amended from time to time,
"hazardous waste" as defined pursuant to the Resource
Conservation and Recovery Act, as amended from time to time,
polychlorinated byphenals or substances containing
polychlorinated byphenals, asbestos or materials containing
asbestos, petroleum or petroleum products, urea formaldehyde foam
insulation, or any other substances which may be the subject of
liability pursuant to Environmental Laws (as defined below).
Optionor represents and warrants that, to the best of its
knowledge, all activities at the Premises have been and are being
conducted in compliance with all laws concerning discharges to
the air, soil, surface water or ground water, and storage,
treatment or disposal of, any contaminant (collectively,
"Environmental Laws"). Optionor represents and warrants that, to
the best of his knowledge, he does not know of any tanks,
underground or otherwise, presently or formerly on the Premises,
or any part thereof, used for the storage of any liquid, solid,
gas or other material above or below ground on the Premises.
<PAGE> 8
Optionor agrees to indemnify, defend and hold harmless Optionee
of, from and against any and all expense, loss or liability
(including any and all reasonable legal fees and costs) suffered
by Optionee by reason of Optionor's breach of any provisions of
this Paragraph.
9. Investigation. Optionor shall afford Optionee and its
representatives full access to the Premises, to all files,
records and other information relevant to the Premises as
Optionee shall reasonably request, and shall have the right to
perform such tests and studies (including without limitation
topographical studies, soils tests and engineering, environmental
and other tests), prepare such plans and surveys and make such
applications, inquires and searches of governmental records as
Optionee shall deem necessary or appropriate in connection with
its evaluation of the Premises and the feasibility of the
Project; and Optionor shall cooperate fully with such
investigation of the Premises. With respect to material damage
to the Premises caused by Optionee or its representatives during
any such investigation, Optionee shall restore such damaged areas
to substantially their same condition existing prior to such
studies and tests.
10. Recording. Optionor agrees to sign a copy of this
Agreement or a memorandum thereof in the form of Exhibit "F"
attached hereto for purposes of recording this Agreement or such
memorandum with the Recorder's Office of Union County,
Pennsylvania.
11. Condemnation. Optionor has not received any notice of
any condemnation proceeding or other proceedings in the nature of
eminent domain or taking in connection with the Premises, or any
part thereof. In the event Optionor receives any such notice, it
will forthwith send a copy of such notice to Optionee, and
Optionee shall have the sole right (in the name of Optionor or in
its own name) to negotiate for, to agree to or to contest all
offers and awards. If any portion of the Premises is taken or
condemned, which, in Optionee's opinion, materially adversely
affects the construction or operation of the Property, Optionee
shall have the right to terminate this Agreement within twenty
(20) days after first receiving written notice of such event.
<PAGE> 9
12. Assignment. Optionee may assign its interests under
this Agreement at any time.
13. Notices. All notices and other communications to be
given under this Agreement shall be in writing and shall be hand
delivered or sent by reputable, overnight courier service, or by
registered or certified mail, return receipt requested addressed
or sent as follows:
if intended for Optionor:
Marvin L. Slomowitz
313 Sylbert Drive
Kingston, PA 18704
if intended for Optionee:
c/o Mark Centers Trust
600 Third Avenue
Kingston, PA 18704
Attn: Mr. Joshua Kane
All such notices or other communications shall be deemed to have
been given on the date of delivery thereof if given by hand
delivery, or on the date deposited with the courier service or
the United States Postal Service if given by overnight courier
service or United States mail, respectively. Notices by or to
the parties may be given or their behalf by their respective
attorneys.
14. Right of First Refusal. If during the Term, Optionor,
his heirs, executors, administrators, legal representatives,
successors or assigns shall obtain a bona fide, binding and
written offer (the "Offer") (at a price and upon terms acceptable
to him) for the Prior Option Property, Optionee, its successors
or assigns, shall have the right to purchase the Prior Option
Property for the per acre price contained in the Offer. Optionor
shall notify Optionee in writing ("Notice") forthwith after the
receipt of the Offer, the Notice to be accompanied by a copy of
the Offer. Within thirty (30) days after the receipt of the
Notice, Optionee shall, if it desires to purchase the Prior
Option Property, do so in accordance with the terms of this
<PAGE> 10
Agreement by delivering the Exercise Notice within such thirty
(30) day period and all of the terms and conditions of this
Agreement shall apply to such purchase except that the Note shall
be in the principal amount of the purchase price described in the
Notice. Optionee's failure to deliver the Exercise Notice within
the said thirty-day period shall automatically terminate this
Option Agreement.
15. Miscellaneous.
(a) Successors. This Agreement shall be binding
upon the inure to the benefit of Optionor and Optionee and their
respective heirs, executors, administrators, successors and
assigns.
(b) Captions. The captions in this Agreement are
inserted for convenience of reference only; they form no part of
this Agreement and shall not affect its interpretation.
(c) Entire Agreement; Governing Law. This Agreement
contains the entire understanding of the parties with respect to
the subject matter hereof, supersedes all prior or other
negotiations, representations, understandings and agreements of,
by or among the parties, express or implied, oral or written,
which are fully merged herein. The express terms of this
Agreement control and supersede any course of performance and/or
customary practice inconsistent with any such terms. Any
agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of this Agreement unless such
agreement is in writing and signed by the party against whom
enforcement of such change, modification, discharge or
abandonment is sought. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania.
(d) Provisions Separable. The provisions of this
Agreement are independent of and separable from each other, and
no provision shall be affected or rendered invalid or
unenforceable by virtue of the fact that for any reason any other
provision may be invalid or unenforceable in whole or in part.
(e) Survival. Nothwithstanding any presumption to the
contrary, all covenants, conditions and representations contained
in this Agreement, which by their nature, impliedly or expressly,
involve performance after settlement, or which cannot be
ascertained to have been fully performed until after settlement,
<PAGE> 11
shall survive settlement.
(f) Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall be deemed to be
an original as against any party whose signature appears thereon,
and all of which shall together constitute one and the same
instrument. This Agreement shall be binding when one or more
counterparts hereof, individually or taken together, shall bear
the signatures of all of the parties reflected on this Agreement
as the signatories.
(g) Interpretation. No provision of this Agreement
is to be interpreted for or against either party because that
party or that party's legal representative or counsel drafted
such provision.
(h) Time. Time is of the essence of this
Agreement. In computing the number of days for purposes of this
Agreement, all days shall be counted, including Saturdays,
Sundays and holidays; provided, however, that if the final day of
any time period provided in this Agreement shall end on a
Saturday, Sunday or legal holiday, then the final day shall
extend to 5:00 p.m. of the next full business day. For the
purposes of this Section, the term "holiday" shall mean a day
other than a Saturday or Sunday on which banks in the state in
which the Real Property is located are or may elect to be closed.
In witness whereof, Optionor and Optionee have executed this
Agreement as of the day and year first written above.
Optionor:
/s/ Marvin L. Slomowitz
Marvin L. Slomowitz
<PAGE> 12
Optionee:
MARK CENTERS LIMITED PARTNERSHIP,
a Delaware limited partnership, by
its general partner
By: MARK CENTERS TRUST, a Maryland
Business Trust
By: /s/ David S. Zook
Name: David S. Zook
Title: Executive Vice President
<PAGE> 1
TERMINATION OF OPTION TO PURCHASE
AND NOW, this 16th day of March 1998, this Termination of
Option to Purchase is hereby entered into between Mark Centers
Limited Partnership, with offices located at 600 Third Avenue,
Kingston, Pennsylvania 18704 and Marvin L. Slomowitz, Trustee,
600 Third Avenue, Kingston, Pennsylvania 18704.
WITNESSETH:
In consideration of the sum of One Dollar ($1.00) and of the
mutual covenants contained herein, the parties hereto agree as
follows: That Mark Centers Limited Partnership hereby agrees to
terminate its Option to Purchase as set forth in the records of
Union County in Records Book 478 at Page 76 and 499 at Page 105
and that this termination can be recorded of record in Union
County.
IN WITNESS WHEREOF and intending to be legally bound hereby,
the parties hereto have set their hands and seals on the day and
year first above written.
MARK CENTERS LIMITED PARTNERSHIP
ATTEST By: Mark Centers Trust, its General Partner
/s/Jon Grisham /s/ David S. Zook
David S. Zook
Executive Vice President
WITNESS:
/s/ Isobel C. Slomowitz /s/Marvin L. Slomowitz
Marvin L. Slomowitz, Trustee
<PAGE> 2
ACKNOWLEDGEMENT
COMMONWEALTH OF PENNSYLVANIA
COUNTY OF LUZERNE
On this 16th day of March, 1998, before me, a Notary Public,
duly commissioned and qualified in and for the Commonwealth and
County aforesaid, personally appeared DAVID S. ZOOK, Executive
Vice President of MARK CENTERS TRUST, General Partner of MARK
CENTERS LIMITED PARTNERSHIP, a limited partnership, and that he
as such Executive Vice President, being authorized to so do,
executed the foregoing instrument for the purposes therein
contained, by signing the name of the partnership by himself as
Executive Vice President.
IN WITNESS WHEREOF, I hereunto set my hand and official
seal.
/s/ Diane Policare
Diane Policare, Notary Public
My Commission Expires:
March 18, 2000
<PAGE>1
Fifth Amendment to Revolving Credit Loan Agreement
("Fourth Amendment") by and among Mark Centers Limited
Partnership ("Borrower"), Mark Centers Trust ("MCT") and
Mellon Bank, N.A. ("Lender")
Ladies and Gentlemen:
Borrower, MCT and Lender are parties to a Revolving Credit
Loan Agreement dated October 5, 1994, amended by a First
Amendment to Revolving Credit Loan Agreement dated November 15,
1995 (the "First Amendment"); a Second Amendment to Revolving
Credit Loan Agreement dated February 29, 1996 (the "Second
Amendment"); a Third Amendment to Revolving Credit Loan Agreement
dated October 3, 1996 (the "Third Amendment") and a Fourth
Amendment to Revolving Credit Loan Agreement dated August 7, 1997
(the "Fourth Amendment"). The Revolving Credit Loan Agreement,
as amended by the First Amendment, Second Amendment, Third
Amendment and Fourth Amendment, shall hereinafter be referred to
as the "Loan Agreement". Capitalized terms used in this
Agreement without definition shall have the same meanings
ascribed to those terms in the Loan Agreement.
Borrower and MCT have requested Lender to agree to modify
certain covenants in the Loan Agreement and Lender has agreed to
do so on the terms and conditions hereinafter set forth. In
consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which is hereby
mutually acknowledged, the parties hereto, intending to be
legally bound hereby, agree as follows:
1. Amendments
(a) Commitment Termination Date. Section 1.1 of the
Loan Agreement is amended so that the definition of "Commitment
Termination Date" is deleted and the following is substituted
therefor: "Commitment Termination Date" means July 2, 1998.
(b) Repayment. Nothwithstanding anything in the
Loan Agreement to the contrary, Borrower shall make monthly
payments to the Lender in accordance with the Loan Agreement
equal to the greater of (a) $50,000 together with interest
thereon as provided in the Loan Agreement or (b) the monthly
Operating Income.
<PAGE>2
(c) Fees. In addition to any other fees due to
Lender under the Loan Documents, Borrower shall pay (a) to
Lender, in consideration of the amendments provided herein, the
sum of Six Thousand Six Hundred Eighty Five Dollars ($6,685), and
(b) to Lender's counsel, Drinker Biddle & Reath LLP, for services
previously rendered in connection with prior modifications to the
Loan Agreement, the sum of One Thousand One Hundred Twenty Seven
and 40/100 Dollars ($1,127.40).
2. Representations and Warranties. To induce Lender to
amend the Loan Agreement as provided herein, Borrower and MCT
represent and warrant to Lender as follows:
(a) Borrower and MCT have full power, authority and
legal right to execute and deliver this Amendment, and this Fifth
Amendment constitutes the valid and binding obligation of
Borrower and MCT, enforceable against them in accordance with its
terms.
(b) Neither MCT nor Borrower has any charge, claim,
demand, plea or setoff upon, for or against the Loan Agreement or
any of the Loan Documents. The outstanding principal balance of
the Revolving Credit as of the date hereof is $2,580,753.44, and
such sum remains due and payable in accordance with the terms and
provisions of the Loan Agreement and other Loan Documents, as
modified by this Fifth Amendment.
(c) No Event of Default exists under the Loan
Agreement or any other Loan Document and there is no Unmatured
Event of Default under the Loan Agreement or any other Loan
Document.
(d) The execution, delivery and performance of this
Amendment has been duly authorized by all requisite partnership
action or the part of Borrower and MCT, and will not violate the
partnership documents of Borrower or MCT or any provision of any
law or any order of any tribunal, and will not conflict with,
result in a breach of or constitute a default under any mortgage,
security agreement, loan or other credit agreement, or any other
agreement or instrument to which Borrower or MCT is a party, or
result in the imposition of any lien upon the assets of Borrower
or MCT except as contemplated by this Fifth Amendment.
<PAGE>3
3. Effectiveness of Loan Documents. Except as
specifically amended by this Fifth Amendment, the Loan Agreement
and the other Loan Documents remain unmodified and in full force
and effect. References in any of the Loan Documents to the Loan
Agreement shall hereafter be deemed to mean and refer to the Loan
Agreement as amended by this Fifth Amendment.
4. Reaffirmation of Guaranty. MCT acknowledges that it
is unconditionally liable and legally and validly indebted to
Lender in accordance with the terms of the Guaranty, and such
indebtedness is not subject to any defense, counterclaim or
offset. MCT consents to the delivery of this Fifth Amendment and
the modifications made herein, and affirms that the Guaranty is
in full force and effect and includes, without limitation, the
indebtedness, liabilities and obligations arising under or in any
way connected with the Loan Agreement and this Fifth Amendment,
whether now existing or hereafter arising including, without
limitation, principal, interest, costs and expenses of
collection.
5. Miscellaneous
(a) This Fifth Amendment constitutes the entire
understanding among Borrower, MCT and Lender concerning the
modification of the Loan Agreement. All prior and
contemporaneous negotiations and understandings are merged in
this Fifth Amendment.
(b) The captions preceding the sections of this Fifth
Amendment are for convenience of reference only. They are not a
part of this Fifth Amendment and shall not be considered in
construing its meaning or effect.
(c) Borrower and MCT shall pay the attorneys' fees and
costs incurred by Lender in connection with the modification of
the Loan Agreement evidenced by this Fifth Amendment.
(d) This Fifth Amendment may be executed in any number
of counterparts, each of which shall be an original, and such
counterparts together shall constitute one and the same
instrument. The parties hereto agree that a facsimile
transmission of an executed counterpart of this Fifth Amendment
shall have the same binding effect upon the signatory as an
executed and delivered original hereof. The parties hereto
<PAGE>4
further agree, for confirmatory purposes only, to exchange copies
of executed counterpart originals promptly after the aforesaid
facsimile transmission so that each party may have one fully
executed original hereof.
(e) This Fifth Amendment shall be construed in
accordance with the laws of the Commonwealth of Pennsylvania and
shall be binding upon the parties hereto and their respective
successors and assigns.
IN WITNESS WHEREOF the parties hereto have caused this Fifth
Amendment to be duly executed the day and year first above
written.
Borrowers:
MARK CENTERS LIMITED PARTNERSHIP,
a Delaware limited partnership
By: MARK CENTERS TRUST, a Maryland
business trust, its general partner
By: /s/ Joshua Kane
Joshua Kane, Sr VP & CFO
MARK CENTERS TRUST, a Maryland
business trust
By: /s/ Joshua Kane
Joshua Kane, Sr VP & CFO
Lender:
MELLON BANK, N.A., a national
banking association
By: /s/ Wayne R. Evans
Wayne R. Evans, Sr VP
Prepared by:
Brent S. Gorey, Esq.
Stradley, Ronon, Stevens & Young, LLP
2600 One Commerce Square
Philadelphia, PA 19103
MORTGAGE AND SECURITY AGREEMENT
THIS MORTGAGE, given as of the 28th day of January, 1998, by
MARK CENTERS LIMITED PARTNERSHIP, a Delaware limited partnership,
with offices located at 600 Third Avenue, Kingston, Pennsylvania
18704, ("Mortgagor"), to ROYAL BANK OF PENNSYLVANIA, a
Pennsylvania banking institution with offices at 732 Montgomery
Avenue, Narberth, Pennsylvania 19072 ("Mortgagee").
WHEREAS, Mortgagor by a promissory note dated the date of
this Mortgage (as the same may be amended, modified, extended or
renewed from time to time, the "Note") promises to pay to the
order of Mortgagee, with interest, the principal sum of Three
Million Five Hundred Thousand Dollars ($3,500,000.00), or so much
thereof as may be advanced from time to time by Mortgagee
pursuant to the terms of a Land Acquisition and Construction Loan
Agreement dated the date of this Mortgage between Mortgagor and
Mortgagee (as the same may be amended, modified, or supplemented
from time to time, the "Loan Agreement");
WHEREAS, the Note contains provisions which allow for
changes from time to time in the rate of interest;
NOW THIS INDENTURE WITNESSETH, that Mortgagor, in consider-
ation of the principal sum of Three Million Five Hundred Thousand
Dollars ($3,500,000.00) evidenced by the Note, and to secure the
payment thereof with interest thereon, and all other sums due or
to become due under the Note, this Mortgage, or the Loan
Agreement (the Note, this Mortgage, the Loan Agreement, and all
other documents given as security for or in connection with the
Note, as the same may be amended, modified, or supplemented from
time to time, are sometimes collectively referred to below as the
"Loan Documents"), and to secure the performance of all other
covenants, terms, conditions, and agreements of Mortgagor under
the Loan Documents, and to secure the payment of any past,
present, and future loans, advances, extensions of credit, or
other financial accommodations made by Mortgagee to Mortgagor, or
<PAGE 2>
to third parties upon the surety, guaranty, endorsement, or other
accommodation of Mortgagor, and intending to be legally bound,
does hereby transfer, assign, mortgage and pledge and does hereby
grant, bargain, sell, convey, alien, release and confirm unto
Mortgagee, its successors and assigns, and does hereby assign and
grant to Mortgagee, its successors and assigns, a security
interest in:
ALL THAT CERTAIN lot(s) or parcel(s) of ground in Ocean
County, New Jersey, described in Exhibit "A" attached hereto and
incorporated herein by this reference (the "Premises");
TOGETHER WITH all present and future buildings and improve-
ments erected or to be erected thereon, as well as all present
and future alterations, additions and improvements now or
hereafter made thereto (collectively, the "Improvements"); and
all streets, alleys, passages, easements, licenses, ways, water,
water courses, water rights, air rights, other rights, timber,
crops, minerals, liberties, privileges, hereditament and the
appurtenances thereunto belonging (collectively, the
"Hereditaments");
TOGETHER WITH all present and future reversions, remainders,
incomes, rents, security deposits, issues, profits, fees,
payments, grants, franchises, rights, claims, concessions, and
operating privileges derived from or received in connection with
all purposes for which the Premises and the Improvements might be
employed, whether now existing or hereafter arising
(collectively, the "Rents");
TOGETHER WITH all present and future machinery, apparatus,
equipment, fittings, fixtures, and articles of personal property
of Mortgagor now or hereafter located on, about, under or in the
Premises or the Improvements, without regard to whether the same
may be affixed to the Premises or Improvements, at any time and
from time to time and used or usable in connection with any
present or future operation or occupancy of the Improvements,
including but not limited to all heating, electrical, air condi-
tioning, ventilating, lighting, laundry, incinerating and power
equipment, engines, pipes, pumps, tanks, motors, conduits,
switchboards, plumbing, lifting, cleaning, fire prevention, fire
extinguishing, and communications apparatus, appliances, furnish-
ings, carpeting, cabinets, partitions, ducts and compressors, and
all parts and accessories therefor and all substitutions and
<PAGE 3>
replacements thereof, and the cash and non-cash proceeds of all
the foregoing, including but not limited to the proceeds of any
policy of insurance thereon (collectively, the "Building
Equipment");
TOGETHER WITH all present and future contracts relating to
the Premises, the Improvements, the Hereditaments, or the
Building Equipment; all documents, contract rights, accounts,
commitments, construction contracts, architectural agreements,
general intangibles (including, but not limited to, trademarks
and trade names), instruments, notes and chattel paper arising
from or by virtue of any transaction related to the Premises, the
Improvements, or the Building Equipment; and all other interests
of every kind and character that Mortgagor now has or hereafter
acquires in and to the Premises, the Improvements, the Heredita-
ments and the Building Equipment (collectively, the "Rights");
TOGETHER WITH all awards, decrees, proceeds and settlements
made to or for the benefit of Mortgagor by reason of any damage
to, destruction of or taking of the Premises or any part thereof
or any Improvements, Hereditaments, or Building Equipment,
whether made by reason of the exercise of the right of eminent
domain or otherwise, or by any public or private authority,
tribunal, corporation or other entity or by any natural person
("Damages").
All of the foregoing property of whatever kind encumbered by
this Mortgage and any additional property now owned or hereafter
acquired by Mortgagor and subject to the lien of this Mortgage or
intended to be so is sometimes referred to below as the
"Mortgaged Property."
TO HAVE AND TO HOLD the Mortgaged Property to Mortgagee, its
successors and assigns, forever to its and their own proper use,
benefit and behoof forever.
PROVIDED, HOWEVER, that if Mortgagor shall promptly pay or
cause to be paid to Mortgagee the principal sum (including all
additional advances and all other sums) payable by Mortgagor to
Mortgagee under the Loan Documents, with interest thereon, and
shall perform or cause to be performed all other covenants,
terms, conditions, and agreements contained in the Loan
Documents, and shall promptly pay or cause to be paid all other
sums secured by this Mortgage, all without fraud or delay or
<PAGE 4>
deduction or abatement of anything or for any reason, then this
Mortgage and the estate granted by this Mortgage shall cease,
terminate and become void.
Mortgagor covenants and warrants that Mortgagor is sole
lawful owner of an indefeasible estate in fee simple in the
Mortgaged Property, free from all prior liens and encumbrances,
and will warrant and forever defend the title thereof unto the
Mortgagee against all claims whatsoever. In the event the
interest of Mortgagee in the Mortgaged Property or any part
thereof should be endangered or should be challenged, directly or
indirectly, Mortgagor authorizes Mortgagee, at Mortgagor's
expense, to take all necessary and proper steps for the defense
of such interest, including the employment of counsel, the
prosecution or defense of litigation, and the compromise or
discharge of claims made against such interest.
Mortgagor further covenants and agrees with Mortgagee that,
until payment of all sums secured by this Mortgage:
1. Payment of Sums Secured and Performance.
(a) Mortgagor shall pay when due the principal sum
secured by the Mortgage with interest thereon at the times and in
the manner as provided in the Note and shall pay when due all
other sums secured by this Mortgage.
(b) Mortgagor shall promptly and faithfully observe
and perform all covenants, terms, conditions, and agreements
contained in this Mortgage, in the Note, and in the other Loan
Documents.
2. Taxes and Other Charges. Mortgagor shall pay, prior to
the time when interest or penalties commence to accrue thereon,
all taxes, sewer and water rents and other charges, including
charges in lieu of taxes, and other claims owing the State of New
Jersey or any other governmental authority, state or local, and
all taxes, charges, and claims owing to the United States of
America. Promptly after request by Mortgagee, Mortgagor shall
produce to Mortgagee receipts or other satisfactory evidence of
the payment of such items; provided, however, if Mortgagor in
good faith and by appropriate legal action shall contest the
validity or the amount of any such item, after notice to
Mortgagee, and, if required by Mortgagee, shall have furnished
<PAGE 5>
and deposited security as required by Mortgagee and furnished
assurance satisfactory to Mortgagee indemnifying it against any
loss by reason of such contest, then Mortgagor shall not be
required to pay the item or to produce the required receipts so
long as the contest: (i) operates to prevent collection and
enforcement; (ii) does not interfere with the use, occupancy or
operations of the Mortgaged Property and the timely payment of
all sums due under this Mortgage; (iii) does not jeopardize the
lien of this Mortgage; (iv) is maintained and prosecuted with
diligence; and (v) is not terminated or discontinued adversely
to Mortgagor.
3. Insurance.
(a) Mortgagor shall keep the Premises, the Improve-
ments, and the Building Equipment insured for the benefit of
Mortgagee, its successors and assigns, as its interest may
appear, against loss or damage by fire and other hazards
including, without limitation, "all risks" (with extended
coverage, vandalism and malicious mischief endorsements), upon
terms and in companies satisfactory to Mortgagee, at all times in
amounts required by Mortgagee and not less than the full
replacement value of the Improvements and the Building Equipment.
Mortgagor shall deliver all policies of insurance to the
Mortgagee, each of such policies to contain noncontributory
mortgagee clauses satisfactory to Mortgagee and provision for
thirty (30) days' written notice, certified mail, return receipt
requested, to Mortgagee of cancellation or material change in
coverage, and to be endorsed to name Mortgagee as an additional
insured with loss payable to Mortgagee. Mortgagor shall not take
out separate insurance concurrent in form or contributing in the
event of loss with the insurance required to be maintained under
this Mortgage, unless Mortgagee is included on such insurance as
an additional named insured with loss payable to Mortgagee under
a standard mortgagee endorsement of the character above
described. Mortgagor shall immediately notify Mortgagee whenever
such separate insurance is taken out and shall promptly deliver
to Mortgagee the policy of such insurance. Mortgagor shall
maintain and deliver satisfactory evidence to Mortgagee that
there are in effect, if and as required by Mortgagee, policies of
workmen's compensation, general liability insurance, and flood
insurance, in such amounts as Mortgagee may from time to time
require, in such form and issued by companies acceptable to
Mortgagee, and such other insurance (including without limitation
<PAGE 6>
business interruption insurance) as Mortgagee may from time to
time require. Mortgagor shall promptly proceed to effect new
insurance on the Mortgaged Property satisfactory to Mortgagee, if
any required insurance shall expire, or be withdrawn, or become
void by breach of any condition by Mortgagor, or become void or
unsafe by reason of the failure of or impairment of the capital
of any company in which such insurance may then be, or if for any
other reason whatsoever such insurance shall become
unsatisfactory to Mortgagee.
(b) Mortgagor shall pay as they shall become due all
premiums for all insurance, and shall deliver evidence of payment
to Mortgagee within ten (10) days of payment. In event of loss
or casualty, Mortgagor shall give immediate written notice to
Mortgagee, and Mortgagee may make proof of loss if not promptly
made by Mortgagor. Mortgagee shall have the right, at its
election, to adjust and compromise any loss claims under such
insurance. Mortgagor directs any insurance company to pay
directly to Mortgagee any monies which may become payable to
Mortgagor or Mortgagee as above and under such insurance,
including return of unearned premiums, and Mortgagor appoints
Mortgagee as attorney-in-fact to endorse any draft for such
monies. All amounts recoverable under any insurance policy
required by this Mortgage are assigned to Mortgagee and in the
event of a loss the amount so collected, net of any cost incurred
by Mortgagee in collecting the same, including attorneys' fees,
shall be made available for restoration or replacement of the
Improvements and Building Equipment then subject to the lien of
this Mortgage, provided:
(i) The fire or other occurrence causing the
loss occurs more than six (6) months prior to the maturity date
of the Note.
(ii) An Event of Default does not exist and,
during the course of restoration and replacement does not occur,
under this Mortgage or the other Loan Documents.
(iii) Mortgagor shall deposit with Mortgagee in
an interest bearing account sufficient funds to cover the costs
of restoring and replacing the Improvements to the extent such
costs are in excess of the available insurance proceeds.
<PAGE 7>
(iv) Mortgagor shall promptly furnish to
Mortgagee plans and specifications for the restoration and
replacement of the Improvements by such architect as shall be
selected and engaged by Mortgagor and approved by Mortgagee.
(v) Mortgagor shall submit evidence satisfac-
tory to Mortgagee that the value of the Premises, as restored and
replaced, is not less than the value of the Premises as of the
date of the loss.
(vi) Mortgagor shall submit satisfactory
evidence that the restoration will be completed prior to the
earlier of: (i) the maturity of the Note or (ii) one hundred
eighty (180) days after the fire or other occurrence causing the
loss, or such other period of time necessary due to extent of
such loss as Mortgagee may approve in writing in its sole
discretion (the "Completion Date").
(vii) Prior to the commencement of such restora-
tion, Mortgagor shall take all steps necessary to avoid the
imposition of any mechanics' liens on the Premises or
Improvements.
Subject to the foregoing, insurance proceeds, net of
the cost of adjusting, collecting, and such reasonable
administrative charge as Mortgagee may impose for distributing
same, shall be advanced pursuant to and subject to the provisions
and conditions of this Mortgage as work progresses and upon the
architect's certification. The insurance proceeds to be released
shall be disbursed on request, but no more frequently than twice
each month, in accordance with a draw schedule approved by
Mortgagee. The item or items to which each distribution may be
applied are subject to the prior approval of Mortgagee. Upon
completion of such restoration, reconstruction and renovation, or
upon occurrence of an Event of Default under this Mortgage, any
portion of the insurance proceeds remaining unexpended shall be
applied by Mortgagee in its sole discretion to the payment of
accrued and unpaid interest, if any, on account of the unpaid
principal sum, or to other sums due under this Mortgage or the
other Loan Documents, in such order as Mortgagee may elect. No
damage or destruction of the Mortgaged Property nor any
application of insurance proceeds to the payment of the
<PAGE 8>
indebtedness evidenced by the Note shall postpone or reduce the
amount of any installment of principal or interest due under the
Note.
In the event all conditions of this paragraph (b) are
not fully complied with within forty-five (45) days after the
fire or other occurrence causing the loss, or all restoration,
reconstruction and renovation is not completed by the Completion
Date, and with regard to all other insurance proceeds (other than
proceeds payable under the hazard insurance policy), all
insurance proceeds shall be applied by Mortgagee in its sole
discretion to the payment of accrued and unpaid interest, if any,
on account of the unpaid principal sum, or to other sums due
under this Mortgage or under the other Loan Documents, in such
order as Mortgagee may elect.
(c) In the event of foreclosure of this Mortgage or
other transfer of title to the Mortgaged Property in
extinguishment of the indebtedness secured by this Mortgage, all
right, title and interest of Mortgagor to any insurance policies
then in force covering the Mortgaged Property shall pass to the
transferee of the Mortgaged Property. Mortgagee is irrevocably
appointed by Mortgagor as attorney-in-fact for Mortgagor, coupled
with an interest, to assign any policy in the event of the
foreclosure of this Mortgage or other extinguishment of the
indebtedness secured by this Mortgage.
4. Escrow Deposits.
(a) Mortgagor shall deposit with Mortgagee, in a lump
sum concurrently with the execution of this Mortgage and in
monthly installments thereafter, such sums as shall equal
annually the amount of the annual real estate taxes and such
other charges as may be assessed or levied by any public
authority on the Mortgaged Property. It is intended that not
later that one month prior to the dates on which the taxes and
other charges shall last be due and payable without interest or
penalty, such sums shall be applied to the payment of the item or
items in respect of which such sums were deposited, or, at
Mortgagee's option, to the payment of such items in such order of
priority as Mortgagee shall determine, as the same become due and
payable, and Mortgagor shall make available to Mortgagee proper
bills therefor. If at any time that it is intended that
Mortgagor shall have deposited with Mortgagee a sufficient sum to
<PAGE 9>
pay any tax or other charge in full and the amount then held by
Mortgagee on deposit therefor shall be insufficient for that
purpose, Mortgagor, upon demand, shall pay to Mortgagee any
amount necessary to make up such deficiency. If Mortgagor shall
be in default under this Mortgage, Mortgagee may at its option
apply the amounts then deposited with Mortgagee, or any part
thereof, in payment of the unpaid sums secured by this Mortgage.
Nothing contained in this paragraph shall be deemed to affect any
right or remedy of Mortgagee under any provisions of this
Mortgage or any statute or rule of law to pay any such items and
to add the amount of the payment, with interest, as provided in
this Mortgage, to the indebtedness secured by this Mortgage, and
to require payment thereof on demand. Payments from the deposit
required under this Mortgage may be made by Mortgagee even though
subsequent owners of the Mortgaged Property may benefit by such
payments. If, when making any assignment of this Mortgage and the
Note, the then Mortgagee shall pay over to its assignee the then
balance of the deposits made by Mortgagor, such assigning
Mortgagee shall have no further obligation to Mortgagor for the
proper application of such deposits.
(b) No amounts paid under paragraph (a), above, shall
be deemed to be trust funds but may be commingled with the
general funds of Mortgagee. Unless otherwise required by law,
Mortgagee shall have no obligation to pay interest to Mortgagor
on any amounts so deposited.
5. Maintenance of Mortgaged Property. Mortgagor shall
maintain the Mortgaged Property in good repair, order, and in
first class condition; except as otherwise provided in or
contemplated by the Loan Agreement, shall not remove any Building
Equipment from the Premises or the Improvements, without the
prior written consent of Mortgagee; except as otherwise provided
in or contemplated by the Loan Agreement, shall not make,
install, or permit to be made or installed, any alterations,
additions, improvements, fixtures, appliances or equipment of any
nature to or in the Mortgaged Property, without the prior written
consent of Mortgagee; shall not commit or suffer any waste of the
Mortgaged Property; shall not make any change in the use of the
Mortgaged Property which may increase in any way the risk of fire
or other hazard or which may impair the security of this
Mortgage; shall not permit the Mortgaged Property to become
deserted or unguarded; shall promptly protect and conserve any
portion of the Mortgaged Property remaining after any damage to
<PAGE 10>
or partial destruction of the Mortgaged Property; shall promptly
repair, restore, replace, or rebuild any portion of the Mortgaged
Property which is damaged or destroyed; and shall promptly
restore the balance of the Mortgaged Property remaining after any
condemnation.
6. Inspections. Mortgagor shall permit Mortgagee and its
agents, at any time and from time to time, to enter upon the
Premises and Improvements and to inspect and appraise the same
for any purpose.
7. Estoppel Affidavit. Mortgagor shall, within five (5)
days after request in person or within ten (10) days after
request by mail, furnish a written statement or declaration, duly
acknowledged, of the amount due on this Mortgage and whether any
offsets or defenses exist thereto or against this Mortgage.
8. Compliance with Laws and Agreements. Mortgagor shall
comply with all rules, laws, ordinances, regulations, agreements,
covenants, conditions, contracts, declarations, easements,
encumbrances, licenses and restrictions affecting the Mortgaged
Property, shall not suffer or permit any violation thereof, shall
pay all fees and charges of any kind in connection therewith, and
shall do or cause to be done all things necessary to preserve
intact and unimpaired any and all easements, appurtenances, and
other interests and rights in favor of, or constituting any
portion of, the Mortgaged Property.
9. Transfer of Mortgagor Property. Mortgagor shall not
sell, transfer, or assign, and shall not permit the sale,
transfer or assignment, voluntarily or involuntarily, by
operation of law or otherwise, of the Mortgaged Property, or any
part of or interest in the Mortgaged Property, without the prior
written consent of Mortgagee, which consent Mortgagee may in its
sole discretion withhold. A transfer of the Mortgaged Property
shall be deemed to have occurred by virtue of the transfer of
more than fifty percent (50%) of any interest (stock, partnership
or otherwise) in Mortgagor, whether in a single transaction or by
virtue of a series of transactions and whether voluntarily or
involuntarily, by operation of law or otherwise.
10. Liens and Encumbrances. Mortgagor shall maintain this
Mortgage as a valid first lien (and security interest) on the
Mortgaged Property, and shall not create, incur, assume, or
<PAGE 11>
suffer to exist any mortgage, lien, charge, security interest or
other encumbrance upon the Mortgaged Property, or any part
thereof, whether senior or subordinate, without the prior written
consent of Mortgagee, which consent Mortgagee may in its sole
discretion withhold. If any such lien or encumbrance is filed or
recorded without Mortgagee's consent, then in addition to the
other remedies available under the terms of this Mortgage,
Mortgagor shall have it removed of record within thirty (30) days
after it is filed or recorded. By placing or accepting any
mortgage, lien or encumbrance of any type, whether voluntary or
involuntary, whether consented to by Mortgagee or not, against
the Mortgaged Property, the holder shall be deemed to have
agreed, without any further act or documentation, that its
mortgage, lien, and encumbrance shall be subordinate in lien
priority to this Mortgage (including, without limitation, amend-
ments which increase the interest rate on the Note, provide for
future advances secured by this Mortgage, or provide for the
release of portions of the Mortgaged Property with or without
consideration).
11. Condemnation. Mortgagor shall notify Mortgagee
promptly of the commencement of any proceedings for the
condemnation or the taking by eminent domain of all or any part
of the Mortgaged Property. Mortgagee shall have the right to
commence, appear in, and prosecute in its own or in Mortgagor's
name, any such proceeding, and to settle or compromise any claim
in connection therewith. Mortgagor appoints Mortgagee attorney-
in-fact for Mortgagor, which appointment is coupled with an
interest, to collect and receive any awards, damages, payments,
and compensation from the authorities making the same, and to
give receipts and acquittance therefor, and to institute, appear
in and prosecute any proceeding therefor. All sums collected by
or paid to Mortgagee pursuant to any such assignment, net of any
cost incurred by Mortgagee in collecting the same, including
attorneys' fees, may be: (i) applied by Mortgagee, in such order
of priority as Mortgagee shall determine, to the payment of
accrued interest and principal, whether or not then due and
payable, or any other sums secured by this Mortgage; or (ii) paid
or made available to Mortgagor, on such terms and conditions as
Mortgagee may determine in its discretion, without waiving or
impairing any equity or lien under and by virtue of this
Mortgage. If, prior to the receipt by Mortgagee of such sums,
the Mortgaged Property or any part thereof shall have been sold
on foreclosure of this Mortgage, Mortgagee shall have the right,
<PAGE 12>
whether or not a deficiency judgment on the Note shall have been
sought, recovered or denied, to receive such sums to the extent
of the debt remaining unsatisfied after such sale, with interest
thereon at the highest rate set forth in the Note, and to receive
the counsel fees, costs and disbursements incurred by Mortgagee
in connection with the collection of such sums.
12. Leases and Rents. Mortgagor assigns to Mortgagee, as
security for Mortgagor's obligations under this Mortgage, any and
all leases entered into by Mortgagor for any portion of the
Premises or Improvements, whether now existing or hereafter
created, including all rents due and to become due thereunder as
well as all rights and remedies provided therein for the
collection of rents. Mortgagee in no way assumes or will assume
any of the obligations as lessor under any leases, and this
assignment shall not release Mortgagor of its obligations as
lessor. Mortgagor shall perform, or cause to be performed, every
obligation of the lessor and shall enforce every obligation of
the lessee in every lease that is assigned to Mortgagee or any
tenancy in which the rents are or may be assigned to Mortgagee,
and shall not, modify, alter, waive or cancel any such lease or
any part thereof, nor anticipate for more than one (1) month any
rents that may be collectible under such lease or that may have
been assigned to Mortgagee, nor assign any such lease or any such
rents, without the prior written consent of Mortgagee.
13. Subordinate Lienholders. Mortgagor shall not permit
the holder of any subordinate mortgage or other subordinate lien,
whether or not consented to by Mortgagee, to terminate any lease
or agreement of sale for all or a portion of the Mortgaged
Property, whether or not that lease or agreement of sale is
subordinate (whether by law or the terms of such lease or a
separate agreement) to the lien of this Mortgage, without the
prior written consent of Mortgagee. The holder of any
subordinate mortgage or other subordinate lien shall have no such
right, whether by foreclosure of its mortgage or lien or
otherwise, to terminate any such lease or agreement of sale,
whether or not permitted to do so by Mortgagor or as a matter of
law, and any such attempt to terminate any such lease or
agreement of sale shall be ineffective and void, without the
prior written consent of Mortgagee.
<PAGE 13>
14. Payment of Costs and Expenses. If Mortgagor fails to
pay any taxes, water and sewer rents, assessments, charges,
claims, fees, costs, or expenses required to be paid under the
terms of this Mortgage or to maintain insurance as required, or
to make all necessary repairs to the Mortgaged Property,
Mortgagee may, but shall not be obligated to, advance sums on
behalf of Mortgagor in payment of such taxes, water and sewer
rents, assessments, charges, claims, costs, expenses, fees,
insurance and repairs, with right of subrogation, without
prejudice to the right of enforcement of the obligation of the
Note, or the other remedies of Mortgagee in this Mortgage, by
reason of the failure of Mortgagor to make payment of the same;
and all such sums so advanced by Mortgagee shall be added to and
become a part of the indebtedness secured by this Mortgage, and
payment of such sums (with interest thereon at the highest rate
specified in the Note) may be enforced at any time by Mortgagee
against Mortgagor.
15. Changes in Laws of Taxation. If at any time the United
States Government or any department or bureau thereof shall
require internal revenue stamps on the Note secured by this
Mortgage, Mortgagor shall pay for same upon demand; and on
default of such payment within fifteen (15) days after demand,
the holder of the Note may pay for such stamps and add the amount
so paid to the indebtedness evidenced by the Note and secured by
this Mortgage. If any law or ordinance adopted after the date of
this Mortgage imposes a tax on Mortgagee with respect to the
Mortgaged Property, the value of Mortgagor's equity in the
Mortgaged Property, the amount of the indebtedness secured by
this Mortgage, the Note, or the other Loan Documents, Mortgagee
shall have the right at its election to give Mortgagor sixty (60)
days written notice to pay the indebtedness secured by this
Mortgage, whereupon such indebtedness shall become due and
payable at the expiration of such period of sixty (60) days,
unless prior thereto, lawfully and without violation of usury
laws, Mortgagor has paid any such tax in full as the same became
due and payable.
16. Environmental Covenants.
(a) Mortgagor shall not use, nor permit any other
party to use, the Mortgaged Property for the purpose of
generating, treating, producing, storing, handling, transferring,
processing, transporting, disposing or otherwise releasing
Hazardous Substances, either on, from or about the Mortgaged
<PAGE 14>
Property or elsewhere, which (i) creates or causes or threatens
to create or cause contamination, either on the Mortgaged
Property or elsewhere, required by any governmental authority to
be removed or remedied under any Environmental Law, (ii) creates
any form of liability, direct or indirect, due to such actual or
threatened contamination, or (iii) is in contravention of any
Environmental Law. Mortgagor shall require in all leases and
subleases that all tenants, subtenants, and other occupants of
the Mortgaged Property not use or occupy the Mortgaged Property
in contravention of the Environmental Laws and the terms of this
Mortgage.
(b) The term "Environmental Law" includes any and all
current or future federal, state, county, regional and local
laws, statutes, rules, regulations and ordinances concerning
protection of health or the environment, including, but not
limited to, the Comprehensive Environmental Response,
Compensation and Liability Act, 42 U.S.C. Sub Section 9601 et
seq., as amended ("CERCLA"), the Resource Conservation and
Recovery Act, 42 U.S.C. Sub Section 6901 et seq., as amended
("RCRA"), the Toxic Substances Control Act, 15 U.S.C. Sub Section
2601 et seq., as amended ("TSCA"), the New Jersey Spill
Compensation and Control Act, N.J.S.A. 58:10-23.11 et. seq.
("Spill Act"), and the New Jersey Industrial Site Recovery Act
("ISRA"). The term "Hazardous Substances" includes "hazardous
substances" as defined in CERCLA and the Spill Act, "hazardous
wastes" as defined in RCRA, and "toxic substances" as defined in
TSCA, and any and all other pollutants and contaminants regulated
or controlled by Environmental Laws.
(c) Mortgagor shall, in the event of any actual or
threatened discharge, spill, injection, escape, emission,
disposal, leak or other release of Hazardous Substances on, from
or about the Mortgaged Property, which is not authorized by a
permit or other approval issued by the appropriate governmental
agencies, promptly notify the U.S. Environmental Protection
Agency and the appropriate agency of the State of New Jersey, and
shall take all steps necessary to promptly remove, remediate, or
otherwise clean up such actual or threatened discharge, spill,
injection, escape, emission, disposal, leak or other release in
accordance with the provisions of all Environmental Laws, and
shall receive a certification from the appropriate agency of the
State of New Jersey, or U.S. Environmental Protection Agency that
the Mortgaged Property and any other affected property has been
<PAGE 15>
cleaned up to the satisfaction of those agencies.
(d) Mortgagor grants Mortgagee and its agents,
employees, contractors and designees an irrevocable license
(coupled with an interest) to enter the Mortgaged Property from
time to time, at Mortgagor's expense, to evaluate and monitor the
Mortgaged Property for compliance with all Environmental Laws as
well as the terms of this Mortgage, and to perform appropriate
tests (including, without limitation, test borings) and to take
samples (including, without limitation, soil and groundwater
samples). Mortgagor shall provide Mortgagee with all notices and
other communications received from federal, state, county,
regional and local agencies and departments which enforce and
administer Environmental Laws. Mortgagor shall provide
Mortgagee, from time to time upon request, with any and all
information requested by Mortgagee concerning the use of the
Mortgaged Property and Mortgagor's compliance with the terms of
this Mortgage and Environmental Laws.
(e) Mortgagor shall and does release, indemnify, agree
to pay on behalf of, and hold harmless Mortgagee and its
officers, directors, agents, employees, successors and assigns of
and from any loss, claim, cost, cause of action, action, demand,
damage, fine (civil or criminal), penalty or expense, including
without limitation clean-up costs, attorneys' fees and court
costs, which may be incurred, suffered or sustained by reason of
any violation or alleged violation of any terms of this Mortgage
or any Environ-mental Law on, in, under, from or about the
Mortgaged Property, caused in whole or in part, regardless of
fault, by any past, present or future owner, occupier, tenant,
subtenant, licensee, guest, or other person or entity, including
but not limited to Mortgagor and Mortgagee. The terms of this
paragraph shall survive the payment in full of all sums secured
this Mortgage and the termination and satisfaction of record of
this Mortgage.
(f) If Mortgagee should pay or incur any costs, fees,
expenses, settlements, damages, fines (criminal or civil) or
penalties, including, but not limited to, clean-up costs, at-
torneys' fees and court costs, because of a past, present or
future violation of the terms of this Mortgage or Environmental
Laws on, in, under, from or about the Mortgaged Property, all
such sums shall be added to the indebtedness secured by this
Mortgage, shall be payable on demand by Mortgagor, and shall bear
<PAGE 16>
interest at the highest rate set forth in the Note. The terms of
this paragraph shall survive the payment in full of all other
sums secured by this Mortgage and the termination and
satisfaction of record of this Mortgage.
17. Environmental Representations. Mortgagor has investi-
gated the prior ownership and uses of the Mortgaged Property, in
a manner consistent with good commercial and customary practice,
to determine that the Mortgaged Property is free of Hazardous
Substances. Mortgagor, in performing its investigation, has
considered (i) the relationship of the purchase price to the
value of the Mortgaged Property if uncontaminated when acquired,
(ii) commonly known or ascertainable information about the
Mortgaged Property, and (iii) the obviousness of the presence or
likely presence of contamination. Mortgagor warrants and
represents to Mortgagee, to the best of Mortgagor's knowledge,
that:
(a) None of the Mortgaged Property has ever been used
to treat, store, produce, handle, transfer, process, transport,
dispose or otherwise release Hazardous Substances which has
caused, however remotely, a contamination that requires or could
require removal or remediation under any Environmental Law or
that creates or could create any liability for removal or
remediation.
(b) No contamination or pollution or danger of
pollution or contamination exists from a condition on the
Mortgaged Property which requires any corrective action under any
Environmental Law or which could result in any liability for
corrective action.
(c) No notification has been filed with regard to a
release of Hazardous Substances on, into or from the Mortgaged
Property under any Environmental Laws.
(d) Neither Mortgagor nor any prior owner or occupier
of the Mortgaged Property has received a summons, citation,
notice of violation, administrative order, directive, letter or
other communication, written or oral, from any governmental or
quasi-governmental authority concerning any violation or alleged
violation of any Environmental Law.
<PAGE 17>
(e) No underground storage tanks are currently located
on the Mortgaged Property. Any such tanks that previously
existed on the Mortgaged Property were removed in compliance with
all Environmental Laws and there was no evidence of any
contamination caused by the removal of any such tanks.
(f) No asbestos-containing materials and no polychlor-
inated biphenyls are located on the Mortgaged Property.
18. Events of Default. The occurrence of any one or more
of the following events shall constitute a default under this
Mortgage ("Event of Default"):
(a) Mortgagor fails to observe or perform any terms,
conditions, and agreements of this Mortgage or the other Loan
Documents to be observed or performed by Mortgagor (subject, to
the extent applicable thereto, to any cure or grace periods in
the Note).
(b) A default or event of default otherwise occurs
under the Note, the Loan Agreement, or the other Loan Documents.
(c) A default or event of default occurs under or in
connection with any other loan, advance, extension of credit, or
other financial accommodation now or hereafter made by Mortgagee
to Mortgagor, or under any other agreements, documents, or
instruments now or hereafter executed or delivered by Mortgagor
to Mortgagee.
(d) A default occurs under or in connection with any
other indebtedness or obligation secured by the Mortgaged
Property or any part thereof.
19. Remedies Upon Default. Upon the occurrence of an Event
of Default, or at any time during the continuance of an Event of
Default, Mortgagee, may at its election, declare the whole unpaid
principal sum and all accrued and unpaid interest thereon, and
all other sums payable under the Loan Documents, to be
immediately due and payable without notice or demand, and
Mortgagee may immediately and without demand exercise any of the
following rights and remedies, in addition to any of the rights
or remedies provided in the other Loan Documents or in other
documents held by Mortgagee as security for the indebtedness
evidenced by the Note, and such rights and remedies otherwise
<PAGE 18>
available to Mortgagee at law, in equity, by virtue of statute,
or otherwise, without further stay, any law, usage or custom to
the contrary notwithstanding:
(a) Mortgagee may either in person or by agent, with
or without bringing any action or proceeding, take possession of
the Premises, the Improvements and the Building Equipment and
exercise with respect thereto all rights of a mortgagee in
possession, and may collect all rents therefrom and, after
deducting all costs of collection and administration expense,
apply the net rents to the payment of taxes, water and sewer
rents, charges and claims, insurance premiums and all other
carrying charges, to the maintenance, repair or restoration of
the Mortgaged Property, or on account and in reduction of the
principal or interest secured by this Mortgage, in such order and
amounts as Mortgagee may elect in its sole discretion. Upon
taking possession, Mortgagee may do any acts which it deems
necessary or desirable to preserve the value, marketability or
rentability of the Premises, the Improvements, and the Building
Equipment, to increase the income therefrom and to protect the
security thereof, including sue for or otherwise collect the
rents, issues and profits thereof, including those past due and
unpaid. The making of such alteration, additions, improve-ments,
renovations, repairs and replacements to the Mortgaged Property
as Mortgagee may deem proper; the demolishing of any part or all
of the buildings, structures or other improvements on the
Premises which in the judgment of Mortgagee may be in an unsafe
condition and dangerous to life or property; and the remodeling
of such buildings, structures or other improvements so as to make
them available in whole or in part for any business, dwelling,
multiple dwelling or other purposes.
(b) Mortgagee may institute, notwithstanding the
provisions of any law or act of assembly to the contrary, any
appropriate action or proceeding to foreclose this Mortgage as if
any and all redemption periods had fully expired, and proceed to
judgment and execution for all sums secured by this Mortgage.
(c) MORTGAGOR IRREVOCABLY AUTHORIZES AND EMPOWERS ANY
PROTHONOTARY, CLERK OF COURT OR ANY ATTORNEY OF ANY COURT OF
RECORD OF THE COMMONWEALTH OF PENNSYLVANIA OR ELSEWHERE, TO
APPEAR FOR AND CONFESS JUDGMENT AGAINST MORTGAGOR, AS WELL AS
AGAINST ALL PERSONS CLAIMING UNDER, BY OR THROUGH MORTGAGOR, AND
IN FAVOR OF MORTGAGEE, AS OF ANY TERM, PAST, PRESENT OR FUTURE,
<PAGE 19>
WITH OR WITHOUT DECLARATION, FOR POSSESSION OR CONTROL OF THE
PREMISES AND THE IMPROVEMENTS TOGETHER WITH THE HEREDITAMENTS AND
BUILDING EQUIPMENT (WITHOUT THE NECESSITY OF FILING ANY BOND AND
WITHOUT ANY STAY OF EXECUTION OR APPEAL) FOR WHICH THIS
INSTRUMENT (OR A COPY THEREOF VERIFIED BY AFFIDAVIT) SHALL BE A
SUFFICIENT WARRANT; WHEREUPON, APPROPRIATE PROCESS TO OBTAIN
POSSESSION OR CONTROL OF THE PREMISES AND THE IMPROVEMENTS
TOGETHER WITH THE HEREDITAMENTS AND BUILDING EQUIPMENT (INCLUDING
LEVY AND EXECUTION) MAY BE ISSUED FORTHWITH, WITHOUT ANY PRIOR
WRIT OR PROCEEDING WHATSOEVER, MORTGAGOR RELEASING AND AGREEING
TO RELEASE MORTGAGEE AND SUCH ATTORNEYS FROM ALL ERRORS AND
DEFECTS WHATSOEVER IN ENTERING SUCH JUDGMENT OR IN CAUSING SUCH
WRIT OR PROCESS TO BE ISSUED OR IN ANY PROCEEDING THEREON OR
CONCERNING THE SAME, PROVIDED THAT MORTGAGEE SHALL HAVE FILED IN
SUCH ACTION AN AFFIDAVIT MADE BY SOMEONE ON MORTGAGEE'S BEHALF
SETTING FORTH THE FACTS NECESSARY TO AUTHORIZE THE ENTRY OF SUCH
JUDGMENT ACCORDING TO THE TERMS OF THIS INSTRUMENT, OF WHICH
FACTS SUCH AFFIDAVIT SHALL BE PRIMA FACIE EVIDENCE; AND IT IS
EXPRESSLY AGREED THAT IF FOR ANY REASON AFTER ANY SUCH ACTION HAS
BEEN COMMENCED, THE SAME SHALL BE DISCONTINUED, MARKED SATISFIED
OF RECORD OR BE TERMINATED, OR POSSESSION OF THE PREMISES AND
IMPROVEMENTS TOGETHER WITH THE HEREDITAMENTS AND BUILDING
EQUIPMENT REMAINS IN OR IS RESTORED TO MORTGAGOR OR ANYONE
CLAIMING UNDER, BY OR THROUGH MORTGAGOR, MORTGAGEE MAY, WHENEVER
AND AS OFTEN AS MORTGAGEE SHALL HAVE THE RIGHT TO AGAIN TAKE
POSSESSION OF THE PREMISES AND THE IMPROVEMENTS TOGETHER WITH THE
HEREDITAMENTS AND BUILDING EQUIPMENT, BRING ONE OR MORE FURTHER
CONFESSIONS IN THE MANNER SET FORTH ABOVE TO RECOVER POSSESSION
OF THE PREMISES AND IMPROVEMENTS TOGETHER WITH THE BUILDING
EQUIPMENT, AND THE AUTHORITY AND POWER ABOVE GIVEN TO ANY SUCH
ATTORNEY SHALL EXTEND TO ALL SUCH FURTHER CONFESSIONS.
(d) Mortgagee, in its sole discretion, regardless of
whether a foreclosure suit has been commenced, shall be entitled
to the appointment of a receiver of the rents, without notice, to
the extent not prohibited by applicable law, with power to
collect the rents, issues and profits of the Mortgaged Property
as a matter of strict right and without notice, with power to
collect rents, issues and profits of the Mortgaged Property due
and coming due, both prior to and during the pendency of such
foreclosure suit, without regard to the value of the Mortgaged
Property or to the solvency of the Mortgagor or any other person
liable for the indebtedness secured by this Mortgage, and
regardless of whether Mortgagee has an adequate remedy at law.
<PAGE 20>
Such receiver may rent the Mortgaged Property, or any part
thereof, for such term or terms and on such other terms and
conditions as such receiver may see fit, collect all rents (which
term shall also include sums payable for use and occupation) and,
after deducting all costs of collection and administration
expense, apply the net rents to the payment of taxes, water and
sewer rents, other lienable charges and claims, insurance
premiums and all other carrying charges, and to the maintenance,
repair and restoration of the Mortgaged Property, or in reduction
of the principal or interest, or both, secured by this Mortgage,
in such order and amounts as such receiver may elect. Mortgagor,
for itself and its successors and assigns, waives any and all
defense to the application for a receiver and consents to such
appointment. The expenses, including receiver's fees, counsel
fees, costs and agent's compensation, incurred in connection with
the exercise of the powers contained in this Mortgage shall be
secured by this Mortgage.
(e) Mortgagee may exercise any and all remedies avail-
able to a secured party under the Uniform Commercial Code or
available at law, in equity, by virtue of statute or otherwise.
20. Security Agreement. Mortgagor agrees that the Building
Equipment, to the extent permitted by law, is part of the
Premises and is subject to the lien of this Mortgage, and this
Mortgage, in the event and to the extent that any Building
Equipment shall not be deemed to be part of the Premises, shall
constitute a security agreement under the Uniform Commercial
Code. Mortgagor shall execute and deliver to Mortgagee on
demand, and irrevocably appoints Mortgagee or any officer of
Mortgagee the attorney-in-fact of Mortgagor (which appointment is
agreed to be coupled with an interest) to execute, deliver and
file such financing statements and other instruments as Mortgagee
may require in order to perfect and maintain such security
interest under the Uniform Commercial Code. A carbon,
photographic or other reproduction of this Mortgage shall be
sufficient as a financing statement for filing purposes under the
Uniform Commercial Code.
21. Construction Mortgage. The indebtedness secured by
this Mortgage is to be advanced, in part, in connection with the
construction of certain improvements upon the Premises pursuant
to the Loan Agreement, the terms and conditions of which are
incorporated in this Mortgage by this reference with the same
<PAGE 21>
force and effect as it more fully set forth in this Mortgage. It
is understood and agreed that the Mortgage covers present and
future advances, in the aggregate amount secured by this
Mortgage, made by Mortgage to or for the benefit of Mortgagor
pursuant to the Loan Agreement and the lien of such future
advances shall relate back to the date of this Mortgage. This
Mortgage constitutes a "construction mortgage" as defined in
Section 9-313 of the Uniform Commercial Code and secures an
obligation incurred for the construction of the improvements.
22. Purchase Money Mortgage. The indebtedness secured by
this Mortgage was incurred in part to finance the acquisition of
a portion of the Mortgaged Property. This Mortgage constitutes a
"purchase money mortgage" and shall be entitled to all benefits
as such under the laws of the State of New Jersey and all other
applicable laws.
23. Future Advances.
(a) This Mortgage shall constitute security for any
and all past, present, and future loans, advances, extensions of
credit, or other financial accommodations made by Mortgagee to
Mortgagor, or to third parties upon the surety, guaranty,
endorsement, or other accommodation of Mortgagor, as well as for
any and all other obligations and liabilities of any kind of
Mortgagor o Mortgagee, and for all interest thereon; provided,
however, that the maximum amount of indebtedness secured by this
Mortgage shall not exceed the principal sum of $3,500,000.00 plus
all accrued and unpaid interest, plus all costs and expenses
incurred or assumed by Mortgagee under this Mortgage (including,
without limitations, costs and expenses described in paragraph
(b), below).
(b) In addition to and not in limitation of any other
provisions in this Mortgage, it is understood and agreed that
this Mortgage shall constitute security for the unpaid balance of
advances made, with respect to the Mortgaged Property, for the
payment of taxes, assessments, maintenance charges, insurance
premiums, or costs incurred for the protection of the Mortgaged
Property or the lien of this Mortgage, expenses incurred by
Mortgagor by reason of default by Mortgagor under this Mortgage,
and advances made under the Loan Agreement to enable completion
of the improvements for which the loan was originally made.
<PAGE 22>
24. Additional Notices. In addition to and not in
limitation of any other notice requirements in this Mortgage,
Mortgagor shall give Mortgagee prompt written notice of the
occurrence of any of the following: (i) receipt from any govern-
mental authority of any notice or other communication relating to
the structure, use or occupancy of the Mortgaged Property or any
part thereof; (ii) change in the occupancy of the Mortgaged
Property or any part thereof; (iii) commencement of any
litigation or receipt of notice of any threat of litigation
affecting the Mortgaged Property or any part thereof; (iv)
receipt of any notice from any tenant or subtenant of the
Mortgaged Property or any part thereof; (v) the occurrence of a
default under the terms of any agreements affecting or relating
to the Mortgaged Property or any part thereof; (vi) the
occurrence of a fire or other casualty causing damage to the
Mortgaged Property or any part thereof; (vii) receipt of notice
of eminent domain proceedings or condemnation of the Mortgaged
Property or any part thereof; and (viii) receipt of any notice of
the imposition of, or of threatened or actual execution on, any
lien on or security interest in the Mortgaged Property or any
part thereof.
25. Miscellaneous.
(a) No extension or indulgence granted to Mortgagor,
and no alteration, change or modification of the Loan Documents
consented or agreed to by Mortgagee, and no other act or omission
of Mortgagee, including the taking of additional security or the
release of any security, shall constitute a release of the lien
and obligation of this Mortgage or be interposed as a defense
against the enforcement of this Mortgage, except an act of
Mortgagee which constitutes an express release and satisfaction
of the Note and all other obligations. This Mortgage may not be
changed orally or by any course of dealing between Mortgagor and
Mortgagee, but only by an agreement in writing duly executed on
behalf of the party against whom enforcement of any waiver,
change, modification or discharge is sought.
(b) All rights and remedies granted by this Mortgage
or in the other Loan Documents or otherwise available at law, in
equity, by statute, or otherwise, shall be cumulative and concur-
rent and may be pursued separately, successively, or concurrently
at Mortgagee's sole option, and may be exercised from time to
<PAGE 23>
time and as often as occasion therefor shall arise until the
indebtedness secured by this Mortgage is paid in full. Mortgagee
may resort to any security it holds in such order and manner as
Mortgagee deems fit and may sell at any foreclosure sale on this
Mortgage the Premises, Improvements, and Building Equipment in
one parcel or in such parcels as Mortgagee elects in its sole
discretion; the fore-closure sale shall pass title to all such
property; and Mortgagee may bid and become the purchaser of the
Mortgaged Property or any part thereof at any foreclosure sale
under this Mortgage.
(c) Any part of the Mortgaged Property may be released
by Mortgagee without affecting the lien, security interest and
assignment of this Mortgage against the remainder of the
Mortgaged Property. The taking of additional security, or the
extension or renewal of the indebtedness evidenced by the Note or
any part thereof, shall not release or impair the lien, security
interest and other right granted by this Mortgage, or affect the
liability of any endorser or guarantor or improve the right of
any permitted junior lienholder; and this Mortgage, as well as
any instrument given to secure any renewal or extension of the
indebtedness evidenced by the Note, or any part thereof, shall be
and remain a first and prior lien, except as otherwise provided
in this Mortgage, on all of the Mortgaged Property not expressly
released until the Note is paid in full.
(d) In the event that Mortgagee shall refer any or all
of the Loan Documents to counsel because of any default under the
Loan Documents, Mortgagor shall reimburse Mortgagee for
attorneys' fees and costs incurred by Mortgagee. If judgment is
entered under the Note or any of the other Loan Documents, or
foreclosure proceedings are commenced upon this Mortgage, then
reasonable attorneys' fees shall be payable and shall be
recovered in addition to all principal, interest and other
recoverable sums then due, in addition to costs of suit. If
Mortgagee shall become a party, whether as plaintiff or
defendant, to any suit or legal proceeding affecting the lien
created by this Mortgage, Mortgagor shall pay to Mortgagee on
demand its costs, expenses, and attorneys' fees in such suit or
proceeding.
(e) To the extent permitted by law, Mortgagor waives
any right pertaining to the marshalling of assets, the exemption
of homestead, the administration of estates of decedents, or
<PAGE 24>
other matter to defeat, reduce or affect the right of Mortgagee
to sell the Mortgaged Property for the collection of the
indebtedness evidenced by the Note (without any prior or
different resort for collection), or the right of Mortgagee to
the payment of such indebtedness out of the proceeds of sale of
the Mortgaged Property in preference to every other person and
claimant.
(f) To the extent that Mortgagee pays any outstanding
lien, charge or encumbrance affecting the Mortgaged Property,
such proceeds shall be deemed to have been advanced by Mortgagee
at Mortgagor's request, and Mortgagee shall be subrogated to all
rights, interests and liens owned or held by the owner or holder
of such outstanding liens, charges and encumbrances, irrespective
of whether such liens, charges or encumbrances are released of
record; provided, however, that the terms and provisions of this
Mortgage shall govern the rights and remedies of Mortgagee and
shall supersede the terms, provisions, rights, and remedies of
the lien or liens to which Mortgagee is subrogated under this
paragraph (f).
(g) Nothing contained in this Mortgage is intended to
create any partnership, joint venture or association between
Mortgagor and Mortgagee, or in any way make Mortgagee a co-
principal with Mortgagor with reference to the Mortgaged
Property.
(h) If at any time Mortgagee determines that any
further instruments, documents, acts or things are necessary or
desirable to vest or confirm any right or remedy granted in this
Mortgage, Mortgagor shall execute and deliver any instrument or
document and do or cause to be done any act or thing deemed
necessary or desirable by Mortgagee for any purpose.
(i) All written notices to be given by either party
to the other party shall be given by personal delivery or sent
by registered or certified mail, return receipt requested,
postage prepaid, such notices shall be deemed to be effective the
date personally delivered or deposited in the United States
mails. Any notice by Mortgagor to Mortgagee shall be addressed
to Mortgagee at its place of business, 732 Montgomery Avenue,
Narberth, Pennsylvania 19072, Attn: Lee Tabas, or at such
address as Mortgagee may specify in writing to Mortgagor. Any
notice by Mortgagee to Mortgagor shall be addressed to Mortgagor
<PAGE 25>
at 600 Third Avenue, Kingston, Pennsylvania 18704, Attn: Joshua
Kane, Senior Vice President or at such address as Mortgagor may
specify in writing to Mortgagee.
(j) To the extent permitted by law, Mortgagor waives
and releases all errors, defects and imperfections in any
proceedings instituted by Mortgagee under the terms of this
Mortgage and the Note, as well as all benefits that might accrue
to Mortgagor by virtue of any present or future laws exempting
the Mortgaged Property, or any other property, real or personal,
or any part of the proceeds arising from any sale of any such
property, from attachment, levy or sale under execution, or
providing for any stay of execution, exemption from civil process
or extension of time for payment.
(k) All provisions under any act, statute or
regulation of the State of New Jersey or the Commonwealth of
Pennsylvania now in effect or hereafter passed to relieve
Mortgagor in any manner from the obligations assumed by this
Mortgage or requiring the foreclosure and sale of the Mortgaged
Property before the attachment of or execution against other
property, real or personal, of Mortgagor, are expressly waived in
favor of the obligee on the Note or this Mortgage.
(l) At the sole option of Mortgagee, this Mortgage
shall become subject and subordinate, in whole or in part (but
not with respect to priority of entitlement to any award in
condemnation) to any and all leases of all or any part of the
Mortgaged Property, upon the execution by Mortgagee and recording
thereof any time hereafter, in the appropriate office for the
recording of deeds in and for the county or district wherein the
Mortgaged Property is situated, of a unilateral declaration to
that effect.
(m) If any term or provision of this Mortgage or the
application thereof to any person or circumstances should, to any
extent be invalid or unenforceable, the remainder of this
Mortgage, and the application of such term or provision to
persons or circumstances other than those as to which it is held
invalid or unenforceable, shall not be affected, and each term
and provision of this Mortgage shall be valid and shall be
enforced to the fullest extent permitted by law.
<PAGE 26>
(n) This Mortgage is made solely for the benefit of
Mortgagee and its successors and its assigns. No purchaser of
the Premises or any tenant under any lease the Premises, nor any
other person, shall have standing to bring any action against
Mortgagee as a result of this Mortgage, or to assume that
Mortgagee will exercise any remedies provided in this Mortgage,
and no person other than Mortgagee shall under any circumstances
be deemed to be a beneficiary of any provision of this Mortgage.
(o) This Mortgage shall be binding upon the successors
and assigns of Mortgagor. The use of the terms "Mortgagor" and
"Mortgagee" shall be deemed to include the respective successors
and assigns of the parties.
(p) Whenever used in this Mortgage, unless the context
clearly indicates a contrary intent: (i) the use of any gender
shall include all genders; (ii) the singular number shall include
the plural, and the plural the singular, as the context may
require; and (iii) the word "including" shall mean "including
without limitation".
(q) Mortgagor shall give advance notice in writing to
Mortgagee of any proposed change in Mortgagor's name, identity,
or structure, and shall execute and deliver to Mortgagee, prior
to or concurrently with the occurrence of any such change, all
additional financing statements and other documents and
instruments that Mortgagee may require to establish and maintain
the validity and priority of Mortgagee's security interest with
respect to any of the Mortgaged Property.
(r) MORTGAGOR WAIVES ANY RIGHT TO A TRIAL BY JURY IN
ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER
THIS MORTGAGE OR THE OTHER LOAN DOCUMENTS, OR ANY PROCEEDING IN
ANY WAY ARISING OUT OF OR IN CONNECTION WITH THIS MORTGAGE OR THE
OTHER LOAN DOCUMENTS, AND MORTGAGOR AGREES THAT ANY SUCH ACTION
OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A
JURY.
(s) This Mortgage shall be governed by and construed
in accordance with the laws of the Commonwealth of Pennsylvania,
except to the extent that rights and remedies which relate to
realizing upon the Mortgaged Property are governed by the laws of
the State of Delaware.
<PAGE 27>
MORTGAGOR ACKNOWLEDGES RECEIPT, WITHOUT CHARGE, OF A TRUE
AND CORRECT COPY OF THIS MORTGAGE.
IN WITNESS WHEREOF, Mortgagor has duly executed this
Mortgage on the day and year first above written.
Witness: MARK CENTERS LIMITED PARTNERSHIP
By: Mark Centers Trust,
General Partner
/s/ Alexander S. Kroll /s/ Joshua Kane
Senior Vice President and
Chief Financial Officer
<PAGE>
<PAGE 28>
COMMONWEALTH OF PENNSYLVANIA :
: SS
COUNTY OF PHILADELPHIA :
On this 28th day of January, 1998, before me, a Notary
Public, personally appeared Joshua Kane, who acknowledged that he
is the Senior Vice President of Mark Centers Trust, general
partner of Mark Centers Limited Partnership, a limited
partnership, and that being authorized to do so, executed the
foregoing instrument for the purposes therein contained.
IN WITNESS WHEREOF, I have hereunto set may hand and
official seal.
/s/ Elaine T. Vidovich
Notary Public
<PAGE 29>
EXHIBIT A
LEGAL DESCRIPTION
Attached
<PAGE 30>
Land Title Agency, Inc.
464 Valley Brook Avenue
Lyndhurst, NJ 07071
(201) 804-8844
Title No. 97-LT-0552.B
DESCRIPTION
ALL that certain tract or parcel of land and premises, situate,
lying and being in the Township of Stafford, in the County of
Ocean, and State of New Jersey, more particularly described as
follows:
BEING known and designated as Lot 1.05 Block 77 as shown on map
entitled "Major Subdivision Manahawkin Village, Tax Map Lot 1.01
Block 77, Stafford Township, Ocean County, N.J." dated July 29,
1993 and revised to September 21, 1993 by Owsen, Little &
Associates, Inc., Engineers, Planners, Surveyors, and filed in
the Ocean County Clerk's Office at Toms River, New Jersey, on
December 13, 1993 as Map No. G-2499.
Together with any rights, benefits and/or interest acquired in
Reciprocal Easement and Operation Agreement recorded in Deed Book
5042 page 217.
ALSO being described pursuant to a survey drawn by Kenderian
Zilinski Associates dated November 24, 1997 as follows:
BEGINNING at a concrete monument found in the northerly line of
Lot 1.06, said point also being the common corner of Tax Map Lots
1.05 and 1.04, Block 77, and running thence
(1) South 58 degrees 30 minutes 30 seconds West 304.24 to a
point; thence
(2) South 30 degrees 30 minutes 30 seconds West 85.00 feet to a
point; thence
(3) South 47 degrees 49 minutes 41 seconds West 366.92 feet to a
point; thence
<PAGE 31>
(4) North 31 degrees 29 minutes 30 seconds West along the common
line of Lots 1.07 and 1.05, Block 77 a distance of 183.89
feet to a point; thence
(5) North 52 degrees 00 minutes 00 seconds West along the common
line of Lots 1.05 and 1.07, Block 77 a distance of 166.68
feet to a point being the common line corner of Lots 1.04
and 1.05, Block 77; thence
(6) North 58 degrees 30 minutes 30 seconds East along the common
line of Lots 1.04 and 1.05, Block 77 a distance of 223.87
feet to an angle; thence
(7) North 12 degrees 57 minutes 56 seconds West still along the
common line of Lots 1.04 and 1.05, Blcok 77 a distance of
105.30 feet to a point; thence
(8) North 77 degrees 02 minutes 04 seconds East still along the
common line of Lots 1.04 and 1.05, Block 77 a distance of
199.30 feet to an angle point; thence
(9) South 12 degrees 57 minutes 56 seconds East still along the
common line of Lots 1.04 and 1.05, Block 77 a distance of
8.70 feet to an angle point; thence
(10) North 77 degrees 02 minutes 04 seconds East still along the
common line of Lots 1.04 and 1.05, Block 77 a distance of
312.22 feet to an angle point; thence
(11) North 12 degrees 57 minutes 56 seconds West still along the
common line of Lots 1.04 and 1.05; Block 77 a distance of
18.00 feet to a point; thence
(12) North 77 degrees 02 minutes 04 seconds East still along the
common line of Lots 1.04 and 1.05, Block 77 a distance of
73.00 feet to an angle point; thence
(13) South 12 degrees 57 minutes 56 seconds East still along the
common line of Lots 1.04 and 1.05, Block 77 a distance of
30.32 feet to the point of curvature; thence
(14) still along the common line of Lots 1.04 and 1.05, Block 77
on a curve to the left having a radius of 128.00 feet, an
arc length of 41.39 feet (central angle of 18 degrees 31
<PAGE 32>
minutes 34 seconds) (chord bearing South 22 degrees 13
minutes 43 seconds East, 41.21 feet) to the point of
tangency; thence
(15) South 31 degrees 29 minutes 30 seconds East still along the
common line of Lots 1.04 and 1.05, Block 77 a distance of
85.63 feet to the point and place of BEGINNING.
FOR INFORMATION ONLY:
Being known as lot 1.05 in Block 77 on the Official Tax Map of
the Township of Stafford in the County of Ocean and State of New
Jersey.
ALL that certain tract or parcel of land and premises, situate,
lying and being in the Township of Stafford, in the County of
Ocean, and State of New Jersey, more particularly described as
follows:
BEGINNING at a concrete monument found in the southwesterly line
of Washington Avenue (60 foot R.O.W.). Siad point also being the
common corner of Lots 1.04 and 1.06, Block 77; and running thence
(1) South 31 degrees 29 minutes 30 seconds along the
southwesterly line of Washington Avenue, a distance of
232.26 feet to the point being the common corner of Lots 2 and
1.06, Block 77; thence
(2) South 28 degrees 17 minutes 43 seconds West, along the
common line of Lots 2 and 1.06, Block 77 a distance of
250.00 feet to an angle point; thence
(3) South 31 degrees 29 minutes 30 seconds East, still along the
aforesaid common line of Lots 2 and 1.06, Block 77 a
distance of 12.00 feet to a point being the common corner of
Lots 1.06 and 1.07, Block 77; thence
(4) South 58 degrees 30 minutes 30 seconds West along the common
line of Lots 1.06 and 1.07, Block 77 a distance of 729.57
feet to an angle point; thence
<PAGE 33>
(5) North 31 degrees 29 minutes 30 seconds West, still along the
common line of Lots 1.06 and 1.07, Block 77 a distance of
247.15 feet to a point being the common corner of Lots 1.06
and 1.05, Block 77; thence
(6) North 47 degrees 49 minutes 41 seconds East, along the
common line of Lots 1.06 and 1.05, Block 77 a distance of
366.92 feet to an angle point; thence
(7) North 30 degrees 30 minutes 30 seconds East, still along the
common line of Lots 1.06 and 1.05, Block 77, a distance of
85.00 feet to a concrete monument found at an angle point;
thence
(8) North 58 degrees 30 minutes 30 seconds East, still along the
common line of Lots 1.06 and 1.05 then 1.04, Block 77, a
distance of 375.00 feet to a concrete monument found at
angle point; thence
(9) North 52 degrees 10 minutes 05 seconds East, along the
common line of Lots 1.06 and 1.04, Block 77 a distance of
135.83 feet to the point and place of BEGINNING.
The above description is in accordance with a survey drawn by
Kenderian Zilinski Associates dated November 24, 1997.
FOR INFORMATION ONLY:
Being known as lot 1.06 (part of Lot 1.02) in Block 77 on the
Official Tax Map of the Township of Stafford in the County of
Ocean and State of New Jersey.
Being also known as South New Jersey Route 72.
<PAGE>
PROMISSORY NOTE
$3,500,000.00 January 28, 1998
FOR VALUE RECEIVED, and intending to be legally bound
hereby, MARK CENTERS LIMITED PARTNERSHIP (hereinafter called
"Maker"), promises to pay to the order of ROYAL BANK OF
PENNSYLVANIA (hereinafter called "Bank"), the sum of THREE
MILLION FIVE HUNDRED THOUSAND DOLLARS ($3,500,000.00), with
interest as hereinafter provided on the unpaid principal balance
until paid, lawful money of the United States of America in
immediately available funds, without setoff or defalcation, at
the offices of Bank at 732 Montgomery Avenue, Narberth,
Pennsylvania 19072 or such other address as Bank may designate by
written notice to Maker.
INTEREST: The unpaid balance shall bear interest as
follows:
A floating rate per annum ("Floating Rate") equal to one and one-
half percentage points (1.50%) in excess of the Prime Rate (as
hereinafter defined). As used herein, "Prime Rate" shall mean
the rate publicly announced by Bank from time to time as its
prime rate. The Prime Rate may or may not be the lowest rate of
interest charged to Bank s commercial borrowers. Interest shall
be calculated on the basis of a 360 day year by multiplying the
interest rate in effect by a fraction, the numerator of which is
the actual number of days in the current billing period and the
denominator of which is 360.
PAYMENT TERMS: The principal sum and interest shall be paid
by Maker to Bank as follows: Interest shall be due and payable
commencing on March 1, 1998, and continuing on the first day of
each month thereafter until February 1, 1999 (the "Maturity
Date"), on which date all outstanding principal and accrued
interest shall be due and payable in full. Maker shall be
entitled to extend a Maturity Date for two (2) additional periods
of six (6) months each; provided, however, that no Event of
Default has occurred and is continuing. In the event Maker
elects to extend the Maturity Date, interest shall continue to be
due and payable on the first day of each month. Maker may
exercise these extension options by written notice to Bank, not
less than thirty (30) days prior to its then current Maturity
Date, accompanied by an extension fee in an amount of $35,000.00.
<PAGE 2>
If any payment hereunder is not paid when due and continues
unpaid for a period of six (6) days thereafter, Maker agrees to
pay to Bank, in addition to all amounts of principal and
interest, a late charge of five cents ($.05) for each one dollar
($1.00) so overdue, or such lesser late charge as may be required
by law, but in no event shall the late charge be less than
$25.00. The late charge is imposed for the purpose of defraying
the Bank's expenses incident to the handling of delinquent
payments and is in addition to, and not in lieu of, the exercise
by Bank of any rights and remedies hereunder, under the other
Loan Documents or under applicable laws, and any fees and
expenses of any agents or attorneys which Bank may employ. If
after an Event of Default (as hereinafter defined), Bank elects
to accelerate the maturity of this note and declare the entire
debt due and owing immediately, Bank may, as an element of
damages, continue to assess late charges against Maker pursuant
to the late charge terms that have heretofore been set forth.
Said late charges shall apply to each and every subsequent month
(before or after acceleration) that payment is not made and shall
compound at the Default Rate (as hereinafter defined).
In order to secure payment of this Promissory Note
(hereinafter called "Note") and all other obligations of Maker to
Bank presently existing or hereafter arising or incurred
(collectively, the "Obligations"), Maker hereby pledges to Bank
and grants to Bank a security interest in and a continuing lien
and right of setoff against, all property (real and personal,
tangible and intangible) owned by Maker or in which Maker has any
interest or any power of pledge, hypothecation or other
disposition, which Bank shall have in its possession or control
(including items in transit to Bank) at any time for any reasons
whatsoever, including, but not limited to monies, deposit
accounts, stocks, bonds, securities, mortgages, judgments,
security interests, chattel paper, accounts, accounts receivable,
contract rights, general intangibles, insurance policies,
instruments, documents, motor vehicle titles, real estate,
fixtures, goods, chattels, merchandise, inventory, equipment and
all other items of like kind and type and all additions and
accessions thereto and all proceeds therefrom (hereinafter called
"Collateral"). The Bank shall have no duty or obligation with
respect to the Collateral.
<PAGE 3>
Maker agrees to comply with each and every covenant,
condition and term set forth in this Note as well as all other
documents (collectively, the "Loan Documents") given by Maker or
any other Obligor (as hereinafter defined) to Bank and agrees
that any default under any of the other Loan Documents shall also
be an Event of Default hereunder. The terms and provisions of
the other Loan Documents are incorporated herein by reference.
As used herein, the term "Obligor" means any Maker and any
Guarantor, and the term "Guarantor" means any guarantor or surety
of the Obligations of Maker to Bank existing on the date of this
Note or arising in the future.
Bank shall have the right at Maker s expense to audit
Maker s books and records periodically including access to
accounts receivable and payable as well as executory contract
records. Maker agrees to provide Bank and to cause any Obligor
to provide Bank with periodic financial statements as requested
from time to time by Bank in form satisfactory to Bank.
Upon the occurrence of any of the following events with
respect to any Obligor, each of which shall constitute an "Event
of Default" hereunder, the entire unpaid amount of principal and
interest hereunder shall at the option of Bank become immediately
due and payable, together with the prepayment fee described
above, without notice or demand: (a) if payment of principal or
interest, as aforesaid, is not paid when due, and continues
unpaid for a period of fifteen (15) days thereafter; or (b) if at
any time during the term of this Note, Maker does not pay
principal and interest when due, but such payment is made after
the fifteen (15) day period set forth in subparagraph (a) above,
and such event occurs more than four (4) times during the term of
this Note; or (c) if any Obligor defaults in the payment or
performance of any other obligation to Bank or any other holder
hereof; or (d) if any Obligor is unable to pay its debts as they
mature or if any Obligor becomes insolvent or shall voluntarily
suspend transaction of its business or operations; or (e) if any
Obligor shall make an assignment for the benefit of creditors or
file a voluntary petition to reorganize or to effect a plan or
other arrangement with creditors or apply for or consent to the
appointment of a receiver or trustee of all or part of its
property; or (f) if any Obligor shall file an answer admitting
the jurisdiction of the court and the material allegations of an
involuntary petition filed pursuant to the Bankruptcy Code, as
amended, or shall be adjudicated a bankrupt; or (g) if an order
<PAGE 4>
shall be entered approving an involuntary petition to reorganize
any Obligor or to effect a plan or other arrangement with its
creditors, or appointing a trustee or receiver of all or part of
its property; or (h) if any Obligor shall institute liquidation,
dissolution, merger or consolidation proceedings; or (i) if any
Obligor dies or is incarcerated, or is adjudicated legally
incompetent; or (j) if there is entered against any Obligor a
judgment, levy or lien or if a writ or warrant of attachment,
execution, garnishment, distraint, possession, or any similar
process shall be issued by any court against all or a part of the
property of any Obligor; or (k) if there is a taking of
possession of a substantial part of the property of any Obligor
at the instance of any governmental authority; or (l) if any
Obligor fails to pay any income, excise, or other taxes of any
nature whatsoever prior to the time that they become delinquent;
or (m) if any information or signature heretofore or hereafter
furnished to Bank by any Obligor in connection with any
Obligations is materially false or incorrect; or (n) if any
Obligor fails to timely furnish to Bank such financial and other
information as Bank may reasonably request or require; or (o) if
any Obligor fails to perform or comply with any agreement with
Bank or to pay any obligation whatsoever to Bank when due; or (p)
if Bank, in view of circumstances which in its commercially
reasonable judgment it considers adequate, believes that the
credit of any Obligor has become impaired or that a material
adverse change has occurred in the financial condition of any
Obligor.
After an Event of Default, interest shall continue to accrue
and be payable on demand at a rate equal to three percent (3%)
per annum in excess of the interest rate which is otherwise
payable hereon but not more than the maximum rate allowed by law
(the "Default Rate"). The Default Rate shall apply retroactively
to the first such Event of Default and shall continue until all
Events of Default have been cured. Such interest shall accrue
notwithstanding the entry or opening of any judgment and shall be
added to and become part of the Obligations.
Upon the occurrence of an Event of Default hereunder, Bank
shall have all rights and remedies provided under all applicable
law and shall be deemed to have exercised the same immediately
upon the occurrence of any such event without notice or future
action, irrespective of when any record of the same may
thereafter be entered on Bank s books and Bank shall have and may
<PAGE 5>
exercise as to the Collateral all rights and remedies provided
under the Uniform Commercial Code and under all other applicable
laws; and Bank shall have the right, immediately and without
further action by it, to setoff against this Note all money owed
by Bank in any capacity to Maker, whether or not due, and also to
setoff against all other obligations of Maker to Bank all money
owned by Bank in any capacity to Maker, and Bank shall be deemed
to have exercised such right of setoff and to have made a charge
against any such money immediately upon the occurrence of such
default even though such charge is made or entered on the books
of Bank subsequent thereto. In addition thereto Bank may sell
all or any part of any Collateral at private or public sale
without advertisement or notice to or demand upon Maker or any
other Obligor, or upon seven (7) days notice, if notice is
required, and Bank may purchase the same or any part thereof at
any such sale free of all trusts, claims or equity of redemption.
Bank shall not be required to resort to any particular security
or persons to enforce payment and Bank shall not be subject to
any marshaling requirements or equities among the person(s)
designated as Maker or among any other Obligors.
No waiver of any default hereunder shall be construed as a
waiver of any subsequent default, and the exercise of any right
hereunder shall not waive the right to exercise such right
thereafter.
Maker, and each of them, does hereby authorize and empower
the prothonotary or clerk or any attorney of any court of record,
following the occurrence of an Event of Default, to appear for
and to CONFESS AND ENTER A JUDGMENT OR JUDGMENTS against Maker or
any one of them, in favor of Bank, its successors and assigns,
and any other holder hereof, for which this, or a true copy
hereof, shall be a sufficient warrant: (a) for such sums as are
due and/or may become due under this Note and the other Loan
Documents, and/or (b) in any action of replevin instituted by
Bank to obtain possession of any Collateral securing any of the
Obligations, with interest at the Default Rate as above provided
and the prepayment fee, with reasonable attorneys fees added, and
with costs of suit, at any one or more times after this Note
becomes due, with or without declaration filed with release of
all errors, and without stay of execution; and does hereby waive
and release all relief from any and all appraisements, stay,
exemption and homestead laws of any state, now in force or
hereafter passed, and any right to except to, strike off, appeal
<PAGE 6>
from or open any judgment so entered; and further does waive the
right of inquisition on any real estate that may be levied upon
to collect this Note, hereby voluntarily condemns the same and
authorizes the entry upon the writ of execution of such voluntary
condemnation, and agrees that such real estate may be sold on a
writ of execution. MAKER, AND EACH OF THEM, FURTHER WAIVES ALL
RIGHT TO PRIOR NOTICE AND HEARING BEFORE ENTRY OF JUDGMENT. If a
copy of this Note, verified by affidavit by Bank or someone on
behalf of Bank, shall have been filed in such action, it shall
not be necessary to file the original Note as a warrant of
attorney.
The authority and power to appear for and CONFESS JUDGMENT
against Maker, and each of them, shall not be exhausted by the
initial exercise thereof and may be exercised as often as Bank
shall find it necessary and desirable and this Note shall be a
sufficient warrant therefor. Bank may CONFESS one or more
JUDGMENTS in the same or different jurisdictions for all or any
part of the Obligations, without regard to whether JUDGMENT has
theretofore been CONFESSED on more than one occasion for the same
obligations. In the event any JUDGMENT CONFESSED against Maker,
and each of them, is stricken or opened upon application by or on
Maker s behalf for any reason, Bank is hereby authorized and
empowered to again appear for and CONFESS JUDGMENT against Maker,
and each of them, for any part or all of the Obligations, as
provided for herein, if doing so will cure any errors or defects
in such prior proceedings.
MAKER ON BEHALF OF ITSELF AND ALL OBLIGORS HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY WAIVES ANY AND ALL
RIGHTS MAKER MAY HAVE TO A TRIAL BY JURY, AND TO RAISE
COUNTERCLAIMS IN CONNECTION WITH ANY LITIGATION ARISING OUT OF
THIS NOTE OR THE LOAN DOCUMENTS, OR ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF
BANK AND/OR ANY OBLIGOR OR IN ANY LITIGATION IN WHICH ANY OBLIGOR
AND BANK ARE ADVERSE PARTIES. THIS PROVISION IS A MATERIAL
INDUCEMENT FOR BANK S GRANTING THE LOAN(S) SUBJECT TO THIS NOTE.
If any provision of this Note shall for any reason be held
to be invalid or unenforceable, such provision shall not affect
any other provision of this Note that can be given effect without
such provision and this Note shall be construed as if such
provision has never been contained herein.
<PAGE 7>
This Note shall be binding upon the undersigned and their
respective heirs, personal representatives, successors and
assigns, and the benefits hereof shall inure to the benefit of
Bank and its successors and assigns. If this Note is executed by
more than one party, it shall be the joint and several
obligations of all such parties.
In the event that Bank engages an attorney to represent it
in connection with (1) any alleged default by any obligor under
any of the Loan Documents, (2) the enforcement, administration or
modification of any of Bank s rights and remedies under any of
the Loan Documents, (3) any potential and/or actual bankruptcy or
other insolvency proceedings commenced by or against any obligor,
and/or (4) any potential and/or actual litigation arising out of
or related to any of the foregoing, the Loan Documents or any of
the Obligations, then Maker shall be liable to and shall
reimburse Bank, on demand for all attorneys fees, costs and
expenses incurred by Bank in connection with any of the
foregoing. Maker shall also be liable and shall reimburse Bank,
on demand, for all other costs and expenses (including attorneys
fees) incurred by Bank in connection with the collection,
preservation and/or liquidation of any Collateral and/or in the
enforcement of any Obligor s obligations hereunder and under any
of the Loan Documents.
Presentment for payment or acceptance, demand and protest,
and notice of dishonor of payment or acceptance, notice of
protest and notice of any renewal, extension, modification or
change of time, manner, place or terms of payment are hereby
waived by Maker. Any notice to Maker shall be sufficiently
served for all purposes if placed in the mail addressed to, or
left upon the premises of the address of Maker shown on the
Bank s records. Bank may surrender this Note to any person
paying the final installment or payment due hereunder, and may
endorse or assign it to such person or his order without
recourse.
The parties agree and consent to the exclusive jurisdiction
of the federal and state courts located in Pennsylvania in
connection with any matters arising hereunder, including the
collection and enforcement hereof, except as Bank may otherwise
elect.
<PAGE 8>
This Note shall be governed by the substantive laws of the
Commonwealth of Pennsylvania.
Witness: MARK CENTERS LIMITED PARTNERSHIP
/s/ Alexander S. Kroll By: Mark Centers Trust,
General Partner
By: /s/ Joshua Kane,
Senior Vice President and
Chief Financial Officer
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-80390) for the Mark Centers Trust
Restricted Share Plan, in the Registration Statement (Form S-8
No. 33-95966) for the Mark Centers Trust 1994 Share Option Plan
and Mark Centers Trust 1994 Non-Employee Trustee's Share Option
Plan in the Registration Statement (Form S-3 No. 33-85190) of
Mark Centers Trust of our report dated April 8, 1998, with
respect to the consolidated financial statements and schedule of
Mark Centers Trust included in this Annual Report (Form 10K) for
the year ended December 31, 1997.
/s/ ERNST & YOUNG LLP
New York, New York
April 8, 1998
